OSWOOD et al v. PENN PUBLIC TRUST et al

Filing 183

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE WENDY BEETLESTONE ON 8/1/22. 8/1/22 ENTERED AND COPIES E-MAILED.(mbh)

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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
MORGEN & OSWOOD
CONSTRUCTION CO., INC., and
GREGORY A. OSWOOD
Plaintiffs,

CIVIL ACTION

v.

NO. 13-666

NATIONWIDE LIFE INSURANCE
COMPANY,
Defendant.
MEMORANDUM OPINION
Plaintiffs Gregory Oswood and Morgen & Oswood Construction Co., Inc. contend that,
by taking certain actions as the insurer of life insurance policies which were devalued through a
larger, complex scheme to swindle funds from welfare benefit plans operated by one John
Koresko, Defendant Nationwide Life Insurance Company (“Nationwide”) violated two sections
of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1132(a)(2)(3) and two sections of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18
U.S.C. §§ 1962(c)-(d). They also make claims against Nationwide for the following under
Pennsylvania common law: fraud, breach of fiduciary duty, knowing participation in and aiding
and abetting breach of fiduciary duty, breach of an obligation of good faith, and negligence.
Plaintiffs now move for summary judgment pursuant to Federal Rule of Civil Procedure
56 on their ERISA claims, and Defendant cross-moves for summary judgment on all of
Plaintiffs’ claims. For the reasons that follow, both Parties’ Motions shall be granted in part and
denied in part.
I.

BACKGROUND

This story arises from a complex scheme run by John Koresko and his affiliates to steal

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tens of millions of dollars from hundreds of welfare benefit plans. In the decade of litigation
following the discovery of this scheme, the focus of these suits has shifted from Koresko to the
insurers which provided life insurance policies used in the welfare benefit plans. Plaintiffs are
some of Koresko’s victims and contend that Defendant Nationwide was in on Koresko’s scheme.
Specifically, Plaintiffs contend that Defendant was an ERISA fiduciary because it exercised
undirected control by changing the owner of the life insurance policy on Plaintiff Gregory
Oswood’s life and issuing a loan on said policy, and that Defendant breached such fiduciary
duties. Plaintiffs also argue that Defendant was part of a RICO enterprise with Koresko and his
cohorts.
To follow the narrative, one must be familiar with the myriad characters involved and the
roles they played. Plaintiff Gregory Oswood owns Plaintiff Morgen & Oswood Construction
Co., Inc. (“M&O”). He is a participant in the Morgen & Oswood Construction Co. Inc. Welfare
Benefit Plan Welfare Benefit Plan (“M&O Plan”).
Much of the work in running the M&O and other plans was done by John Koresko who
established several entities which he used to perpetuate his fraud. These entities included the
Regional Employers’ Assurance Leagues (“REAL”)—a loose, unincorporated association of
unrelated employers through which Koresko offered to employers his program of employee
welfare benefit plans and benefits. Koresko also established two trusts, the Regional Employers
Assurance League Voluntary Employees’ Beneficiary Association Trust (“REAL VEBA Trust”)
and the Single Employer Welfare Benefit Plan Trust (“Single Employer Trust”). Four different
entities, First Union National Bank (“FUNB”), Community Trust Company (“CTC”), Farmers &
Merchants Trust Company (“F&M”) and Penn Public Trust (“PPT”), served as the two Trusts’
trustees in that order. The last of these trustees, PPT, was established and owned by Koresko.

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Koresko also founded, owned and served as the director of PennMont Benefits Services, Inc.
(“Penn-Mont”), which served as the administrator for each employer’s plan, including the M&O
Plan. Finally, Koresko founded and wholly owned two law firms—the Koresko Law Firm and
Koresko & Associates, P.C.—which represented and acted on behalf of the other Koresko
entities.
To join the arrangement, Oswood and M&O executed several interrelated documents, 1
which consolidated power into the hands of John Koresko and his affiliates, including PennMont and the trustee of the REAL VEBA and Single Employer Trusts. These documents
established and named Plaintiffs’ welfare benefits plan, the M&O Plan, and referenced certain
entities and persons involved in the management of the plan and the Koresko arrangement. They
named Koresko a fiduciary of the M&O Plan, authorized him to complete any documents on
behalf of Oswood which Penn-Mont determined to be incident to the M&O Plan, and provided
that his signature alone could direct the Trustee to act in matters related to the trusts and the
M&O Plan. These documents similarly authorized Penn-Mont to: (1) complete and execute any
documents on behalf of Oswood which it determined were related to the M&O Plan; (2) instruct
the Trustee to act on behalf of the trusts and the M&O Plan; and, (3) exercise its sole discretion
to delegate any and all fiduciary responsibilities under the Trusts. The Trustee, which was
FUNB at the time of execution, could take all manner of action on behalf of the Trusts at the
direction of Penn-Mont, or Koresko. Koresko and Penn-Mont thus held all the authority to act
on behalf of the M&O Plan and the Trusts, Oswood with respect to matters pertaining to the
M&O Plan, and could direct the trustee to exercise its powers to do their bidding.

