Schultz v. Glens Falls Hospital

1
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
____________________________________________
KIMBERELY M. SCHULTZ, on behalf of
herself and all others similarly situated,
Plaintiff,
vs. 	1:25-CV-00581
(MAD/PJE)
GLENS FALLS HOSPITAL,
Defendant.
____________________________________________
APPEARANCES: 	OF COUNSEL:
SIRI & GLIMSTAD LLP 	MARINA RESCINITI, ESQ.
745 Fifth Avenue - Suite 500 	OREN FAIRCLOTH, ESQ.
New York, New York 10151
Attorneys for Plaintiff
BOND SCHOENECK & KING, PLLC 	JACQUELINE ZAHN, ESQ.
One Lincoln Center 	LOUIS ORBACH, ESQ.
Syracuse, New York 13202
Attorneys for Defendant
BOND, SCHOENECK & KING, PLLC 	MICHAEL D. BILLOK, ESQ.
268 Broadway
Suite 104
Saratoga Springs, New York 12866
Attorneys for Defendant
Mae A. D'Agostino, U.S. District Judge:
MEMORANDUM-DECISION AND ORDER
I. INTRODUCTION
Plaintiff Kimberely M. Schultz brings this putative class action, alleging that the health
insurance plan offered by Defendant Glens Falls Hospital imposes a tobacco surcharge in
violation of the Employee Retirement Income Security Act ("ERISA"). See generally Dkt. No. 1.
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 1 of 27

2
Defendant moves to dismiss, pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil
Procedure, arguing that Plaintiff lacks Article III standing to bring her claims, and that the
complaint fails to state a claim on which relief can be granted. See Dkt. No. 21.1 For the reasons
that follow, Defendant's motion is granted in part and denied in part.
II. BACKGROUND
A. 	Relevant Statutory and Regulatory Landscape
The Court will begin with a discussion of the statues and regulations relevant to Plaintiff's
claims.
Under ERISA, an employer administering a group health plan "may not require any
individual . . . to pay a premium or contribution which is greater than such premium or
contribution for a similarly situated individual enrolled in the plan on the basis of any health
status-related factor in relation to the individual." 29 U.S.C. § 1182(b)(1). Section 1182 lists
eight health-status related factors: health status, medical condition (including both physical and
mental illnesses), claims experience, receipt of health care, medical history, genetic information,
evidence of insurability (including conditions arising out of acts of domestic violence), and
disability. See id. § 1182(a)(1).
However, that provision of ERISA does not prevent an employer from "establishing
premium discounts or rebates . . . in return for [an employee's] adherence to programs of health
promotion and disease prevention." 29 U.S.C. § 1182(b)(2)(B); see also 42 U.S.C. § 300gg-
4(b)(2)(B); Bokma v. Performance Food Grp., Inc., 783 F. Supp. 3d 882, 887-88 (E.D. Va. 2025)
1 The parties have also submitted numerous notices of supplemental authority. See Dkt. Nos. 27,
28, 29, 30, 31, 32, 33, 34, 35. None of this supplemental authority is binding on this Court, and is
merely additional persuasive authority. Nevertheless, the Court has carefully considered all
materials submitted by the parties.
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 2 of 27

