United States District Court, E.D. Pennsylvania
JAMES CORMAN, ENERGY ALTERNATIVE STUDIES, INC. AND THE ENERGY ALTERNATIVE STUDIES INC. HEALTH AND WELFARE PLAN, Plaintiffs,
THE NATIONWIDE LIFE INSURANCE COMPANY, Defendant.
Koresko was the mastermind behind a large-scale endeavor to
convert welfare benefit funds to his own use, which has
spawned years of litigation. See generally Perez v.
Koresko, 86 F.Supp.3d 293 (E.D. Pa. 2015); Solis v.
Koresko, 884 F.Supp.2d 251 (E.D. Pa. 2012),
aff'd, 646 Fed.Appx. 230 (3d Cir. 2016).
the revelation of the scheme, Plaintiffs James Corman, Energy
Alternative Studies, Inc. (“EAS”), and the Energy
Alternative Studies Inc. Health and Welfare Plan (the
“EAS Plan”) filed a complaint in August 2017
against Defendant Nationwide Life Insurance Company
(“Nationwide”), which was dismissed without
prejudice. Corman v. Nationwide Life Ins. Co., 347
F.Supp.3d 248, 258 (E.D. Pa. 2018). Plaintiffs filed an
Amended Complaint to which Defendant has filed a motion to
dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).
The Amended Complaint alleges that Defendant: (1) breached
its fiduciary duty and engaged in prohibited transactions in
violation of Section 1132(a)(2) of the Employee Retirement
Income Security Act of 1974 (“ERISA”); (2)
knowingly participated in fiduciary breaches and in
prohibited transactions in violation of Section 1132(a)(3) of
ERISA; (3) conducted the affairs of an enterprise through a
pattern of racketeering activity in violation of Section
1962(c) of the Racketeer Influenced and Corrupt Organizations
Act (“RICO”); (4) benefited from the RICO
violations of Koresko and his associates in violation of
Section 1962(c) of RICO under a respondeat superior
theory of liability; and, (5) violated Section 1962(d) of
RICO by conspiring to violate Section 1962(c) of RICO. For
the reasons that follow, the motion will be denied.
addressing the facts themselves, a preliminary question
arises: Which facts and documents may be considered in
resolving this motion to dismiss? As a general rule, courts
may consider “documents that are attached to or
submitted with the complaint, and any matters incorporated by
reference or integral to the complaint, items subject to
judicial notice, matters of public record, orders, and items
appearing in the record of the case.” Buck v.
Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir.
2006); see also Mayer v. Belichick, 605 F.3d 223,
230 (3d Cir. 2010) (on motion to dismiss, consideration may
be given to “the complaint, exhibits attached to the
complaint, matters of public record, as well as undisputedly
authentic documents if the complainant's claims are based
upon these documents”). The Third Circuit has explained
that “[t]he rationale underlying this [rule] is that
the primary problem raised by looking to documents outside
the complaint [is] lack of notice to the plaintiff, ”
and that this problem “is dissipated where the
plaintiff has actual notice and has relied upon these
documents in framing the complaint.” In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426
(3d Cir. 1997).
Defendant's prior motion to dismiss, it attached two
documents central to this case: the “Plan Documents,
” which established the welfare benefit plan at issue
here, and the “Policy, ” which insured Plaintiff
James Corman and his wife Mary Corman's lives. Defendant
did not, however, attach these documents to its currently
pending motion to dismiss. Noticing this discrepancy, the
Court ordered the parties to show cause why the Court should
not take judicial notice of the documents submitted with the
initial motion to dismiss. While ultimately not dispositive
to the pending motion, the Court concludes based on the
parties' responses that the Plan Documents and the Policy
may appropriately be considered, for several reasons.
the documents are “undisputedly authentic, ”
Mayer, 605 F.3d at 230, insofar as when they were
attached to the prior motion to dismiss, Plaintiffs did not
contest their authenticity. And here, Plaintiffs offer no
argumentation to suggest otherwise.
these documents are “integral to the complaint.”
Buck, 452 F.3d at 260. The “integral”
criterion is met where “the claims in the complaint are
‘based' on an extrinsic document.”
Burlington Coat Factory, 114 F.3d at 1426.
Plaintiffs state that their claims are not
“based” on the documents because the documents
are “referenced to establish the confusion, ambiguity,
and false impressions created by them.” Plaintiffs'
contention is partly true; the Complaint certainly does
allege some confusion relating to the documents. But the
Amended Complaint also “base[s]” its ERISA claims
on the supposition that Defendant breached its fiduciary
duties by engaging in actions not authorized by the terms of
the Plan Documents or the Policy (including, as will be
discussed at length below, issuing an unauthorized loan).