These documents included: (1) an “Adoption Agreement” which required Plaintiffs to adopt and agree to the
“REAL Health and Welfare Plan Document”—a prototype plan document created by Koresko, and a Master Trust
Agreement called the “REAL VEBA Trust Agreement”; and, (2) an “Employee Participation Agreement.”
1

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Once the M&O Plan was established, life insurance policies were taken on the lives of
plan participants though the trustee, then FUNB, which was named as the owner for the benefit
of the welfare benefit plans. The Trust functioned as a pass-through vehicle, receiving insurance
premiums paid by the employer and paying them to the insurance company for the policies. In
this case, at Oswood’s request, a written application was submitted on behalf of the M&O Plan
to Nationwide for a life insurance policy with a death benefit of $5,162,546 on Oswood’s life
(the “Policy” or the “Oswood Policy”). The application listed the owner and beneficiary for the
Policy as the “First Union Bank, Trustee f/b/o Morgen & Oswood Const. WBP” and its address
as a King of Prussia P.O. Box left to the care of Penn-Mont. The application also did not specify
the role or relationship of Penn-Mont to the Policy or FUNB. Nationwide issued the policy on
July 1, 1999.
Aside from John Koresko and his companies, two other individuals were key to his
arrangement. The first is his brother, Lawrence Koresko, 2 who was the Vice President and partowner of Penn-Mont and worked inter alia as an independent insurance broker at Koresko
Financial, an insurance wholesaler he founded and jointly owned with his brother John.
The other key person involved in the execution of the Koresko scheme is Jeanne Bonney.
She, like the Koreskos, held a variety of hats in the arrangement. The record indicates that she
was an attorney employed by Koresko’s two law firms, was affiliated with Penn-Mont and
served as the Attorney in Fact for the REAL.
The final character in this story is the Department of Labor, which as mentioned supra
sued the REAL VEBA Trust, the Single Employer Trust, Koresko, Bonney, CTC, and Koresko’s
law firms for violating ERISA by misusing funds from hundreds of welfare benefit plans.
2

Unless otherwise noted, “Koresko” as used in this opinion refers only to John Koresko.

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Ultimately, in February 2015, the Department of Labor prevailed in its lawsuit against Koresko
and the other defendants in the action—who were determined to be ERISA fiduciaries of the
employers’ plans and found to have violated various provisions of the law by misusing plan
funds, including by taking out loans exceeding $35 million on insurance policies. 3 As relevant
here, a loan in the amount of $680,509.29 was issued by Defendant on the Oswood Policy, which
loan has not been repaid and has continued to accrue interest in the 13 years since it was issued.
These characters, or the “who,” are not the only piece to solving the puzzle of the case;
the “what” and the “when” are also determinative. Specifically, who or what entity owned the
insurance policy on Oswood’s life changed over time (at various points, Koresko and his cohorts
told Defendant that the policy was owned by— “First Union National Bank, Trustee f/b/o
Morgen & Oswood Const. WBP,” the Single Employer Trust and the four entities which served
as its trustees), as did who or what had the authority to make changes to the policy (those who
claimed authority included FUNB, CTC, PPT and Koresko) and to what extent of authority they
represented themselves to have. Further, when Defendant learned of who or what had what
authority with respect to the policy is unclear from the record.
II.

STANDARD OF REVIEW

To prevail at summary judgment, “the movant must show that ‘there is no genuine issue
as to any material fact and the moving party is entitled to a judgment as a matter of law.’” Nat’l
State Bank v. Fed. Rsrv. Bank of N.Y., 979 F.2d 1579, 1581 (3d Cir. 1992) (quoting Fed. R. Civ.
P. 56(c)). A factual dispute is material where it “might affect the outcome of the suit under the
governing law. . . .” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). And a genuine
issue is present “when a reasonable trier of fact, viewing all of the record evidence, could
See Perez v. Koresko, 86 F. Supp.3d 293, 293-300 (E.D. Pa. 2015), aff’d sub nom. Sec’y U.S. Dep’t of Labor v.
Koresko, 646 F. App’x 230 (3d Cir. 2016).

