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John J. Koresko, V, et al. v. Hilda Solis

November 10, 2011


The opinion of the court was delivered by: McLaughlin, J.


This case involves the Department of Labor's ("DOL") decision to subpoena and ultimately sue the plaintiffs for violations of the Employee Retirement Income Security Act of 1974 ("ERISA"). In 2003 the Department of Labor began investigating the plaintiffs for possible violations of the statute. The DOL issued two sets of administrative subpoenas to supplement its investigation. The Court enforced the first set of subpoenas entirely and the second set in part when the plaintiffs did not comply. In 2009, when the DOL filed an ERISA enforcement suit in this Court, the DOL issued a press release stating that they had filed the lawsuit and describing the allegations against the plaintiffs.

The plaintiffs claim that the subpoenas, the DOL's lawsuit, and the press release violated their rights under various provisions of the United States Constitution, the Pennsylvania Constitution, the Administrative Procedure Act ("APA"), and the Dragonetti Act. The defendants have moved to dismiss the complaint. The Court will grant the defendants' motion.

I. Background

A. Related Litigation

John Koresko, ("Koresko") a plaintiff in this case, administers welfare benefits plans for employers through his company, PennMont Benefit Services. In 2004 and 2006, the DOL issued administrative subpoenas to John Koresko, Lawrence Koresko (the principal of PennMont), the PennMont Benefit Services company, the trusts through which the benefit plans were administered, and Koresko's law firm.

The DOL brought enforcement proceedings when the plaintiffs did not comply with the subpoenas. The Court issued an order enforcing the 2004 subpoenas, which was affirmed by the United States Court of Appeals for the Third Circuit. Chao v. Koresko, No. 04-mc-74, 2004 WL 1102381 (E.D. Pa. May 11, 2004). On December 8, 2008, the Court issued an order granting in part and denying in part the petition to enforce the 2006 subpoenas. The Court of Appeals affirmed the District Court's decision. Chao v. Koresko, No. 04-mc-74, Docket Nos. 181, 214.

The DOL filed an ERISA enforcement action, alleging that Koresko had underpaid benefits to plan participants, improperly withdrawn more than $1 million in plan assets from the plan trusts, and illegally used those assets. A press release was issued on the same day detailing the allegations against the plaintiffs. See Solis v. Koresko, No. 09-988, 2009 WL 2776630, at *1-*4 (E.D. Pa. Aug. 31, 2009) (Jones, J.) (detailing the enforcement action).

Koresko filed two motions in response to the DOL's lawsuit. First, he filed for a temporary restraining order against the government arguing that the lawsuit and the press release violated his constitutional rights. The Court denied the request for a temporary restraining order. Koresko appealed, and the Court of Appeals affirmed the Court's denial of the motion. Second, Koresko filed a motion for contempt. He claimed that the lawsuit violated the Court's stay order in the subpoena enforcement actions. The Court denied the motion for contempt, and the Court of Appeals affirmed. Solis v. Koresko, No. 09-988, 2009 WL 911131 (E.D. Pa. Mar. 31, 2009); Sec'y of Labor v. Koresko, 378 F. App'x 152 (3d Cir. 2010).

B. Allegations of the Complaint

The plaintiffs sued eleven current and former DOL

employees in their personal and official capacities: Hilda Solis, the Secretary of Labor; Mabel Capolongo, the regional director of the agency's Employee Benefits Security Administration; six DOL attorneys; and three DOL investigators.*fn1

1. Causes of Action in the Complaint Count I of the complaint alleges that the defendants deprived the plaintiffs of their rights under the First, Fifth, and Fourteenth Amendments to the United States Constitution, and Count II alleges that the defendants engaged in a conspiracy to do so. Compl. ¶¶ 58-63.

Count III claims a violation of the APA. The plaintiffs claim that the rules used by the DOL to issue the subpoenas and file the lawsuit against them were arbitrary and unreasonable. Compl. ¶¶ 71-74.

The complaint contains several state law claims. Count IV alleges a violation of the Pennsylvania Constitution's right to reputation. Count V alleges substantive violations of the Dragonetti Act, Pennsylvania's codification of the tort of malicious prosecution. Count VI alleges conspiracy to commit these state law violations. Compl. ¶¶ 76-86.

Finally, the plaintiffs claim in Count VII that the defendants' conduct was wilful, intentional, and reckless, and entitles them to punitive damages. Compl. ¶ 88.

This case was initially assigned to the Honorable Darnell Jones. When the government filed a motion to dismiss the plaintiffs' first complaint, the plaintiffs asked for leave to amend the complaint. Judge Jones granted the request. The case was reassigned to the undersigned. The defendants move to dismiss all claims in the amended complaint.

2. Factual Allegations

The complaint alleges that the DOL retaliated against the plaintiffs when they exercised their First Amendment rights and expressed views different from those held by the DOL in their press release, which received significant media attention in Philadelphia. One article written about the case included the following statement from the Secretary of Labor: "These defendants abused their duty of trust to workers and employers when they diverted plan assets for personal gain." Compl. ¶ 36.

On June 24, 2009, the DOL sent a letter to clients of the Koresko Law Firm and benefit plan participants. The letter asked these individuals to contact the DOL if they were represented by Koresko. Ms. Bonney, a lawyer for Mr. Koresko's law firm and a plaintiff in this case, contacted members of the DOL to demand they cease contacting Koresko clients. Compl.

¶¶ 27, 28, 40.

The plaintiffs aver that the defendants knowingly issued improper administrative subpoenas in violation of the APA and in order to violate their rights under the U.S. Constitution. Compl. ¶¶ 63-71.

The defendants are accused of undertaking the enforcement actions and associated behavior with the express purpose of harming the plaintiffs' professional reputations and putting them out of business. Compl. ¶¶ 44-46, 77, 79.

II. Discussion*fn2

A. Claims Against Attorney Defendants and All Defendants Sued in Their Official Capacities The Court will dismiss the claims against the DOL

lawyers on the ground of absolute immunity, and all claims against the government employees in their official capacities.*fn3

1. Absolute Immunity for Attorney Defendants The plaintiffs aver that various actions by DOL attorneys gave rise to the causes of action in the complaint. From this list, the Court distills two actions by the DOL's lawyers that allegedly violated the plaintiffs' rights:

(1) issuing the administrative subpoenas, and (2) filing the ERISA enforcement suit. Compl. ¶ 25, 27, 33, 38.*fn4

In Imbler v. Pachtman, 424 U.S. 409, 427-31 (1976), the Supreme Court held that prosecutors are absolutely immune from liability under 42 U.S.C. ยง 1983 when they are initiating or presenting a case. The test focuses exclusively on the nature of the conduct, not the title of the actor, to determine if the application absolute immunity is appropriate. Buckley v. Fitzsimmons, 509 U.S. 259, 269 (1993). Immunity applies with ...

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