United States District Court, D. Maryland
THOMAS E. PEREZ, Secretary of Labor, Plaintiff,
CHIMES DISTRICT OF COLUMBIA, INC., et al., Defendants.
RICHARD D. BENNETT UNITED STATES DISTRICT JUDGE
States Secretary of Labor, Thomas E. Perez, (“the
Secretary”) has brought a ten-count Amended Complaint
against The Chimes D.C., Inc. Health & Welfare Plan (the
“Plan”) and its alleged fiduciaries and service
providers, including Defendants Chimes District of Columbia,
Inc.; Chimes International, Ltd.; FCE Benefit Administrators,
Inc.; Gary Beckman; Stephen Porter; Martin Lampner; Albert
Bussone; Benefits Consulting Group; Jeffrey
Ramsey; and Marilyn Ward, alleging violations of
the Employee Retirement Income Security Act of 1974
(“ERISA”), as amended, 29 U.S.C. §§
1001, et seq. First Am. Compl., p. 1-2, ECF No. 102.
Currently pending before this Court is Defendant Marilyn
Ward's Motion to Dismiss Counts I, VII, VIII, IX, and X
of the First Amended Complaint (ECF No. 124). The
parties' submissions have been reviewed, and no hearing
is necessary. See Local Rule 105.6 (D. Md. 2016).
For the reasons stated herein, Defendant Marilyn Ward's
Motion to Dismiss Counts I, VII, VIII, IX, and X of the First
Amended Complaint (ECF No. 124) is DENIED.
ruling on a motion to dismiss, this Court must accept the
factual allegations in the plaintiff's complaint as true
and construe those facts in the light most favorable to the
plaintiff. See, e.g., Edwards v. City of Goldsboro,
178 F.3d 231, 244 (4th Cir. 1999); Harris v. Publish Am.,
LLLP, No. RDB-14-3685, 2015 WL 4429510, at *1 (D. Md.
July 17, 2015). The facts of this case have previously been
set forth in this Court's Memorandum Opinion of October
5, 2016 (ECF No. 141). See Perez v. Chimes D.C., Inc., et
al., No. RDB-15-3315, 2016 WL 5815443, at *1 (D. Md.
Oct. 5, 2016). The following factual allegations pertain
specifically to those claims raised against Marilyn Ward in
Counts VII, VIII, IX, and X of the First Amended Complaint,
the subject of the pending motion:
Defendant Marilyn Ward, Plan Trustee
Ward [(“Defendant” or “Ward”)] was a
Plan trustee and named fiduciary of the Plan.” First
Am. Compl., ¶ 20, ECF No. 102. Ward “exercised
discretionary authority and/or discretionary control
respecting management of the Plan and/or exercised any
authority or control respecting management or disposition of
its assets, and had discretionary authority and/or
discretionary responsibility in the administration of the
Plan.” Id. “Under the Amended and
Restated Trust Agreement governing her appointment as
Trustee, Ward had ‘exclusive authority and discretion
to manage and control funds' except to the extent
delegated to the Plan Administrator (Chimes DC) or an
investment manager, and ‘[a]ll discretions . . .
conferred on her' were ‘absolute' ‘unless
specifically limited[.]' ” Id. “The
Trust Agreement granted Ward exclusive powers over various
aspects of the Plan, including but not limited to
investments, obligations and litigation, deposits, insurance
benefits, insurance protection, advances to the trust,
distributions, and hiring agents.” Id.
“The Trust Agreement also required Ward to
‘maintain full and complete records of her transactions
for, and funds held for the account of, the Trust, ' and
she had discretionary authority and/or responsibility over
such records, including payments to FCE.” Id.
“In addition to her enumerated powers and
responsibilities, Ward exercised discretionary control and
authority over her and FCE's fees by authorizing fees
that were not made in accordance with the fee schedules
agreed upon and approved by Chimes DC.” Id.
Therefore, the Secretary alleges that Ward “was a Plan
fiduciary within the meaning of Section 3(21)(A) of ERISA, 29
U.S.C. § 1002(21)(A)” and “a party in
interest under ERISA [Section] 3(14)(A) and (B), 29 U.S.C.
§ 1002(14)(A) and (B).” Id.
Alleged Violations of the Employee Retirement Income
Security Act (“ERISA”)
FCE's Receipt of Payments from Plan Service
relevant times, and consistent with the Adoption Agreement,
FCE had and exercised fiduciary authority to recommend,
negotiate, and execute contracts between the Plan and various
service providers, thereby exercising authority and control
over the management of Plan assets.” Id. at
¶ 45. “Such service providers included the
Plan's trustees as well as service providers related to
the Plan's stop loss insurance, prescription drug
benefits, behavioral health and employee assistance programs,
and medical benefits.” Id. “In
connection with the Plan's contracts with the service
providers, the FCE Defendants caused FCE to receive rebates,
commissions, and other payments from the service
providers.” Id. “This compensation,
received from Plan service providers, was paid in addition to
fees paid directly by the Plan.” Id.