3
(reviewing relevant statutory and regulatory background). These programs are referred to as
"wellness programs" under 42 U.S.C. § 300gg-4(j).
The Public Health Service Act ("PHSA"), which was amended and incorporated into
ERISA by the Patient Protection and Affordable Care Act, see 29 U.S.C. § 1185d(a)(1); Plesha v.
Ascension Health Alliance, No. 24-CV-1459, 2026 WL 279321, *2 (E.D. Mo. Feb. 3, 2026), sets
forth the conditions that a wellness program must meet to qualify as a permissible program of
health promotion or disease prevention rather than a discriminatory surcharge, see 42 U.S.C. §
300gg-4(j). To qualify, a wellness program must meet certain statutory requirements, including
that it "be reasonably designed to promote health or prevent disease[,]" make available the "full
reward" to "all similarly situated individuals," and must "disclose in all plan materials describing
the terms of the wellness program the availability of a reasonable alternative standard[.]" 42
U.S.C. § 300gg-4(j)(3)(B)-(E). A reward for compliance with a qualifying wellness program may
include "the absence of a surcharge" for the complying employee. 42 U.S.C. § 300g-4(j)(3)(A).
"The upshot of these provisions is that employers may surcharge plan participants who do not
comply with such 'wellness programs,' and may offer incentives to plan participants who engage
in wellness programs, without running afoul of ERISA's nondiscrimination rules in Section
1182." Chirinian v. Travelers Cos., Inc., No. 24-CV-3956, 2025 WL 2147271, *1 (D. Minn. July
29, 2025).
In 2013, the Department of Labor ("DOL") incorporated these requirements into federal
regulations (the "Regulations") that further specify the requirements that a wellness program must
meet. See Incentives for Nondiscriminatory Wellness Programs in Group Health Plans, 78 Fed.
Reg. 33158, 33181-86 (June 3, 2013) (codified at 29 C.F.R. § 2590.702). The Regulations
expound upon the statutory requirements described above and provide a series of examples of
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 3 of 27

4
how a compliant wellness program may be structured. See generally id. Three specific
regulations are relevant to the issues in the present matter: 29 C.F.R. § 2590.702(f)(4)(i), 29
C.F.R. § 2590.702(f)(4)(iv), and 29 C.F.R. § 2590.702(f)(4)(v). A decision issued in the District
of Minnesota thoroughly explains these three relevant regulations as follows:
First, the wellness program "must give individuals eligible for the
program the opportunity to qualify for the reward under the
program at least once per year." 29 C.F.R. § 2590.702(f)(4)(i). The
once-per-year requirement is a "bright-line standard for determining
the minimum frequency that is consistent with a reasonable design
for promoting good health or preventing disease." Incentives for
Nondiscriminatory Wellness Programs in Group Health Plans, 78
Fed. Reg. 33158, 33162 (June 3, 2013) (codified at 29 C.F.R. §
2590.702) . . . .
Second, the "full reward" for completing the wellness program
"must be available to all similarly situated individuals." 29 C.F.R. §
2590.702(f)(4)(iv). The Department of Labor interprets this
provision to require health plans to offer "a reasonable alternative
standard (or waiver of the otherwise applicable standard) for
obtaining the reward" for any individual who does not meet the
applicable health standard (in this case, being tobacco-free). Id. §
2590.702(f)(4)(iv)(A). Moreover, if a plan participant's personal
physician states that meeting the applicable health standard is not
medically appropriate for that participant, the plan "must provide a
reasonable alternative standard that accommodates the
recommendations of the individual's personal physician with regard
to medical appropriateness." Id. § 2590.702(f)(4)(iv)(C)(4).
Third, the plan "must disclose in all plan materials describing the
terms of an outcome-based wellness program, and in any disclosure
that an individual did not satisfy an initial outcome-based standard,
the availability of a reasonable alternative standard to qualify for
the reward," including "contact information for obtaining a
reasonable alternative standard and a statement that
recommendations of an individual's personal physician will be
accommodated." Id. § 2590.702(f)(4)(v).
Chirinian, 2025 WL 2147271, at *1-2.
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 4 of 27

5
Additionally, the Regulations impose particular requirements based on the type of
wellness program at issue. The first category, "participatory programs" requires only
participation in the program rather than the attainment of a particular goal, such as "[a] program
that reimburses employees for the costs of participating, or that otherwise provides a reward for
participating, in a smoking cessation program without regard to whether the employee quits
smoking." See 29 C.F.R. § 2590.702(f)(1)(ii)(D). The second category, "health-contingent
programs," includes programs which require participants "to satisfy a standard related to a health
factor to obtain a reward." Id. § 2590.702(f)(1)(iii). Further, within the category of health-
contingent programs, the Regulations distinguish "activity-only programs," which "require[ ] an
individual to perform or complete an activity related to a health factor," id. § 2590.702(f)(1)(iv);
and "outcome-based programs," which "require[ ] an individual to attain or maintain a specific
health outcome," id. § 2590.702(f)(1)(v).
B. 	Factual Background
Plaintiff is an employee of Glens Falls Hospital and receives health insurance through the
Glens Falls Hospital Health Plan (the "Plan"). Dkt. No. 1 at ¶¶ 1, 13-14. Defendant is the
sponsor of the Plan and the Plan Administrator. See id. at ¶ 16. Under the Plan, Plaintiff is
charged a "tobacco surcharge" of approximately $20 per paychek ($520 per year). See id. at ¶¶ 1,
13. To maintain health insurance under the Plan, Plaintiff must pay this surcharge. See id. at ¶
13. However, according to the complaint, Defendant has failed to abide by ERISA's statutory
requirements and implementing regulations and, therefore, the tobacco surcharge is unlawful. See
id. at ¶ 1. Plaintiff brings her suit individually and on behalf of all other similarly situated
individuals. See id. at ¶ 12.
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 5 of 27