3

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rationally find in favor of the non-moving party in light of his burden of proof.” Doe v. Abington
Friends Sch., 480 F.3d 252, 256 (3d Cir. 2007).
The movant bears the initial burden of identifying those portions of the record “it believes
demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986). Then, the non-moving party must “go beyond the pleadings” and “designate
‘specific facts showing that there is a genuine issue for trial.’” Id. at 324. Courts must “view the
facts and draw reasonable inferences ‘in the light most favorable to the party opposing the
[summary judgment] motion.’” Scott v. Harris, 550 U.S. 372, 378 (2007) (alteration in original)
(internal citation omitted).
III.

DISCUSSION
a. Plaintiffs’ ERISA Section 1132(a)(2) Claims

Plaintiffs advance three theories under Section 1132(a)(2), which provides for plaintiffs
to obtain equitable relief and to recover damages from fiduciaries who breach their duties,
Graden v. Conexant Sys. Inc., 496 F.3d 291, 295 (3d Cir. 2007). Congress enacted ERISA “to
ensure the proper administration of pension and welfare plans, both during the years of the
employee’s active service and in his or her retirement years.” Boggs v. Boggs, 520 U.S. 833, 839
(1997). Crafted to bring order and accountability to a system of employee benefit plans plagued
by mismanagement and abuse, Massachusetts v. Morash, 490 U.S. 107, 112 (1989), ERISA is
principally concerned with protecting the financial security of plan participants and
beneficiaries. 29 U.S.C. § 1001(b); Boggs, 520 U.S. at 845; Shaw v. Delta Air Lines, Inc., 463
U.S. 85, 90 (1983). Because of this remedial purpose, ERISA “should be liberally construed in
favor of protecting the participants in employee benefit plans.” See IUE AFL-CIO Pension Fund
v. Barker & Williamson, Inc., 788 F.2d 118, 127 (3d Cir. 1986).

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A pertinent illustration of ERISA’s broad construction is that the term “fiduciary” is
defined “not in terms of formal trusteeship, but in functional terms of control and authority over
the plan . . . thus expanding the universe of persons subject to fiduciary duties—and to
damages. . . .” Mertens v. Hewitt Assocs., 508 U.S. 248, 262 (1993) (emphasis in original)
(internal citation omitted); see also Edmonson v. Lincoln Nat’l Life Ins. Co., 725 F.3d 406, 413
(3d Cir. 2013) (“The definition of a fiduciary under ERISA is to be broadly construed.”). An
entity is a fiduciary for purposes of ERISA if it is either named as such in the plan, or, as relevant
here, if it exercises any “authority or control respecting management [of the plan] or disposition
of [the plan’s] assets.” 29 U.S.C. § 1002(21)(A); Srein v. Frankford Tr. Co., 323 F.3d 214, 221
(3d Cir. 2003).
A party will be found to be a fiduciary for exercising authority or control if it exercised
“undirected authority and control” over plan assets—meaning that it did not act at the direction
of a person or entity authorized to give such direction. Srein, 323 F.3d at 221-22 (emphasis
added). “[M]ere custody or possession over plan assets, without more,” is not enough to give
rise to fiduciary status. In re Mushroom Transp. Co., Inc., 382 F.3d 325, 347 (3d Cir. 2004). In
determining whether an entity is a fiduciary, it is crucial to keep in mind that it “is not an all or
nothing concept. . . . [A] court must ask whether a person is a fiduciary with respect to the
particular activity in question.” Srein, 323 F.3d at 221 (emphasis added) (quoting Maniace v.
Com. Bank of Kan. City, N.A., 40 F.3d 264, 267 (8th Cir. 1994)). Thus, Defendant may be a
fiduciary for one of the alleged acts of discretionary authority or control but lack fiduciary status
for another. Plaintiffs theorize that Defendant exercised undirected authority over the Policy and
was thereby a fiduciary in three instances: when it changed the ownership of the Policy in 2002
and 2006, and when it issued a loan on the Policy in 2009. Defendant disputes the facts

