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Acosta v. Chimes District of Columbia, Inc.

United States District Court, D. Maryland

November 29, 2018

R. ALEXANDER ACOSTA, Secretary of Labor, Plaintiff,
v.
CHIMES DISTRICT OF COLUMBIA, INC., et al., Defendants.

          MEMORANDUM OPINION

          Richard D. Bennett, United States District Judge.

         The United States Secretary of Labor ("the Secretary")[1] brought a ten-count Amended Complaint against 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.) The Secretary alleges that the Defendants charged the Plan excessive fees for services and engaged in prohibited transactions by receiving commissions, kickbacks, and inappropriate reimbursements.

         Currently pending before this Court are eight motions, including the instant Motion for Summary Judgment on Behalf of Non-Fiduciary Defendants/Counter-Claimants, Benefits Consulting Group and Jeffrey Ramsey ("BCG Defendants") (ECF No. 365).[2] By the instant motion, the BCG Defendants seek summary judgment of the claims set forth against them in Counts I and III of the First Amended Complaint (ECF No. 102), as well as judgment in their favor on their Counterclaim (ECF No. 158) against the Secretary. This Court has reviewed the parties' submissions and heard arguments of counsel at a motions hearing held November 13, 2018. For the reasons stated herein, the Motion for Summary Judgment on Behalf of Non-Fiduciary Defendants/Counter-Claimants, Benefits Consulting Group and Jeffrey Ramsey (ECF No. 365) shall be GRANTED. Accordingly, summary judgment shall be entered in favor of the BCG Defendants on Counts I and III of the First Amended Complaint. Furthermore, judgment shall be entered in their favor on their Counterclaim, together with an award of $100 as a civil penalty and reasonable attorneys' fees and costs to be determined in due course.

         BACKGROUND

         I. The Defendants

         Chimes D.C., Inc. ("Chimes DC) is a Washington, D.C. corporation established under Section 501(c)(3) of the Internal Revenue Code and "is a federal government contractor who employs disabled workers for janitorial and custodial service." (ECF No. 102 at ¶ 10.) Chimes DC established its Health & Welfare Plan "to provide a package of medical, prescription, life insurance, accidental death and dismemberment, disability, and unemployment benefits" to its employees. (Id. at ¶ 2.) "The Plan is a partially self-insured health and welfare plan and is mostly funded by contributions required to be paid under Chimes DCs federal government contracts and federal prevailing wage laws." (Id. at ¶ 21.) The Plan is an employee benefit plan as defined by ERISA, and Chimes DC, as Plan Administrator, is a named fiduciary. (Id. at ¶¶ 10, 21.)

         Defendant Chimes International Limited ("Chimes International") is the parent company of Chimes DC and The Chimes Foundation, Inc. (the "Chimes Foundation"), "a fundraising arm of Chimes International and its subsidiaries." (Id. at ¶ 11.) Chimes International is alleged to be a Plan fiduciary, as defined by ERISA. (Id. citing 29 U.S.C. §1002(21)(A).)

         Defendant Albert Bussone ("Bussone") was Vice President of Chimes DC and Chief Operating Officer and Executive Vice President of Chimes International from at least 2008 until his retirement in December 2014. (Id. at ¶ 12.) He was also Chief Development Officer and Vice President of Chimes DC and Chimes International from February 2012 until December 2014. (Id.)

         Defendant Martin Lampner ("Lampner") was Executive Vice President of Chimes DC and Chimes International from at least 2008 until July 2010, and from July 2010 to the present, he has been President of Chimes DC and Chimes International. (Id. at ¶ 13.) Lampner was also the Chief Financial Officer of Chimes DC and Chimes International from at least 2008 until January 2011, and from January 2011 to the present, he has been Chief Executive Officer of Chimes DC and Chimes International. (Id.) Defendants Chimes DC, Chimes International, Bussone, and Lampner are collectively referred to herein as the "Chimes Defendants."

         Defendant FCE Benefit Administrators, Inc. ("FCE") was the Plan's third party administrator during the relevant time period. (Id. at ¶ 14.) Defendant Gary Beckman ("Beckman") and Defendant Stephen Porter ("Porter") were each 50% owners and officers of FCE. (Id. at ¶¶ 15-16.) Collectively, FCE, Beckman, and Porter are referred to as the "FCE Defendants."