6
Plaintiff brings two claims; the Court will refer to these claims as "Count One" and "Count
Two." In Count One, Plaintiff alleges that Defendant's surcharge is unlawful because it is
imposed in the absence of a wellness program, as required by ERISA. Specifically, Count One is
based on allegations that the Plan discriminates based on a "health status-related factor," in
violation of 29 U.S.C. § 1182, by failing to offer an opportunity for participants to qualify for an
alternative standard at least once a year, failing to provide a reasonable alternative standard,
failing to provide an alternative standard that provides those who satisfy that standard with the
"full reward," and failing to provide proper notice of the reasonable alternative standard. See id.
at ¶¶ 62, 63. In Count Two, Plaintiff alleges that Defendant breached its fiduciary duties to the
Plan and Plan participants in connection with the imposition and collection of the allegedly
unlawful surcharges. See id. at ¶¶ 67-78. Through Count Two, Plaintiff asserts violations of 29
U.S.C. §§ 1104 and 1106, the sections governing fiduciary duties and prohibited transactions
under ERISA. See id. Plaintiff seeks declaratory relief, injunctive relief, various other forms of
equitable relief, including disgorgement and restitution, as well as relief to the Plan. See id. at 28-
30.
III. DISCUSSION
A. 	Legal Standard
"'A court faced with a motion to dismiss pursuant to both Rules 12 (b)(1) and 12(b)(6)
must decide the jurisdictional question first because a disposition of a Rule 12(b)(6) motion is a
decision on the merits and, therefore, an exercise of jurisdiction.'" Kumpf v. N.Y. State United
Tchrs., 642 F. Supp. 3d 294, 304 (N.D.N.Y. 2022) (quoting Mann v. N.Y. State Ct. of Appeals,
No. 21-CV-49, 2021 WL 5040236, *3 (N.D.N.Y. Oct. 29, 2021)). "[A] federal court generally
may not rule on the merits of a case without first determining that it has jurisdiction over the
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 6 of 27

7
category of claim in suit ([i.e.,] subject-matter jurisdiction)." Sinochem Int'l Co., Ltd. v. Malaysia
Int'l Shipping Corp., 549 U.S. 422, 430-31 (2007) (citation omitted). "A case is properly
dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks
the statutory or constitutional power to adjudicate it." Makarova v. United States, 201 F.3d 110,
113 (2d Cir. 2000).
When subject matter jurisdiction is challenged, a plaintiff "bear[s] the burden of 'showing
by a preponderance of the evidence that subject matter jurisdiction exists.'" APWU v. Potter, 343
F.3d 619, 623 (2d Cir. 2003) (quoting Lunney v. United States, 319 F.3d 550, 554 (2d Cir. 2003)).
"In resolving a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) a
district court may consider evidence outside the pleadings." Morrison v. Nat'l Australia Bank
Ltd., 547 F.3d 167, 170 (2d Cir. 2008) (citing Makarova, 201 F.3d at 113).
In reviewing a motion to dismiss under Rule 12(b)(1), the court "must accept as true all
material factual allegations in the complaint, but [is] not to draw inferences from the complaint
favorable to plaintiffs." J.S. ex rel. N.S. v. Attica Cent. Sch., 386 F.3d 107, 110 (2d Cir. 2004)
(citation omitted). The court "may consider affidavits and other materials beyond the pleadings to
resolve the jurisdictional issue, but . . . may not rely on conclusory or hearsay statements
contained in the affidavits." Id. (citations omitted). In resolving a motion to dismiss, a court may
also "'consider 'matters of which judicial notice may be taken.'" Greenblatt v. Gluck, No. 03-CV-
597, 2003 WL 1344953, *1 n.1 (S.D.N.Y. Mar. 19, 2003) (quoting Hertz Corp. v. City of New
York, 1 F.3d 121, 125 (2d Cir. 1993)).
A motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal
Rules of Civil Procedure tests the legal sufficiency of the party's claim for relief. See Patane v.
Clark, 508 F.3d 106, 111-12 (2d Cir. 2007). In considering legal sufficiency, a court must accept
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 7 of 27