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underpinning each of the three claimed acts of undirected control or authority and also raises two
threshold defenses—that (1) Plaintiffs’ claims are time-barred; and, (2) its actions were
ministerial and thereby cannot give rise to fiduciary responsibility.
i. Statute of Limitations
Defendant’s first argument that it contends estops any further inquiry and requires entry
of summary judgment in its favor is that Plaintiffs’ two ERISA claims arising from changes in
the ownership of the Policy are time-barred. ERISA’s statute of limitations provides that an
action pertaining to a fiduciary’s breach must be brought by the earlier of: (1) six years after the
“date of the last action which constituted a part of the breach,” or in the case of an omission, “the
latest date on which the fiduciary could have cured the breach or violation”; or, (2) “three years
after the earliest date on which the plaintiff had actual knowledge of the breach or violation.” 29
U.S.C. § 1113. These limitations apply except in cases of “fraud or concealment” in which case
an action may be commenced not later than six years after the discovery of the breach or
violation. Id.
Plaintiffs brought this action on February 5, 2013. Defendant argues that Plaintiffs’
Section 1132(a)(2) claims premised on two changes in the ownership of the Policy are timebarred because: (1) these changes occurred in 2002 and 2006—more than six years before
Plaintiff filed suit; and, (2) Plaintiffs had actual knowledge of the changes by 2002 or 2009
respectively—more than three years before the instant suit was filed. Specifically, it argues that
Plaintiffs knew of the 2002 ownership change from FUNB to the REAL VEBA Trust from a
2002 quarterly statement which reflected the new owner of the policy, and that they knew of the
2006 change from the REAL VEBA Trust to the Single Employer Trust from a 2006 quarterly
statement which reflected the new owner of the policy.

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Plaintiffs concede that their claim premised on the 2002 ownership change is untimely,
but contend, without any cogent argument, “there is no evidence that plaintiffs had any
knowledge of the 2006 change.” In doing so, Plaintiffs fail to respond to Defendant’s citations to
documents which demonstrate that Plaintiffs knew of the 2006 change later that same year.
Plaintiffs’ failure to rebut Defendant’s evidence or timeliness argument “constitutes
abandonment” of the opportunity to contest summary judgment on that ground. Seals v. City of
Lancaster, 553 F. Supp.2d 427, 432 (E.D. Pa. 2008) (citing Hackett v. Cmty. Behav. Health,
2005 WL 1084621, at *6 (E.D. Pa. May 6, 2005) (holding that a party’s failure to address
arguments waives the opportunity to contest summary judgment on those grounds)); see also
Reynolds v. Wagner, 128 F.3d 166, 178 (3d Cir. 1997) (“[A]n argument consisting of no more
than a conclusory assertion such as the one made here (without even a citation to the record) will
be deemed waived.”). Defendant’s Motion for Summary Judgment shall therefore be granted on
Plaintiffs’ 1132(a)(2) claim to the extent that it is premised on the two changes in the owner of
the Oswood Policy.
ii. Ministerial Acts
Defendant next argues that it cannot be an ERISA fiduciary as a matter of law because its
processing of the loan and change of ownership requests were “purely ministerial” in that these
actions were not “initiated by” Defendant but were done at the request of another—irrespective
of that person’s authority to do so. Defendant continues that a “mistake or miscomprehension
about that authority” cannot transform ministerial functions into actions of discretionary
authority or control. It relies for this argument on a non-binding decision from which it pulls the
proposition that “[t]he power to err . . . is not the kind of discretionary authority which turns an

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administrator into a fiduciary.” IT Corp. v. Gen Am. Life Ins. Co., 107 F.3d 1415, 1421 (9th Cir.
1997).
Other cases cited by Defendant stand for the unremarkable proposition that when a nonfiduciary acts with regard to the plan’s assets at the instruction of an authorized person, which
actions include issuing checks from the plan’s accounts, Nagy v. DeWese, 771 F. Supp.2d 502,
513 (E.D. Pa. 2011), transferring funds, In re Mushroom, 382 F.3d at 332, 4 or receiving deposits,
Bd. of Trs. of Bricklayers & Allied Craftsmen Loc. 6 of N.J. Welfare Fund v. Wettlin Assocs.,
Inc., 237 F.3d 270, 275 (3d Cir. 2001), the non-fiduciary’s actions do not transform it into a
fiduciary. In effect, IT Corp. distinguishes between clerical errors which do not create fiduciary
status, and other kinds of mistakes which suggest a misjudgment that transforms the nonfiduciary into a fiduciary. 107 F.3d at 1421. A manager of a welfare benefit plan who, at the
instruction of a principal at the company, paid that principal more than he was entitled was an
ERISA fiduciary despite acting at the instruction of the principal because the payment of the
excess funds amounted to an “exercise [of] control over and dispos[al] of Plan assets.” Id.
(internal quotation marks omitted) (quoting Yeseta v. Baima, 837 F.2d 380, 385-86 (9th Cir.
1988)). An example of a clerical error, on the other hand, is “when a clerical employee types an
erroneous code onto a computer screen” or errs in mailing a check. Id. Defendant’s reading of
these cases, to wit, that the importance of the task—not whether a change was made at the
direction of an authorized person—is what determines whether a non-fiduciary can be held as a
fiduciary in its execution is not correct.

