Hausknecht v. John Hancock Life Insurance Company of New York

• Docket Number: CIVIL ACTION NO. 17-3911
• Decision Date: 14 July 2022
• Citation: 614 F.Supp.3d 168
• Parties: Aric D. HAUSKNECHT, Complete Medical Care Services of NY, PC and Complete Medical Care Services of NY, PC Health and Welfare Benefit Plan, Plaintiffs, v. JOHN HANCOCK LIFE INSURANCE COMPANY OF NEW YORK, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

614 F.Supp.3d 168

Aric D. HAUSKNECHT, Complete Medical Care Services of NY, PC and Complete Medical Care Services of NY, PC Health and Welfare Benefit Plan, Plaintiffs,

v.JOHN HANCOCK LIFE INSURANCE COMPANY OF NEW YORK, Defendant.

CIVIL ACTION NO. 17-3911

United States District Court, E.D. Pennsylvania.

Filed July 14, 2022

Ira B. Silverstein, The Silverstein Firm, Philadelphia, PA, Nicholas J. Botta, Spear Wilderman PC, Philadelphia, PA, for Plaintiffs.

Ann-Marie Mitchell, Jaclyn M. Metzinger, Neil Merkl, Kelley Drye & Warren LLP, New York, NY, Thomas P. Stevens, Horn Williamson LLC, Philadelphia, PA, for Defendant.

OPINION

WENDY BEETLESTONE, District Judge

Plaintiffs Aric D. Hausknecht, Complete Medical Care Services of NY, P.C. and Complete Medical Care Services of NY, PC Health and Welfare Benefit Plan contend that Defendant John Hancock Life Insurance Company ("John Hancock") 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. (c)-(d), 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 countersued for breach of an indemnification contract, which contract was between Plaintiff CMCS and Defendant's predecessor by merger, Manufacturer's Life Insurance Company of New York ("ManuLife").

Plaintiffs now move for summary judgment on their ERISA claims, and Defendant cross-moves for summary judgment on Plaintiffs’ ERISA and RICO claims as well as its own counterclaim for breach of contract. For the reasons that follow, Plaintiffs’ Motion shall be denied, and Defendant's Motion shall be granted with respect to the RICO claims, granted in part and denied in part with respect to the ERISA claims, and denied with respect to its counterclaim for breach of contract.

I. BACKGROUND

a. The Preliminary Question of Judicial Notice

This is one of many cases involving John Koresko's welfare benefit plan scam. Most of the suits, such as the instant one, involve individual plaintiffs and corporate defendants. But in the largest matter, now closed, the United States Secretary for the Department of Labor sued John Koresko and others associated with him. The Department alleged that Koresko and his associates violated four sections of ERISA, 29 U.S.C. §§ 1103, 1104, 1105, 1106, by holding plan assets despite not being trustees of those plans, violating their fiduciary duties of loyalty and care, and conducting prohibited transactions ("the Department of Labor matter"). The Department of Labor matter gave rise to numerous opinions. See, e.g., Solis v. Koresko , 884 F. Supp.2d 261 (E.D. Pa. 2012), aff'd sub nom. Sec'y of U.S. Dep't Labor v. Koresko , 646 F. App'x 230 (3d Cir. 2016) ; Perez v. Koresko , 86 F. Supp.3d 293 (E.D. Pa. 2015), aff'd sub nom. Sec'y of Labor , 646 F. App'x 230. Although neither the Plaintiffs nor the Defendant here were parties to that litigation, Plaintiffs ask that the Court take judicial notice of certain findings of fact found in opinions written in the Department of Labor matter such that they would be considered as part of the record for purposes of determining the instant Motions. Defendant opposes Plaintiffs’ request because it was "not a party to that case and cannot be bound by its conclusions." The question—whether findings of fact made in different proceedings related to Koresko's misuse of welfare benefit plan assets may be considered as part of the record here—is a threshold issue which must be addressed prior to diving into an evaluation of the Motions for Summary Judgment.

Judicial notice is an "evidentiary doctrine that permits the court to consider as established in a case a matter of law or fact without the necessity of formal proof of the matter by any party." 21B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 5102 (2d ed. updated 2022) (internal citations and quotation marks omitted). It is a familiar concept which, when used to best effect, saves time and expense in litigation. There are two primary schools regarding the precise contours of the doctrine: the "procedural convenience" school which is grounded on "the procedural value of efficiency" advocates for judicial notice "if a fact seemed obviously true to the judge"; whereas the "jury control" school adopts a limited view of judicial notice in that courts are cabined to noticing only those facts which are "indisputable" to avoid the risk of judicial overreach. Id. (internal quotation marks omitted). The federal rule which governs judicial notice, Federal Rule of Evidence 201, adopts the second view and limits judicial notice to facts which are: (1) adjudicative, not legislative; (2) not subject to reasonable dispute; and, (3) either "generally known within the trial court's territorial jurisdiction" or can "be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201.

In taking the position that judicial notice of the factual findings from the Department of Labor action is appropriate, Plaintiffs assert only that "[t]his Court may take judicial notice of these facts in the context of a motion for summary judgment. F. R. E.[sic ] Rule 201 (‘The court may judicially notice a fact that is not subject to reasonable dispute because it: (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned’....)." They, however, do nothing to demonstrate that each of the Rule's three requirements is satisfied. Where, as here, a party's argument consists of no more than "conclusory assertion[s]," the argument is deemed waived. See Reynolds v. Wagner , 128 F.3d 166, 178 (3d Cir. 1997). Absent cogent argument in support of their position, their argument must accordingly be ignored. See, e.g., United States v. Dupree , 617 F.3d 724, 728 (3d Cir. 2010) (a litigant "must unequivocally put its position before the trial court at a point and in a manner that permits the court to consider its merits." (quoting Shell Petrol., Inc. v. United States , 182 F.3d 212, 218 (3d Cir. 1999) )).¹

The findings of facts and conclusions in the Department of Labor matter will therefore not be considered as part of the record here and will not be used to determine whether entry of summary judgment for either party is appropriate. However, the existence of this prior litigation and its procedural history will be noticed as and where appropriate. See, e.g., S. Cross Overseas Agencies, Inc. , 181 F.3d at 426 ; O'Boyle v. Braverman , 337 F. App'x 162, 164-65 (3d Cir. 2009).²

b. Setting the Stage

Now onto the main event. This story arises from a complex scheme run by John Koresko and his affiliates to steal 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 John Hancock and its predecessor by merger, ManuLife, were 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 Aric Hausknecht's life and when it issued 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 Aric D. Hausknecht is a physician who owns and operates Plaintiff Complete Medical Care Services of New York ("CMCS"). He established a welfare benefit plan, the Complete Medical Care Services of NY, PC Health and Welfare Plan ("CMCS Plan")—also a Plaintiff in this case—after consulting with an independent insurance broker.

To run this arrangement and perpetrate his fraud, Koresko established several entities. 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. 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 CMCS 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, Hausknecht and CMCS executed several interrelated documents, which consolidated power into the hands of John Koresko and his affiliates, including Penn-Mont and the trustee of the REAL VEBA Trust.³ These documents established and named Plaintiffs’ welfare benefits plan, the CMCS 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 CMCS Plan, authorized him to complete any documents on behalf of Hausknecht which Penn-Mont determined to be incident to the CMCS Plan, and provided that his signature alone...