8
as true all well-pleaded facts in the pleading and draw all reasonable inferences in the pleader's
favor. See ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (citation
omitted). This presumption of truth, however, does not extend to legal conclusions. See Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). Although a court's review of a motion to
dismiss is generally limited to the facts presented in the pleading, the court may consider
documents that are "'integral'" to that pleading, even if they are neither physically attached to, nor
incorporated by reference into, the pleading. See Mangiafico v. Blumenthal, 471 F.3d 391, 398
(2d Cir. 2006) (quoting Chambers v. Time Warner, Inc., 282 F.3d 147, 152-53 (2d Cir. 2002)).
To survive a motion to dismiss, a party need only plead "a short and plain statement of the
claim," Fed. R. Civ. P. 8(a)(2), with sufficient factual "heft to 'sho[w] that the pleader is entitled
to relief,'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007) (quotation omitted). Under this
standard, the pleading's "[f]actual allegations must be enough to raise a right of relief above the
speculative level," id. at 555 (citation omitted), and present claims that are "plausible on [their]
face," id. at 570. "The plausibility standard is not akin to a 'probability requirement,' but it asks
for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678
(citation omitted). "Where a complaint pleads facts that are 'merely consistent with' a defendant's
liability, it 'stops short of the line between possibility and plausibility of "entitlement to relief."'"
Id. (quoting Twombly, 550 U.S. at 557). Ultimately, "when the allegations in a complaint,
however true, could not raise a claim of entitlement to relief," or where a plaintiff has "not nudged
[his] claims across the line from conceivable to plausible, the[ ] complaint must be dismissed."
Twombly, 550 U.S. at 558, 570.
B. 	Article III Standing
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 8 of 27

9
"Article III, Section 2 of the Constitution limits the subject-matter jurisdiction of the
federal courts to 'Cases' and 'Controversies.'" SM Kids, LLC v. Google LLC, 963 F.3d 206, 211
(2d Cir. 2020) (citing Dhinsa v. Krueger, 917 F.3d 70, 77 (2d Cir. 2019)). "The doctrine of
standing gives meaning to these constitutional limits by 'identify[ing] those disputes which are
appropriately resolved through the judicial process.'" Susan B. Anthony List v. Driehaus, 573
U.S. 149, 157 (2014) (citation and footnote omitted).
The Supreme Court has "established that the 'irreducible constitutional minimum' of
standing consists of three elements." Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016) (quoting
Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)). "The plaintiff must have (1) suffered an
injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is
likely to be redressed by a favorable judicial decision." Id. (citing Lujan, 504 U.S. at 560-61).
"'Article III standing requires a concrete injury even in the context of a statutory
violation.'" Thole v. U.S. Bank N.A., 590 U.S. 538, 544 (2020) (quoting Spokeo, 578 U.S. at 341).
And "'Article III does not give federal courts the power to order relief to any uninjured plaintiff,
class action or not.'" TransUnion LLC v. Ramirez, 594 U.S. 413, 431 (2021) (quoting Tyson
Foods, Inc. v. Bouaphakeo, 577 U.S. 442, 466 (Roberts, C. J., concurring)).
"As with any other matter on which the plaintiff bears the burden of proof, each element
of standing must be supported 'with the manner and degree of evidence required at the successive
stages of the litigation.'" Do No Harm v. Pfizer Inc., 126 F.4th 109, 119 (2d Cir. 2025) (quoting
Lujan, 504 U.S. at 561)). "At the pleading stage, general factual allegations of injury resulting
from the defendant's conduct may suffice, for on a motion to dismiss we presume that general
allegations embrace those specific facts that are necessary to support the claim." Elias Bochner,
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 9 of 27