Defendant advances a remarkably strained reading of In re Mushroom. It argues that because “the Third Circuit
did not even mention the issue” of the authority of the individual who instructed the defendant bank to distribute
assets, the Third Circuit would find that the distribution of assets at the request of a stranger would not give rise to
ERISA fiduciary status in In re Mushroom. But Defendant has not demonstrated that there was any question as to
the requesting person’s authority, or even that this question was properly raised to the Third Circuit.

4

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A non-fiduciary acting at the direction of an authorized person, regardless of the
importance of that act, presents a situation distinct from one where it acts for a stranger. See
Hausknecht v. John Hancock Life Ins. Co. of N.Y., 334 F. Supp.3d 665, 673-74 (E.D. Pa. 2018)
(citing Srein, 323 F.3d at 221). When a non-fiduciary has no discretion under a policy or plan
document and acts at the behest of a person authorized under said document, it does not become
a fiduciary with respect to that authorized person’s decisions. Id. In contrast, where a nonfiduciary acts at the request of a stranger to the plan’s assets, it may be found to have exercised
“undirected authority or control” over those assets. See id.; Corman v. Nationwide Life Ins. Co.,
396 F. Supp.3d 530, 545 (E.D. Pa. 2019). This is so even where the plan or policy document
expressly provides that the non-fiduciary lacks discretion. That is because the execution of the
stranger’s request is made “in defiance” of that document’s strictures. Corman, 396 F. Supp.3d
at 545 (emphasis in original); Srein, 323 F.3d at 221 (holding that defendant was a fiduciary
when it paid funds from a plan’s investments to a stranger, though the plan documents provided
that the defendant did not have any discretion with respect to investments); Edmonson v. Lincoln
Nat’l Life Ins. Co., 899 F. Supp.2d 310, 323-25 (E.D. Pa. 2012) (holding that the “performance
of administrative and ministerial tasks by a mere custodian of plan assets does not amount to
practical control” where the tasks “do[] not violate” the terms of the plan), aff’d, 725 F.3d 406
(3d Cir. 2013). Therefore, if Defendant is found to have issued the policy loan at the request of
someone who did not have such authority, it will be deemed a fiduciary with respect to the loan
issuance.
iii. The Issuance of the Policy Loan
Plaintiffs’ remaining theory of fiduciary responsibility arises from Defendant’s issuance
of the Policy loan in 2009. In July 2009, Koresko requested a loan in the “maximum loan

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amount available” on the Policy. The terms of the Policy stated that the policy-owner “may
request a loan at any time while your Policy is in force.” Koresko’s request listed the policy
owner as the “Single Employer [] Trust, CTC Trustee” and was signed by him. Next to
Koresko’s signature was a hand written note which represented that he was signing “for
President & Administrator, Single Employer WP Trust and Attorney in Fact for Insured.” In
support of the application, Koresko submitted the Employee Participation Agreement which
appointed him, among others, as Oswood’s “Limited Attorney in Fact and power of attorney
with respect to all matters connected with and/or related to the procurement and maintenance of
benefits payable to [Oswood] pursuant to REAL VEBA and the Employer’s Welfare Benefit
Plan.” Based on the application and the Agreement, Defendant determined Koresko was
authorized to request the loan, made the loan and issued $680,509.29 to “Single Employer
Welfare Plan, c/o PennMont Benefit SRVC.” Three weeks later, on August 20, 2009,
Nationwide sent a letter to Penn-Mont which stated that the “The Limited [power of attorney
“POA”] recently sent to Nationwide. . . was signed by Gregory Oswood. Please be advised that
since Gregory Oswood is not the owner of this policy, his POA does not give authority to the
parties named in the POA (Penn-Mont and John J. Koresko, V, Esq.) to exercise any rights of
ownership in this policy. We regret to inform you that the enclosed document does not grant any
rights under the Limited POA to any life insurance policy issued by Nationwide.” The record
does not indicate that Nationwide took any action on the loan following this correspondence.
Plaintiffs argue that, as evidenced by Defendant’s own letter, the application and
Employee Participation Agreement did not demonstrate that Koresko had the authority to take
out the loan because the Employee Participation Agreement granted Koresko limited power of
attorney only over Oswood and not for the owner of record—the Single Employer Trust.