Therefore, the documents are sufficiently
“integral” to the Amended Complaint that they may
be considered here.
these documents are “items appearing in the record of
the case.” Buck, 452 F.3d at 260. Plaintiffs,
in response, largely rely on Hoefling v. City of
Miami, 811 F.3d 1271 (11th Cir. 2016), an Eleventh
Circuit decision that held that a district court, when ruling
on a motion to dismiss a second amended complaint, had erred
by considering documents attached only to the first amended
complaint. The panel explained: “[W]hen [the plaintiff]
filed the second amended complaint, the first amended
complaint (and its attached exhibits) became a legal
nullity.” Id. at 1277. But that case does not
govern here primarily because the Hoefling
court's reasoning was based on the plaintiff having
“expressly disavowed or rejected” the previously
attached exhibit in question-whereas here Plaintiffs'
Amended Complaint continues to rely on the documents in
question. In any event, to the extent Hoefling
counsels differently from Buck, persuasive Eleventh
Circuit authority must give way to binding Third Circuit
Plaintiffs were on notice that these documents were central
to their claims and that they could be relied upon in
resolving the motion to dismiss. Plaintiffs aver
otherwise-but do not offer any affirmative argument to
support that position. Regardless, Plaintiffs are mistaken:
The Amended Complaint quotes the Plan Documents extensively
and makes repeated and extensive reference to the Policy,
making plain that Plaintiffs did have notice that they could
and would be relied upon in resolving this motion to dismiss.
Therefore, the Plan Documents and Policy are appropriately
considered in resolving this motion to dismiss.
addition to the Plan Documents and Policy, two more
documents-one entitled “Verification of Trust and
Warrant of Authority” (“the Verification”)
and another referred to by the parties as the
“Custodial Agreement”-are central to this case.
These documents are not attached to any of the parties'
briefs or pleadings, but they are excerpted and otherwise
described in the Amended Complaint. These excerpts and
descriptions are part of the factual allegations of the
Amended Complaint, and therefore they may be considered in
resolving the pending motion. See Ruggiero v. Mount
Nittany Med. Ctr., 736 Fed.Appx. 35, 37 n.1 (3d Cir.
2018) (citing Schmidt v. Skolas, 770 F.3d 241, 249
(3d Cir. 2014)) (“To the extent passages are excerpted
from documents not attached to the complaint, we consider
them because the documents were integral to and explicitly
relied upon in the complaint.”); see also Badillo
v. Stopko, 2012 WL 1565303, at *5 (D.N.J. May 2, 2012)
(considering, on a motion to dismiss, excerpts of a document
that was a part of the underlying complaint even though the
document itself was not attached to the complaint, because
“portions of [the document] are quoted at length”
and because “Plaintiffs' claims rely on it”).
2002 and 2013, John Koresko and others operated a multiple
employer welfare arrangement (the “Arrangement”
or the “Koresko Arrangement”) that allowed
employers to purchase cash value life insurance policies and
take a tax deduction for the premiums as a business expense.
Koresko systematically converted and misused the assets of
the participating welfare benefit plans, which was described
extensively in Perez, supra.
relevant here, the Arrangement was run by PennMont Benefit
Services (“PennMont”), a corporation whose
officers included John Koresko and his brother Lawrence
Koresko (throughout this opinion, unless otherwise noted,
“Koresko” refers to John). PennMont recruited
participants and administered the individual plans, including
the Plaintiff EAS Plan. In its recruitment materials,
PennMont explained to prospective participants that in order
to take advantage of the Arrangement's purported tax
benefits, an employer needed to sign an adoption agreement
that established the employer's own welfare benefit plan
according to terms dictated by Koresko. Employers, including
Plaintiff EAS here, then paid insurance premiums into a
trust, and a trustee passed those payments on to insurance
companies, including Nationwide. As a general rule, the
trustee-not the insured-was the owner and beneficiary of the
policies, although the Plan Documents (which established the
plans) stated that the plans and the trust were to be managed
for the exclusive benefit of the insureds and that
contributions made to the plans would be used to pay the life
The Parties' Relationship with the Arrangement
Plan was a plan participating in the Arrangement; EAS was the
sponsoring employer; and James Corman was a participant in
the EAS Plan whose life (and whose wife's life) was
insured by the Policy purchased through the Trust and issued
by Defendant Nationwide. Plaintiffs joined the Arrangement in
early 2000, at which time the Policy was purchased from
Nationwide. From the time the Policy was purchased, EAS
contributed $865, 000 to pay premiums to the Trust and the
Trustee passed those payments on to Defendant.
to the Amended Complaint, the relationships among these
parties were governed by the Plan Documents, the Policy, the
Verification, and the Custodial Agreement.