10
287 7th Ave. Realty LLC v. City of New York, 118 F.4th 505, 518-19 (2d Cir. 2024) (quoting
Lujan, 504 U.S. at 561).
C. 	Count One
Defendant contends that Count One must be dismissed because there is no private right of
action under the Regulations and because Defendant is not a proper defendant as it is not a "group
health plan" or "health insurance issuer." Dkt. No. 21-1 at 16-19. The Court disagrees.
First, Plaintiff brings Count One for violation of ERISA's statutory anti-discrimination
provisions (29 U.S.C. § 1182(b) and 42 U.S.C. § 300gg-4(b)). ERISA authorizes a participant to
bring a civil action "to recover benefits due to him under the terms of his plan, to enforce his
rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the
plan," 29 U.S.C. § 1132(a)(1), as well as "(A) to enjoin any act or practice which violates any
provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable
relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms
of the plan," id. § 1132(a)(3). Defendant's argument, premised on citations to cases where
plaintiffs merely alleged violations of ERISA's implementing regulations, see Dkt. No. 21-1 at
16-17 (citing Halo v. Yale Health Plan, 819 F.3d 42, 59 (2d Cir. 2016); Chendes v. Xerox HR
Sols., LLC, No. 16-CV-13980, 2017 WL 4698970 (E.D. Mich. Oct. 19, 2017); Anderson v.
Sotheby's Inc. Severance Plan, No. 04-CV-8180, 2005 WL 1309056 (S.D.N.Y. May 31, 2005)),
fails because, here, Plaintiff brings claims for violations of statutory provisions of ERISA.
Indeed, as discussed below, federal courts across the country have considered the merits of claims
brought for similar statutory violations.
Second, Defendant asks this Court to interpret Section 1182 to mean that "group health
plan[s]" and "health insurance issuer[s]" are the only proper defendants to claims for
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 10 of 27

11
discrimination based on health status-related factors. See Dkt. No. 21-1 at 18-19. However, the
terms "group health plan" and "health insurance issuer" do not define the only entities that can be
held liable for a violation of ERISA's anti-discrimination provisions.
For purposes of Section 1182, ERISA defines a "group health plan" to mean "an employee
welfare benefit plan[.]" 29 U.S.C. § 1191b(a)(1).2 ERISA defines an "employee welfare benefit
plan" to mean
any plan, fund, or program which was heretofore or is hereafter
established or maintained by an employer or by an employee
organization, or by both, to the extent that such plan, fund, or
program was established or is maintained for the purpose of
providing for its participants or their beneficiaries, through the
purchase of insurance or otherwise, (A) medical, surgical, or
hospital care or benefits, or benefits in the event of sickness,
accident, disability, death or unemployment, or vacation benefits,
apprenticeship or other training programs, or day care centers,
scholarship funds, or prepaid legal services, or (B) any benefit
described in section 186(c) of this title (other than pensions on
retirement or death, and insurance to provide such pensions).
29 U.S.C.A. § 1002(1) (emphasis added). "The term 'employer' means any person acting directly
as an employer, or indirectly in the interest of an employer, in relation to an employee benefit
plan; and includes a group or association of employers acting for an employer in such capacity."
29 U.S.C § 1002(5).
Plaintiff contends that "she brings claims on behalf of the Plan against [Defendant] under
ERISA § 502(a)(2) and (a)(3) for its role as plan sponsor and administrator, alleging that
[Defendant] imposed, collected, and retained, and misused unlawful surcharges in connection
with its group health plan." Dkt. No. 23 at 23. And, Plaintiff further argues that "[n]othing in 29
2 The "term 'health insurance issuer' means an insurance company, insurance service, or
insurance organization . . . which is licensed to engage in the business of insurance in a State and
which is subject to State law which regulates insurance . . . ." 29 U.S.C. § 1191b(b)(2). There is
no dispute that Defendant is not a health insurance issuer under the facts of the present case.
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 11 of 27