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Plaintiffs also contend that under Defendant’s internal loan procedures as of 2008 and 2021,
Koresko’s request would have been unacceptable and would not have been processed.
Defendant does not respond to these arguments, nor does it explain what to make of its
approval of the loan, the subsequent letter stating that the Employee Participation Agreement did
not endow Koresko with authority over the Policy, and its inaction thereafter to rescind the loan
or otherwise remedy the situation. Instead, Defendant argues that Koresko had actual or
apparent authority to take out a loan on the policy under principles of agency law. But both
these arguments stumble on procedural grounds. With respect to its argument regarding
Koresko’s actual authority, Defendant does not explain its position in its brief, instead directing
the Court to look at the brief of another insurance company, John Hancock, filed in a separate
case stemming from Koresko’s scam. Defendant represents that Hancock “has already
extensively briefed the issue of Koresko’s actual authority to make the loan requests” which
relied on “the same, generally applicable plan documents” so “there is no need to restate those
same arguments.” To prevail on a motion for summary judgment, however, a party must argue
its own case. These arguments, made in a completely separate case, will not be considered
because they are not part of the summary judgment record here.
Defendant argues that Koresko had apparent authority to act on the policy owner’s behalf
because he was: (1) the “Attorney in Fact” for the REAL VEBA; (2) the secretary and a member
of a “Committee” relating to the M&O Plan; (3) the President of Penn-Mont; (4) granted power
of attorney by Oswood; and, (5) “individually or through Penn-Mont” served as the “constant
and exclusive conduit for communications and instructions between the policy owner and
Nationwide from the inception of the Policy through the time of the loan.” But, as Plaintiffs
argue, “[t]hough Penn-Mont was constantly interacting with [Defendant], John Koresko’s name

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does not appear in [the Oswood Policy] file prior to the loan request.” Without some evidence
which establishes that Defendant had reason to believe that Koresko had been authorized by the
Single Employer Trust to act on its behalf, there can be no finding that he had apparent authority
to request the loan. See Universal Comput. Sys., Inc. v. Med. Servs. Ass’n of Pa., 628 F.2d 820,
823-24 (3d Cir. 1980) (approaching the analysis from what Defendant knew or had reason to
believe about the person’s authority).
Defendant’s failure to address Plaintiffs’ arguments regarding the inadequacy of the loan
application materials “constitutes abandonment” of the opportunity to contest summary judgment
on that ground. See Seals, 553 F. Supp.2d at 432 (citing Hackett, 2005 WL 1084621, at *6
(holding that a party’s failure to address arguments waives the opportunity to contest summary
judgment on those grounds)). Absent any challenge to Plaintiffs’ argument that the application
materials did not authorize Koresko to take out a loan on the policy, Defendant has not
demonstrated that there is any issue of fact or law which precludes a determination that its
actions were taken at the direction of an unauthorized person. Plaintiffs’ Motion for Summary
Judgment shall be granted on this issue—Defendant exercised undirected control and acted as
fiduciary with respect to the loan issuance on the policy.
Plaintiffs next argue that, by issuing the loan, Defendant breached its duties as an ERISA
fiduciary. In support of this argument, Plaintiffs copy the portion of the ERISA statute setting
forth a fiduciary’s duties and conclude that “the breach of those duties by Nationwide is selfevident.” They state, without any legally supportable argument or citation to evidence in the
record, that “[g]ranting the loan was (i) not in the interest of the participants and beneficiaries,
(ii) not for the exclusive purpose of providing benefits to participants and their beneficiaries, (iii)
not for the exclusive purpose of defraying reasonable expenses of administering the plan, and

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(iv) not in accordance with the documents and instruments government the plan.” In making an
argument, however, a party must “offer some argument or development of its theory”, “cite
relevant precedents” and “frame the issues for decision.” United States v. Dupree, 617 F.3d 724,
728 (3d Cir. 2010). As Plaintiffs did not complete any of these tasks, they did not present their
argument that Defendant breached its duties “in a manner that permits the court to consider its
merits.” Id.

Accordingly, the question of whether Defendant’s issuance of the loan on the

Oswood Policy constituted a breach of its fiduciary duties cannot be determined on summary
judgment. 5
a. The RICO Claims
Plaintiffs raise three RICO claims—two of which are brought pursuant to Section
1962(c), 18 U.S.C. § 1962(c), and the third of which is brought under Section 1962(d).
18 U.S.C. § 1962(d). For the following reasons only Plaintiffs’ Section 1962(d) claim survives
summary judgment.
Turning first to Plaintiffs’ Section 1962(c) claims: one is premised on Defendant’s direct
liability for a RICO violation, and the others are for vicarious liability for the actions of the two
Koresko brothers and their various companies. Section 1962(c) makes it unlawful for “any
person employed by or associated with any enterprise engaged in, or the activities of which
affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the
conduct of such enterprise’s affairs through a pattern of racketeering activity.” 18 U.S.C. §
1962(c). To maintain a claim for liability under Section 1962(c), Plaintiffs must demonstrate