Plan Documents established the EAS Plan, and stated that
insurance policies purchased under the Plan and the cash
value contained in those policies “shall be owned by
the Trustee.” The Plan Documents also granted
wide-ranging authority to the Trustee to control those
The Trustee may purchase Policies on each Participant. . . .
The policy shall be a contract between the Trustee and the
Insurer and shall reserve to the Trustee all rights, options
and Benefits provided by the Policy and permitted by the
Insurer, except that the right to name and change the
Beneficiary shall be exercised . . . in writing pursuant to a
power of attorney or other document.
Policy, although it insured the Cormans' lives, made
clear that it was “a legal contract between the Owner
[the Trustee of the Plan] and Nationwide, ” that
“all rights in [the] Policy belong to [the Owner],
” and that the Owner “may assign any or all
rights under [the] Policy.”
it is not entirely clear from the Amended Complaint who the
Trustee was during the first two years of Plaintiffs'
participation in the Arrangement,  on or around April 15, 2002
Community Trust Company (“CTC”) became the
Trustee. The Amended Complaint also alleges that on
or around March 20, 2002-that is, before CTC became
Trustee-CTC “executed” the Verification, which
designated Jeanne Bonney, a Koresko associate, as
“Appointed Signator” on behalf of CTC with
“authority to sign Arrangement-related documents on
behalf of CTC.” The Verification further stated:
The trust empowers the trustee to exercise any and all rights
associated with owning life insurance policies and the
trustee can exercise these rights without the consent of the
insured. These rights include but are not limited to:
surrendering the policy, withdrawing policy values, borrowing
against the policy, transferring ownership, and changing the
also “executed” a document entitled
“Custodial Agreement, ” which purported to
“designate the Koresko Law Firm as CTC's agent
and gave the firm possession of the 1200 insurance policies
CTC was to own as trustee” for benefit of the employer
welfare benefit plans within the Arrangement-including the
Policy issued by Defendant on James and Mary Cormans'
lives. The “Custodial Agreement” also gave the
Koresko Law Firm the same “powers listed in the
Verification, i.e., the authority to change
ownership and beneficiaries of the insurance policies,
surrender policies, and remove cash value through withdrawals
or policy loans, ” and also “[p]urported to
release the Koresko Law [F]irm from any liability other than
liability arising from ‘willful or gross
Custodial Agreement and the Verification were both executed
before CTC became Trustee on April 15, 2002, and both
documents were provided to Defendant at some point after
March 20, 2002. The allegations of the Amended Complaint are
that Nationwide knew that the Verification was invalid and
knew that the Custodial Agreement was incompatible with the
Plan Documents and the trust agreement.
that year, according to the Amended Complaint, Koresko or one
of his associates instructed Nationwide, based on the
purported authority of the Verification, to “change the
name of the owner/beneficiary . . . to REAL VEBA TRUST DATED
3/20/95.” According to the Amended Complaint, knowing
that Koresko lacked the authority to make the changes,
Nationwide followed these instructions.
in 2009, Koresko requested that Defendant make eight loans to
him secured against the cash value of various policies in the
Arrangement, including a loan for $578, 777.52 collateralized
by Plaintiffs' Policy, which was made on August 26, 2009.
The loan requests were made by Koresko “the
individual” in the “purported role of
director-trustee of Penn Public Trust, ” who signed the
loan applications as “Director - Trustee.” When
Koresko requested the loans, he also submitted to Defendant
“an affidavit signed by Koresko that asserted that CTC
no longer existed as the result of a merger into F&M
[Farmers & Merchants Trust Company] and that F&M was
subsequently removed in favor of Penn Public Trust as
Trustee[, ]” and that Koresko “had the right to
request the loan as the ‘sole Director of Penn Public
Trust.'” The loans were made to “Single
Employer Welfare Plan C O Pennmont Benefit
months after the loan secured by Corman's Policy was
requested, and then at least one more time after that,
Plaintiffs requested information from Nationwide and
Koresko-affiliated entities about the status of the
Policy-but Nationwide did not respond. Accordingly,
Plaintiffs did not learn of the 2009 loan until much
later-sometime in mid-2014. Plaintiffs filed this lawsuit on
August 31, 2017.