12
U.S.C. § 1132(d) precludes suit against a plan sponsor; it simply provides that plans may be sued
'as an entity,' not that only plans may be sued." Id. The Court agrees.
According to the complaint, Defendant is the sponsor and administrator of the Glens Falls
Hospital Health Plan. See Dkt. No. 1 at ¶¶ 1, 16. ERISA defines an "administrator" as, inter alia,
(i) the person specifically so designated by the terms of the instrument under which the plan is
operated; [or] (ii) if an administrator is not so designated, the plan sponsor[.]" 29 U.S.C. §
1002(16)(A). And, as relevant here, a "plan sponsor" is "the employer in the case of an employee
benefit plan established or maintained by a single employer[.]" Id. § 1002(16)(B). In accordance
with precedent in this Circuit, ERISA civil enforcement actions against employers in their role as
administrators are cognizable. See Levi v. RSM McGladrey, Inc., No. 12-CV-8787, 2014 WL
4809942, *8 (S.D.N.Y. Sept. 24, 2014) ("The proposed claim can therefore be reasonably
construed as a claim against Defendant, not in its individual capacity, but rather in its capacity as
plan administrator. Such a suit is cognizable") (citing Leonelli v. Pennwalt Corp., 887 F.2d 1195,
1199 (2d Cir. 1989) ("In a recovery of benefits claim, only the plan and the administrators and
trustees of the plan in their capacity as such may be held liable") (emphasis added)); Crocco v.
Xerox Corp., 137 F.3d 105, 107 (2d Cir. 1998) (indicating that an employer cannot be held liable
for benefits under Section 1132(a)(1)(B) unless it is the designated plan administrator)).
Defendant provides no authority to support the conclusion that violations of Section 1182
are somehow exempt from the civil enforcement actions contemplated by Section 1132. Reading
the statutory provisions as a whole, the Court sees no reason to find such exemption. See
Pharaohs GC, Inc. v. United States Small Bus. Admin., 990 F.3d 217, 226 (2d Cir. 2021) ("It is a
fundamental canon of statutory construction that the words of a statute must be read in their
context and with a view to their place in the overall statutory scheme") (citing Davis v. Mich.
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 12 of 27

13
Dep't of Treasury, 489 U.S. 803, 809 (1989)). Accordingly, taking the allegations in the
complaint as true, as the Court must at this juncture, the Court finds Plaintiff has stated a
cognizable claim against Defendant in Count One.
Defendant also argues that Plaintiff lacks Article III standing to bring Count One and/or
fails to state a claim because: (1) she does not allege she uses tobacco; (2) even if Plaintiff had
alleged she uses tobacco, tobacco use is not a health status-related factor; (3) "even if tobacco use
was a health status-related factor, plans are statutorily permitted to charge different rates in return
for adherence to programs of health promotion and disease prevention, and thus plans are allowed
to offer reduced contributions for non-smokers"; and (4) a reasonable alternative standard "would
be statutorily required, if at all, only for an individual for whom it is unreasonably difficult due to
a medical condition to refrain from tobacco, or for whom it is medically inadvisable to attempt to
refrain from tobacco," but Plaintiff does not allege she has any such medical condition. Dkt. No.
21-1 at 8-9. Although Defendant groups its standing and merits arguments together, the Court
finds it appropriate to separate them because they raise distinct legal questions. Defendant's first
argument relates only to standing, the second and third attack the merits of the pleading, and the
fourth presents a mixed question and will be addressed as both a standing and merits-based
challenge. The Court will now address each of these four arguments.
1. 	Standing Arguments—Count One
Defendant challenges only one standing requirement: whether Plaintiff has adequately
alleged a concrete injury. See Dkt. No. 21-1 at 13. However, Defendant's first argument
(Plaintiff lacks standing because she fails to allege she uses tobacco) misconstrues the alleged
injury. Plaintiff claims $20 was deducted from her biweekly paychecks for a tobacco surcharge,
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 13 of 27