Plaintiffs raise an alternate theory of liability under ERISA Section 1132(a)(3) if Defendant was “deemed not to
have been an ERISA fiduciary.” Section 1132(a)(3) “authorize[s] suits against any other person who knowingly
participates in a fiduciary’s violations of her duties.” See Nat’l Sec. Sys., Inc. v. Iola, 700 F.3d 65, 90 (3d Cir. 2012)
(internal citations, quotation marks and alterations omitted) (emphasis added). Because this Court finds that
Defendant was an ERISA fiduciary with respect to the loan issuance, whether Defendant is liable under Plaintiffs’
alternate theory of liability under ERISA need not be reached.
5

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“(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” In re Ins.
Brokerage Antitrust Litig., 618 F.3d 300, 362 (3d Cir. 2010).
Plaintiffs’ Section 1962(c) direct liability claim fails at the first element—conduct. That
is because they have not demonstrated that Defendant took “some part in directing the
enterprise’s affairs” which is necessary for a finding that it “conduct[ed] or participate[d]” in the
conduct of the Koresko’s enterprise under Section 1962(c). Reves v. Ernst & Young, 507 U.S.
170, 178-79 (1993). Direction can extend to the “lower rung participants” and “outsiders” in the
enterprise so long as they “exert control over [the enterprise]” and “conducted or participated in
the conduct of the ‘enterprise’s affairs,’ not just their own affairs.” Id. at 184-85 (emphasis in
original). Services or goods provided by a third-party to the enterprise do not satisfy this
requirement, regardless of how indispensable or valuable the service may have been, because
they do not demonstrate that the defendant had “knowingly engage[d] in ‘directing the
enterprise’s affairs.’” See Univ. of Md. at Balt. v. Peat, Marwick, Main & Co., 996 F.2d 1534,
1539 (3d Cir. 1993) (emphasis in original). In sum, “[i]t cannot be said that by merely
performing what are generic financial and related services . . . even if they are later found to be
deficient, [a] [] firm has opened itself to liability under the federal racketeering statute.” Id. at
1539-40. Indeed, there is consensus that Section 1962(c) claims against outside professionals
providing important services to a racketeering enterprise do not constitute claims that these
professionals directed the affairs of the enterprise. See, e.g., Azrielli v. Cohen L. Offs., 21 F.3d
512, 521-22 (2d Cir. 1994) (provision of legal services related to fraudulent real estate
transaction was not management of the RICO enterprise conducting the fraudulent transaction);
Fidelity Fed. Sav. & Loan Ass’n v. Felicetti, 830 F. Supp. 257, 260 (E.D. Pa. 1993) (holding that
even if appraiser’s reports are “keystone” of the enterprise’s perpetration of fraud, appraiser

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cannot be liable under Section 1962(c)); United States v. Oreto, 37 F.3d 739, 750 (1st Cir. 1994)
(accountants were not liable because their involvement in enterprise’s decision did not arise to
direction because they neither made those decisions nor carried them out); Baumer v. Pachl, 8
F.3d 1341, 1344 (9th Cir. 1993) (providing legal services to an enterprise did not satisfy
“operation or management” test); Stone v. Kirk, 8 F.3d 1079, 1092 (6th Cir. 1993) (sales
representative did not participate in “operation or management” of the enterprise).
Plaintiffs contend that Defendant “was the provider of the product the enterprise was
designed to sell; it was a collaborator and partner in the marketing scheme; in receiving
premiums, paying commissions and administering the insurance policies sold, it played a
substantial role in the continued administration of the enterprise; and, in approving or rejecting
loan requests, it played a pivotal role in the conversions. . . .” Plaintiffs also posit that
Nationwide’s role went beyond merely providing a policy because the plan documents
incorporate the terms of the Policy, which provide that Nationwide has “ultimate control over
whether and how death benefits are to be paid and the amount of the benefits.” Though Plaintiffs
use a variety of verbs to describe what Defendant did, they do not provide competent evidence
that Defendant directed or exercised control regarding the enterprise’s affairs. Even assuming
that Defendant acted as Plaintiffs say it did—which Defendant disputes—these actions are more
akin to a service provider whose support, though integral to the enterprise, does not provide the
basis for RICO liability. Defendant’s Motion for Summary Judgment on Plaintiffs’ Section
1962(c) direct liability claim shall therefore be granted.
Plaintiffs’ theory of vicarious liability under Section 1962(c)—premised on an argument
that the Koreskos and their companies were Defendant’s agents in selling its insurance
products—fares no better. Defendant argues that vicarious liability is not a viable claim under