         Defendant Benefits Consulting Group, ("BCG") is a sole proprietorship, owned by Defendant Jeffrey Ramsey ("Ramsey"), engaged to provide plan representation services to the Plan. (Id. at ¶ 18.) Collectively, BCG and Ramsey are referred to as the "BCG Defendants."

         Defendant Marilyn Ward ("Ward") was an appointed Plan trustee and named fiduciary of the Plan. (Id. at ¶ 20.)

         II. Factual Background Relevant to BCG Defendants

         Since the inception of the Plan in 1995, BCG was retained to provide plan representation services and acted as a liaison between participants, the Plan, and Chimes DC. (ECF No. 389 at 7.) The relationship was governed by the 2004 Amended and Restated Adoption Agreement for the Plan and its exhibits and fee schedule, which was negotiated with Chimes DC by Chimes Defendants Bussone and Lampner. (ECF No. 367 at 5.) Chimes DC retained the authority to appoint, retain, and/or remove BCG upon 60 days' notice. (Id. at 5.)

         As liaison, BCG conducted site visits, educated Chimes DC on relevant topics, assisted with the annual open enrollment process, and facilitated communications between Chimes DC and participants to resolve issues. (ECF No. 389 at 7.) BCG also performed market comparisons of FCE's fees. (Id.) BCG received 7.5% of the Plan contributions as a commission, which totaled annual payments of approximately $445, 000 to $650, 000. (Id.) In 2005, BCG agreed to reduce its fees by 20% from its earnings in 2005 and "hold its fees through the year end 2007." (ECF No. 345-14.) In 2009, BCG also agreed to hold its fees for a five-year period. (ECF No. 343-8 at 2.)

         Between 2007 and 2014, BCG contributed $292, 500 to the Chimes Foundation. (ECF No. 389 at 8.) In 2009, BCG joined with FCE in pledging a total of $330, 000 to the Chimes Foundation over a five-year period beginning in December 2010. (Id.)

         During the relevant time period, Ramsey also had an ownership interest in BCGHR, LLC, which developed affirmative action plans for government contractors needing such plans for their government contracts. (Id. at 9.) Typically such plans cost between $2, 500 to $3, 500 per plan, but BCGHR provided discounts to Chimes DC for the plans it provided to Chimes DC, paying as little as $6, 500 for 14 or 15 plans. (Id.)

         Prior to the filing of this action, on April 19, 2013, in connection with an investigation into the Plan, an investigator with the Employee Benefits Security Administration ("EBSA"), a section of the Department of Labor, interviewed Ramsey, who stated that he owned BCG as a sole proprietorship. (ECF No. 389 at 29.) As part of the continuing investigation, the EBSA investigator issued an administrative subpoena to First Security Bank, N.A. (and its successor, Ciera Bank) (collectively "First Bank") seeking documents relating to the Plan and BCG.[3] (Id.) A copy of the subpoena was not sent to Ramsey, who, on December 11, 2014, filed a complaint regarding the disclosure of documents. (Id.) The Department of Labor then destroyed the documents, provided notice to Ramsey, and sent a new subpoena to First Bank on January 29, 2015. (Id.)

         After Ramsey moved to quash the subpoena, [4] the motion was denied by the United States District Court for the Northern District of Texas, [5] finding that the second subpoena complied with the notice requirements of the Right to Financial Privacy Act of 1978 ("RFPA"), 12 U.S.C. § 3401, etseq. (Id. at 29-30.) First Bank then provided substantially the same documents as it had originally produced. (Id.) Because of the lack of notice to Ramsey related to the first subpoena, the BCG Defendants filed a Counterclaim against the Department of Labor in the instant case alleging three counts against the Department of Labor for Violations of the RFPA. (ECF No. 158)

         III. Procedural History

The Secretary filed a Complaint (ECF No. 1) against all Defendants but Ward on October 20, 2015. The Complaint was amended on June 7, 2016, adding Ward as a Defendant. (ECF No. 102.) The First Amended Complaint (ECF No. 102) alleged ten counts:

• Count I - Excessive Plan Expenses (alleged against the Chimes Defendants, the FCE Defendants, and the ...

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