“FCE's Third Party Administrator Agreement with
Chimes DC attaches fee schedules for various service
providers, including FCE, BCG, and the Plan trustee, and
states that ‘no change in any Service Provider to the
Plan and Trust will be effective unless approved in writing
by both TPA and Employer.' ” Id. at ¶
46. “Ward could not be removed as Trustee without
FCE's consent.” Id. at ¶ 46.
“At all relevant times, FCE recommended and retained
Ward as the Plan trustee and at no time did the Chimes
Defendants question or independently review Ward's
appointment as a Trustee.” Id.
Ward's Payments to FCE and Knowledge of FCE's
Payments to Chimes
own records characterized the charitable contributions made
by FCE to The Chimes Foundation as ‘promotional
expenses' that FCE itemized as ‘Business
Development and Retention Expenses.' ” Id.
at 54. “As a result, at least some of Ward's
payments to FCE for business development and retention
expenses were used to pay charitable donations to The Chimes
Foundation.” Id. “The FCE Defendants
told Ward that the Chimes Defendants had solicited and FCE
paid donations to the Chimes Foundations.” Id.
“On information and belief, Ward knew or should have
known that her payments to FCE were being used to pay
donations to The Chimes Foundation.” Id.
“Ward also knew that FCE agreed to and did employ
Martin Lampner's child in connection with the Plan's
retention of FCE as a service provider for the Plan.”
Id. at 54.
Ward's tenure as Plan trustee, Ward paid the FCE
Defendants the following payments: (1) 10.9% of total trustee
fees received by Ward for ‘Business Development and
Retention Costs;' (2) payments for ‘trustee
assistants' who were employed by FCE, received W-2s from
FCE, and worked in FCE's offices, for performing work,
including but not limited to Plan work; (3) an additional 10%
Management Fee of the total of all trustee assistant costs,
as well as $250/month in ‘overhead' fees; and (4)
rent payments for use of property owned by JMA Investments
(“JMA”), an entity owned by Porter and Beckman.
Id. at 55. “Ward had no written agreement
regarding the rent payments, and she did not compare the
rental price to any alternative facilities.”
Id. at ¶ 56. “The facilities were used
for Plan work, along with other work.” Id.
“Ward did not disclose her arrangements with FCE to the
Chimes Defendants, despite the fact that FCE had fiduciary
authority and control over Ward's continuing appointment
as Plan Trustee and thus the Plan's payment of her fees,
and despite the fact that Ward had fiduciary authority and
control over the Plan's payment of FCE's fees and
responsibility for ensuring their accuracy.”
Id. at 57.
Ward's Imprudent Payment of Fees from Plan to FCE and
had authority and control over the Plan's payment of fees
to service providers, and responsibility for verifying that
fees-including her own fees-were being calculated in
accordance with the fee schedules agreed upon by Chimes
DC.” Id. at 58. However, “Ward failed to
prudently verify whether the fees paid by the Plan matched
the fee schedules agreed upon by Chimes DC.”
Id. at ¶ 59. “She imprudently failed to
request or review supporting documentation and invoices for
fees, including insurance premiums.” Id.
Chimes Defendants had negotiated a tiered fee structure with
FCE and Ward, with the fee rates based on the number of
participants.” Id. at 60. “At relevant
times, FCE informed Ward that their computer system could not
handle the fluctuations in participant counts, and thus FCE
provided Ward with a blended fee rate and average participant
count, which Ward used to authorize fee payments from the
Plan to FCE and herself.” Id. at 61.
“These rates differed from the fee schedule agreed upon
by Chimes DC.” Id.
failed to alert Chimes DC that FCE's computer system was
unable to adequately manage fluctuations in participant
counts.” Id. at 62. “The inadequate
computer system contributed to many of FCE's
administrative problems . . . including FCE's inability
to accurately maintain accurate expense and claims records,
timely update participant coverage information, and
administer a reasonable claims process.” Id.
“Ward caused the Plan to pay administrative fees for
non-Service Contract Act employees which differed from the
fee schedule agreed upon by Chimes DC.” Id. at
63. “Ward also paid administrative fee rates for the
unemployment insurance fund, also known as the DUB, that
differed from the written fee schedule.” Id.
“Ward failed to disclose to ...