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Section 1962(c). As this Court explained in depth in its recent decision in Corman v. Nationwide
Life Ins. Co., 17-cv-3912, Defendant’s position is correct. The text of Section 1962(c) does not
support a private civil cause of action under a theory of vicarious liability, which dooms
Plaintiffs’ Section 1962(c) vicarious liability claim as a matter of law. Defendant’s Motion for
Summary Judgment on this claim shall therefore be granted.
Plaintiffs’ third RICO claim—for conspiracy under RICO Section 1962(d)—survives
summary judgment as Defendant does not make any arguments in its brief against this claim.
Instead, it points to the arguments raised against Plaintiffs’ 1962(c) claim, contending “Plaintiffs’
Section 1962(d) claim must be dismissed for the same reasons that their section 1962(c) claims
fails[sic]: Plaintiffs have failed to make any showing that Nationwide ever conspired with any
Koresko RICO violators or that Nationwide knowingly agreed to facilitate Koresko’s scheme to
embezzle the loan proceeds.” But Defendant’s Section 1962(c) arguments do not address the
following two elements of liability under Section 1962(d): “1) knowledge of the corrupt
enterprise’s activities and 2) an agreement to facilitate those activities.” Smith v. Berg, 247 F.3d
532, 535 (3d Cir. 2001) (internal citation and quotation marks omitted). Defendant’s efforts to
dismiss Plaintiffs’ Section 1962(d) claim thus fails because it did not argue its position “in a
manner that permits the court to consider its merits.” Dupree, 617 F.3d at 728. A party must
“offer some argument or development of its theory,” “cite relevant precedents” and “frame the
issues for decision” before a court will engage with its advocacy. Id. (internal citation and
quotation marks omitted). This Court’s role is not to craft arguments for the parties, especially
those represented by counsel. See Aliaj v. Att’y Gen., 387 F. App’x 136, 138 (3d Cir. 2010).

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b. The Common Law Claims
Defendant moves for summary judgment on grounds of untimeliness against Plaintiffs’
four common law claims for: (1) fraud; (2) breach of fiduciary duty; (3) knowing participation in
and aiding and abetting breaches of fiduciary duty; and, (4) negligence and bad faith. All four of
Plaintiffs’ claims are subject to a two-year statute of limitations and arise from conduct which
either occurred in the late 1990s prior to Plaintiffs’ enrollment in Koresko’s arrangement, or
Defendant’s alleged breaches of its ERISA fiduciary duties in 2002, 2006 and 2009 when it
changed the policy owner and issued the loan on the Policy. At the latest, therefore, the statute
of limitations for Plaintiffs’ claims would have run by 2011—at least two years before they filed
the instant suit in February 2013. Plaintiffs’ only response to Defendant’s untimeliness argument
is that Pennsylvania applies the discovery rule, under which the clock runs once the “plaintiff
knew, or exercising reasonable diligence, should have known (1) he or she was injured and (2)
that the injury was caused by another.” Adams v. Zimmer US, Inc., 943 F.3d 159, 163 (3d Cir.
2019) (citing Coleman v. Wyeth Pharms., 6 A.3d 502, 510-11 (Pa. Super. 2010)). Based on this
rule, Plaintiffs argue that they “would be entitled to the benefit of the discovery rule and they did
not learn of the facts constituting the claim more than two years before filing suit.” Plaintiffs,
however, make no effort to explain or apply the discovery rule to the facts of this case or their
claims. Their “argument” therefore does not make any effort to respond to Defendant’s
untimeliness defense, and “constitutes abandonment” of the opportunity to contest summary
judgment on this ground. Seals, 553 F. Supp.2d at 432 (internal citation omitted); see also

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Reynolds, 128 F.3d at 178. Defendant’s Motion for Summary Judgment shall therefore be
granted against Plaintiffs’ common law claims.
IV.

CONCLUSION 6

For the foregoing reasons, Plaintiffs’ Motion shall be granted with respect to their ERISA
Section 1132(a)(2) claim premised on Defendant’s issuance of the loan on the Oswood policy,
and Defendant’s Motion shall be granted with respect to Plaintiffs’ ERISA Section 1132(a)(2)
claim premised on the 2002 and 2006 changes to the Policy ownership, the RICO Section
1962(c) claims, and Plaintiffs’ common law claims. The Parties’ cross-motions shall be denied
in all other respects.
An appropriate order follows.
BY THE COURT:
/s/Wendy Beetlestone, J.
_______________________________
WENDY BEETLESTONE, J.

Defendant also asks the Court to “determine the amount of Plaintiffs’ damages” at summary judgment, though it
cites no authority to support the propriety of doing so at this juncture. This Court declines Defendant’s request for
an opinion determining its potential liability if Plaintiffs were to succeed on their remaining claims.

6

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