BOARD OF TRUSTEES, OF THE UAW GROUP HEALTH & WELFARE PLAN et al v. ACOSTA et al

Filing 41

OPINION. Signed by Judge Susan D. Wigenton on 9/18/2015. (anr)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
Civil Action No. 14-6247 (SDW) (SCM)
THE BOARD OF TRUSTEES OF THE UAW
GROUP HEALTH & WELFARE PLAN
AND THE UAW GROUP HEALTH &
WELFRE PLAN

OPINION

Plaintiffs,
v.

September 18, 2015

SERGIO ACOSTA; LAWRENCE
ACKERMAN; WILLIAM J. BACHELER
AND BACHELER & CO, P.C.,
Defendants.

WIGENTON, District Judge.
Before this Court are Sergio Acosta, Lawrence Ackerman, William J. Bacheler and
Bacheler & Co, P.C.’s (“Defendants”) Motions to Dismiss the Plaintiffs’ First Amended
Complaint (“Motions to Dismiss”) pursuant to Federal Rules of Civil Procedure 8(a) and 12(b)(6).
This Court has jurisdiction pursuant to 28 U.S.C. § 1332. Venue is proper pursuant to 28 U.S.C.
§ 1391(b). This Court, having considered the parties’ submissions, decides the Motions to Dismiss
without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons stated
below, Defendant Bacheler’s Motion to Dismiss is DENIED and Defendants Ackerman and
Acosta’s Motions to Dismiss are GRANTED IN PART AND DENIED IN PART.

BACKGROUND AND PROCEDURAL HISTORY
Plaintiffs are the Board of Trustees of the UAW Health and Welfare Plan and the UAW
Health and Welfare Plan (“Plan”) (collectively, “Plaintiffs”). The Plan was created in or about
January 1, 2001, via an Agreement and Declaration of Trust (“Trust Agreement”) by and between
several labor unions 1 (“Union”) and certain employers of the union members to facilitate collective
bargaining and for the provision of health insurance and other welfare benefits, as permitted by
ERISA and Section 302(c)(5) of the Labor Management Relations Act of 1947 (“Section
302(c)(5)”). (ECF. No. 6, Amended Complaint (“Am. Compl.”) ¶ 1.) Defendants are Sergio
Acosta, the Union’s designated trustee on the Plan’s Board of Trustee 2 and de facto administrator;
Lawrence Ackerman, the principal of two companies, Atlantic Business Association, Inc. (“ABA”)
and Atlantic Medical Association, Inc. (“AMA”), who allegedly enrolled numerous ineligible
employees in the Plan and damaged the Plan’s interests for his own ends; and William J. Bacheler,
CPA of Bacheler, P.C., who audited the Plan’s financial statements from 2001 through October
11, 2011. (Am. Compl. ¶¶ 5, 8-11, 22-37.)
The Plan, acting through Acosta 3, accepted as health insurance plan participants certain
union members associated with Ackerman’s companies, ABA and AMA. (Id. ¶¶ 5-7, 23, 26.)
Plaintiffs allege that Ackerman fraudulently extended coverage, and at an excessive monthly
premium, to “individuals who were not employees of either company but who were willing to pay
excessive monthly premiums to obtain comprehensive medical and hospitalization coverage
provided by the Plan because they were otherwise unable to procure such coverage in the group or

1

These include the Local Union 2326, International Union, United Automobile, Aerospace and Agricultural
Workers of America.
2
The Plan is administrated by two Trustees, one of whom is appointed by the Union and one of whom is appointed
by the employers obligated to contribute to the Plan. (Am. Compl. ¶ 2.) Acosta was the Union’s appointee.
3
Acosta was an official of the Union during the relevant time period, and for some of that time, a salaried employee
of the UAW.

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individual insurance market due to serious, preexisting health conditions.” (Id. ¶¶ 22-24.) After
remitting the actual and applicable premium amount charged by the insurer to the Plan, Ackerman
purportedly pocketed the difference. (Id.)
During this time, Ackerman also owned Pro-Tech Automotive, LLC, which was, at the
time, a Participating Employer in the Plan. (Id. ¶ 25.) Plaintiffs allege that this relationship made
Ackerman a party in interest to the Plan and that his enrollment of the ABA/AMA participants
constitutes prohibited transactions in violation of Section 406 of the Employee Retirement Income
Security Act (“ERISA”). (Id.)
Plaintiffs allege that Ackerman’s impermissible use of the Plan’s benefit coverage
constituted fraud and negligent misrepresentation. (Id. ¶¶ 65, 88.) Plaintiffs also claim that Acosta
breached his fiduciary duties under the Trust Agreement and under ERISA by allowing the ABA
and AMA enrollees to participate in the Plan. (Id. ¶ 26.) According to the Complaint, Acosta
knew or should have known the Union was required to contribute to the Plan for the cost of
providing health benefits to these employees, which it failed to do. (Id. ¶¶ 41-44.) Lastly,
Plaintiffs charge that Bacheler breached its professional duties to the Plan because it knew or
should have known that the ABA and AMA enrollees were not eligible to participate in the Plan.
(Id. at ¶ 45.)
Plaintiffs claim that from January 1, 2001 through June 30, 2011, the Plan was funded by
group insurance contracts obtained from Oxford, Aetna, and Horizon Blue Cross and Blue Shield
(“Horizon”), but became self-insured as of July 1, 2011. (Id. ¶¶ 20-21.) By letter dated October
13, 2011, Horizon demanded reimbursement from the Plan in the amount of $5,632,774 for losses
it incurred from insuring the ineligible individuals enrolled by Ackerman. (Id. ¶ 37.)

