United States District Court, D. South Dakota, Western Division
BH SERVICES INC., For Itself as Sponsor and Fiduciary and for the BH SERVICES, INC., HEALTH AND WELFARE PLAN, Plaintiff,
FCE BENEFIT ADMINISTRATORS INC., TRUST MANAGEMENT SERVICES, ACEC MW, and TRANSAMERICA LIFE INSURANCE COMPANY, Defendants.
ORDER DENYING MOTION TO TRANSFER VENUE
E. SCHREIER UNITED STATES DISTRICT JUDGE
FCE Benefit Administrators Inc., moves to transfer this
action under 28 U.S.C. § 1404(a) to the Northern
District of California based on the forum selection clause in
a Third Party Administrator (TPA) Agreement between
plaintiff, BH Services, Inc., and FCE. Docket 23; Docket 25-1
at 5. BH Services opposes the motion to transfer and argues
that venue is proper in the District of South Dakota. Docket
30 at 1-2. For the reasons that follow, the court denies the
motion to transfer venue.
Services is a not-for-profit corporation based in Rapid City,
South Dakota, providing employment to over 200 people in
Nebraska and South Dakota. Docket 31 ¶ 2. BH Services is
the sponsor, administrator, and named fiduciary of the BH
Services, Inc. Health and Welfare Plan (the Plan). Docket 28
¶¶ 2.01, 2.02. FCE is a third party administrator
that provides administration support services to ERISA health
and welfare plans. Docket 25 ¶ 2.
1995 to 2015, BH Services retained FCE to provide a plan
document, compliance services, and third-party administrative
services for the Plan. Docket 28 ¶ 5.01. In March 2004,
BH Services and FCE entered into two agreements relating to
FCE's management of the Plan. Docket 25 ¶¶ 3,
4. The first, the Adoption Agreement, incorporated the Plan
by reference and added several exhibits to the Plan.
Id. ¶ 4. The second agreement, the TPA
Agreement, was one of the included attachments and describes
the services FCE would provide related to administering and
managing the Plan. Id. ¶¶ 4, 5.
VIII(f) of the TPA Agreement provides:
Governing Law and Venue: This Agreement will be
governed by the internal laws of the State of California
except to the extent preempted by ERISA, COBRA or other
applicable federal law, and the venue for resolving any
dispute under this Agreement will be San Mateo County,
Docket 25-1 at 5.
October of 2013, BH Services appointed defendant Trust
Management Services (TMS) to serve as trustee of the
Plan's assets. Docket 31 ¶ 8; see also
Docket 28 ¶ 5.01. This appointment was made at FCE's
recommendation. Docket 31 ¶ 3. To effectuate this
appointment, BH Services and TMS executed a Trust Assignment
Agreement, under which TMS agreed to assume “the
rights, claims and obligations of Trustee and agrees to
perform the services and function of the Trustee under the
Trust Agreement as expressly provided therein.” Docket
25-3. Section 7.4 of the Trust Agreement contained a forum
selection clause similar to the one entered into between BH
Services and FCE: “This Trust Agreement will be
construed, administered and enforced according to ERISA and
the law of the State of California . . . . Venue for any
dispute under this Agreement will be San Mateo County,
California.” Docket 25-2 at 4.
10, 2016, BH Services filed a complaint in this court naming
FCE and TMS as defendants. Docket 1 ¶¶ 2.03, 2.04.
FCE responded to the complaint on October 11, 2016, by filing
both a motion to dismiss for failure to state a claim (Docket
20) and a motion to transfer venue (Docket 23). On October
28, 2016, BH Services amended its complaint as a matter of
course under Federal Rule of Civil Procedure 15(a)(1)(B).
See Docket 28. The first amended complaint added two
additional defendants, ACEC MW and Transamerica Life
Insurance Company. Id. ¶¶ 2.05, 2.06.
Services alleges in the first amended complaint that in 2015,
it decided to transfer plan document compliance,
administration, and servicing of the Plan to Fringe Benefits
Group. Id. ¶ 5.01. BH Services also alleges
that it notified FCE and TMS of its intent to terminate their
services on October 28, 2015. Id. BH Services
further alleges that despite its multiple attempts to have
FCE and TMS transfer the Plan's assets to Fringe Benefits
Group, FCE and TMS have failed to transfer the Plan's
assets totaling more than $735, 000. Id. ¶
first amended complaint also recites several allegations
regarding the relationship of the parties to this dispute.
For example, BH Services alleges that, despite its belief
that FCE and TMS would operate the Plan to provide plan
members with group term life insurance, see Id.
¶¶ 1.03, 5.09, FCE and ACEC actually contracted
with Transamerica to provide plan members with life insurance
plans that were part of two master group variable universal
life insurance policies. Id. ¶¶ 1.03,
5.09. Instead of these universal life insurance policies
being owned by TMS, as trustee of the Plan, BH Services
alleges that the Transamerica policies and their cash values
were owned by both FCE and ACEC. Id. ¶ 1.03. BH
Services also alleges that because FCE and ACEC had control
of the Plan's assets and the cash value held in the
Transamerica policies, FCE and ACEC could build up cash
accounts that accumulated in the Transamerica policies.
Id. ¶ 1.04. BH Services further alleges that
FCE and ACEC, along with TMS as trustee of the Plan's
assets, were able to hide the cash surrender value of the
policies from BH Services and access that cash surplus
without BH Services' knowledge. Id. BH Services
also alleges that FCE and TMS are preventing BH Services from
discovering additional information about the Plan's
assets, which has frustrated BH Services' attempts to get
an accounting. Id. ¶ 5.14.
total, the first amended complaint alleges seven causes of
action against FCE, TMS, ACEC, and Transamerica. Count one
seeks an injunction against FCE, TMS, and ACEC under 29
U.S.C. § 1132(a)(3). Count two requests an accounting of
the Plan's assets under 29 U.S.C. § 1132(a)(3)
against FCE and TMS. Count three seeks the recovery of
wrongfully dissipated Plan assets against FCE, TMS, and ACEC
under 29 U.S.C. § 1132(a)(3)(B)(i). Count four seeks
damages against FCE, TMS, and ACEC for the breach of
fiduciary duty and breach of fiduciary duty by co-fiduciaries
under 29 U.S.C. §§ 1105, 1109, and 1132(a)(2).
Count five seeks an award of attorney's fees and costs
under 29 U.S.C. § 1132(g) against FCE, TMS, and ACEC for
BH Services' ERISA claims. Count six seeks damages,
including punitive damages, against FCE and Transamerica for
common law fraud under state law. Count seven seeks damages
for unjust enrichment against FCE, TMS, ACEC, and
responded to the first amended complaint on November 14,
2016, by filing a partial motion to dismiss and motion to
strike portions of the first amended complaint (Docket 33)
and an answer to the first amended complaint (Docket 37). FCE
did not refile its motion to transfer venue, see
Docket 23, and instead, also on November 14, 2016, filed its
reply brief in support of the motion to transfer
venue. Docket 36.
Services filed TMS's waiver of service on March 13, 2017.
Docket 83.Under this waiver, TMS had until May 12, 2017, to
respond to the first amended complaint. TMS failed to file an
answer or responsive motion to the first amended complaint.
Thus, BH Services moved for a clerk's entry of default
against TMS, Docket 85, which was entered on May 19, 2017.
Docket 86. Since the clerk's entry of default ...