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As a result, Plaintiffs filed a six-count complaint on October 9, 2014 and added two more
claims on February 9, 2015. As to Acosta, Plaintiffs allege breach of trust agreement and ERISA
fiduciary duties losses caused by enrollment of ABA/AMA enrollees (Count I); breach of trust
agreement and ERISA failure to collect contributions owed for union enrollees (Count II); and cofiduciary liability losses caused by enrollment of ABA/AMA enrollees (Count V). As to
Ackerman, Plaintiffs allege ERISA § 502(c)(3) participant liability (Count III); breach of ERISA
fiduciary duties/prohibited transactions (Count IV); common-law fraud (Count VI); and common
law negligent misrepresentation (Count VII). Plaintiffs allege professional negligence against
Bacheler (Count VI).
Each defendant filed separate motions to dismiss the amended complaint and Plaintiffs
filed timely opposition. (Dkt. No. 24-25, 28, 34-39.)

LEGAL STANDARD
Motion to Dismiss
The adequacy of pleadings is governed by Federal Rule of Civil Procedure 8(a)(2), which
requires that a complaint allege “a short and plain statement of the claim showing that the pleader
is entitled to relief.” This Rule “requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do. Factual allegations must be enough to
raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007) (internal citations omitted); see also Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d
Cir. 2008) (stating that Rule 8 “requires a ‘showing’ rather than a blanket assertion of an
entitlement to relief”).

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In considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the
Court must “‘accept all factual allegations as true, construe the complaint in the light most
favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint,
the plaintiff may be entitled to relief.”’ Phillips, 515 F.3d at 231 (quoting Pinker v. Roche
Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)). However, “the tenet that a court must accept
as true all of the allegations contained in a complaint is inapplicable to legal conclusions.
Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements,
do not suffice.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 555).
If the “well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct,” the complaint should be dismissed for failing to “show[ ] that the pleader is entitled
to relief” as required by Rule 8(a)(2). Id. at 1950.
According to the Supreme Court in Twombly, “[w]hile a complaint attacked by a Rule
12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to
provide the ‘grounds’ of his[/her] ‘entitle[ment] to relief’ requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do.” 550 U.S.
at 555 (internal citations omitted). The Third Circuit summarized the Twombly pleading standard
as follows: “‘stating . . . a claim requires a complaint with enough factual matter (taken as true) to
suggest’ the required element.” Phillips, 515 F.3d at 234 (quoting Twombly, 550 U.S. at 556).
In Fowler v. UPMC Shadyside, the Third Circuit directed district courts to conduct a twopart analysis. 578 F.3d 203, 210 (3d Cir. 2009). First, the court must separate the factual elements
from the legal conclusions. Id. The court “must accept all of the complaint’s well-pleaded facts
as true, but may disregard any legal conclusions.” Id. at 210-11. Second, the court must determine
if “the facts alleged in the complaint are sufficient to show that the plaintiff has a ‘plausible claim

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for relief.’” Id. at 211 (quoting Iqbal, 566 U.S. at 679). “In other words, a complaint must do
more than allege the plaintiff’s entitlement to relief. A complaint has to ‘show’ such an entitlement
with its facts.” Id. (citing Phillips, 515 F.3d at 234-35.)
Further, when a plaintiff sets forth fraud-based claims, those claims are subject to the
heightened pleading standard of Federal Rule of Civil Procedure 9(b) (“Rule 9(b)”). Rule 9(b)
requires that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind
may be alleged generally.” Plaintiffs “alleging fraud must state the circumstances of the alleged
fraud[ulent act] with sufficient particularity to place the defendant on notice of the ‘precise
misconduct with which [it is] charged.’” Park v. M&T Bank Corp., No. 09-cv-02921, 2010 WL
1032649, at *5 (D.N.J. Mar. 16, 2010) (citing Lum v. Bank of America, 361 F.3d 217, 223-24 (3d
Cir. 2004)). Plaintiffs can satisfy this standard by alleging dates, times, places and other facts with
precision. Park, 2010 WL 1032649, at *5.

DISCUSSION
I.

Claims against Defendant Sergio Acosta
a. Breach of trust agreement and ERISA fiduciary duties losses caused by enrollment
of ABA/AMA enrollees (“The Horizon Claims”) (Count I)
Plaintiffs claim that they would suffer damages in excess of $5 million “[i]f Horizon

pursues a claim against the Plan alleging that the Plan, acting through Acosta, misrepresented to
Horizon that the ABA/AMA Enrollees were eligible for coverage under the Plan and thereby
caused Horizon to incur damages. . . in providing coverage to those individuals. . .” (Compl. at ¶¶
99-100). Plaintiffs, however, do not allege that Horizon has taken any action against the Plan

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beyond issuing a demand letter or that the Plan has suffered any actual injury as a result of
Horizon’s claimed losses. A plaintiff must show that it has sustained discrete injury in fact that is
concrete, imminent, and not hypothetical or a matter of conjecture. Lujan v. Defenders of Wildlife,
504 U.S. 555, 560-61 (1992). Plaintiffs may have a cause of action for subrogation if Horizon
does in fact actively seek and successfully collects the amount sought in reimbursement from
Plaintiffs. That cause of action has yet to accrue at this juncture. Because Plaintiffs’ Horizon claims
are premature, Count I will be dismissed.
b. Breach of trust agreement and ERISA failure to collect contributions owed for union
enrollees (“The Union Contribution Claim”) (Count II)
Plaintiffs claim that Acosta failed to cause the Union to fund the Plan, but they do not offer
sufficient facts to support their claim. Particularly, Plaintiffs do not specify the amount of the
Union’s funding deficit, how many Union employees participated in the Plan, how the deficiency
was calculated, who paid the premiums if the Union did not, or when the contributions should have
been made. As such, this Court will dismiss the contribution claim alleged as Count II without
prejudice. Plaintiffs may amend their complaint to include facts that demonstrate how the Plan
suffered damages or losses as a result of the purportedly delinquent contributions from the Union
within 30 days of the issuance of this opinion.
c. Co-fiduciary liability losses caused by enrollment of ABA/AMA enrollees (“Breach
of Fiduciary Duty”) (Count V).
Plaintiffs allege that Acosta breached his fiduciary duty. By statute, only four classes of
plaintiffs are authorized to bring suit under Section 502(a) of ERISA: the Secretary of Labor, plan
fiduciaries, plan participants, and plan beneficiaries. 29 U.S.C. § 1132(a). As plan fiduciaries, the
Plan’s Board of Trustees has standing to sue Acosta for breach of fiduciary duty as it has in this

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case. However, the Plan itself is not afforded standing to seek relief on a breach of fiduciary duty
claim. Because the Plan is not statutorily authorized to seek recovery for breach of fiduciary duty,
it is dismissed as a plaintiff as to Count V.

II.

Claims against Defendant Ackerman
a. Common-law fraud (Count VI)
Plaintiffs allege common law fraud in Count VI of the complaint. To properly allege a

fraud claim, “. . . a party must state with particularity the circumstances constituting fraud or
mistake.” Fed.R.Civ.P. 9(b). Moreover, a fraud claim must set forth the “who, what, where and
when” of the allegedly false representation. In re Suprema Specialties, Inc. Securities Litigation,
438 F.3d 256, 276 (3d Cir. 2006). Here, Plaintiffs do not allege, with specificity, the facts
necessary to support a cause of action for common law fraud. The complaint merely recites
conclusory statements of the elements of a fraud claim. As such, Count VI is dismissed without
prejudice. Plaintiffs should amend their complaint to provide a sufficient factual basis as to what
allegedly fraudulent representations were made, who made them, when they were made, the mode
of communication in which they were made, the context in which the representations were made
and the circumstances surrounding them.
b. Counts III, IV, and VII.
This Court finds that Counts III, IV, and VII, namely ERISA § 502(c)(3) participant
liability, breach of ERISA fiduciary duties/prohibited transactions, and common law negligent
misrepresentation, respectively, are sufficiently pled. Therefore, Ackerman’s motion to dismiss
those counts is denied.

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III.

Claims against Defendant Bacheler
a. Professional negligence (Count VIII)
In Count VIII of the complaint, Plaintiffs accuse Bacheler of professional negligence.

(Compl. ¶¶ 93-100.) Specifically, they allege that as an auditor of an ERISA plan, Bacheler was
required to test the Plan’s compliance with its eligibility provisions and that, had he done so, the
Plan would have discovered that the ABA/AMA enrollees were not eligible to participate. (Compl.
at ¶¶ 96-97.) As a result of this alleged negligence, Plaintiffs claim that they suffered damages
from their ignorance of and failure to “collect over $900,000 in principal contributions from the
Union.” (Id. at ¶ 99.) While the pleadings scarcely illustrate how the Union’s insufficient
contributions can be attributed to Bacheler, this Court will deny Bacheler’s Motion to Dismiss.
Nonetheless, Plaintiffs should amend their Complaint to provide more facts regarding the causal
relationship between Bacheler’s alleged negligence as an auditor and the Union’s deficient
contributions.
Lastly, because this Court has determined that the Horizon claims are premature and cannot
stand, Plaintiffs may not present, as proof of Bacheler’s alleged professional negligence, their
purported liability to Horizon.
CONCLUSION
Defendant Bacheler’s Motion to Dismiss is DENIED. Defendants Acosta and Ackerman’s
Motions to Dismiss are GRANTED IN PART AND DENIED IN PART. An appropriate order
will accompany this opinion.
s/ Susan D. Wigenton
SUSAN D. WIGENTON
UNITED STATES DISTRICT JUDGE
cc:

United States Magistrate Judge Steven C. Mannion.

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