14
but that Defendant did not satisfy the requirements to impose such surcharge. See Dkt. No. 1 at
¶¶ 13, 32, 61-66. Whether Plaintiff uses tobacco is entirely irrelevant.
Here, Plaintiff alleges that Defendant did not satisfy the statutory or regulatory
requirements of ERISA. See Dkt. No. 1 at ¶¶ 62-64. 	The Court must assume these allegations
are true for purposes of evaluating standing. See Heldman on Behalf of T.H. v. Sobol, 962 F.2d
148, 154 (2d Cir. 1992) (citing Warth v. Seldin, 422 U.S. 490, 501 (1975)). Plaintiff allegedly
paid tobacco surcharges that Defendant was not legally authorized to levy; her payment of a
surcharge that she had a statutory right not to be charged qualifies as a concrete injury for
standing purposes. See Noel v. Pepsico, Inc., No. 24-CV-7516, 2026 WL 558118, *6 (S.D.N.Y.
Feb. 27, 2026) ("Plaintiff's allegation [is] that she paid a surcharge that she contends was
unlawful. This allegation suffices to establish a concrete harm for standing purposes") (citing
Isayeva v. Diamond Braces, No. 22-CV-4575, 2024 WL 1053349, *16 (S.D.N.Y. Mar. 11,
2024)); see also Chirinian, 2025 WL 2147271, at *4-5 (finding Article III standing in similar
circumstances); Lipari-Williams v. Mo. Gaming Co., LLC, 339 F.R.D. 515, 524 (W.D. Mo. 2021)
(same).
As for the fourth argument, Defendant contends Plaintiff has no standing because she does
not allege that she has a medical condition that made is unreasonably difficult or medically
inadvisable to refrain from tobacco and, therefore, Defendant was not statutorily required to offer
a reasonable alternative standard. See Dkt. No. 21-1 at 12-13. Simply stated, Defendant argues
that, even if there was a wellness program, Plaintiff would not have qualified. But, this argument
also misses the point.
Regardless of whether Plaintiff would have qualified to participate, she claims to have
suffered the injury of a $20 biweekly tobacco surcharge despite Defendant's failure to implement
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 14 of 27

15
any wellness program, as statutorily required. Courts have rejected similar arguments, even in
scenarios where there was a wellness program implemented and the plaintiff's challenge was
merely that the program was noncompliant. See, e.g., Baker v. 7-Eleven Inc., No. 3:25-CV-
01609, 2026 WL 473252, *2 (N.D. Tex. Feb. 19, 2026) ("Participation in the Program is
irrelevant—neither ERISA nor Article III requires a plaintiff to enroll in an unlawful program to
establish standing. Baker's injury did not arise from her participation (or non-participation) in the
alternative under the Program, but from 7-Eleven's deduction of a $27.70 premium from each of
her paychecks. Therefore, Baker plausibly alleges a concrete, traceable monetary injury caused
by 7-Eleven's allegedly uncompliant Program which is redressable by the Court") (footnotes
omitted).
Indeed, as the Southern District has explained, "several courts have recently held that
plaintiffs have standing where they claim that to have paid a tobacco surcharge imposed pursuant
to a noncompliant wellness program, regardless of whether they were directly impacted by the
alleged shortcomings of the program." Noel, 2026 WL 558118, at *7 (collecting cases). There is
at least one outlier: in Plesha v. Ascension Health Alliance, the Eastern District of Missouri came
to the opposite conclusion, holding that the plaintiff did not have standing to contest the
defendant's plan disclosures because she had not alleged how the alleged deficiencies in the
required disclosures impacted her behavior or caused her monetary injuries. See Plesha v.
Ascension Health All., No. 4:24-CV-01459, 2026 WL 279321, *7 (E.D. Mo. Feb. 3, 2026). In
one of its notices of supplemental authority, Defendant urges this Court to adopt Plesha's
conclusion. See Dkt. No. 32 at 1-3. However, in refusing to rely on Plesha, the Southern District
noted that "the court did not address . . . the argument that the various courts discussed above
found persuasive—namely, that the failure to satisfy all of ERISA's requirements renders a
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 15 of 27

16
wellness program, as well as any surcharges applied thereunder, unlawful." Noel, 2026 WL
558118, at *7 n.6. This Court agrees with the Southern District's reasoning and respectfully
rejects the conclusion in Plesha.
For these reasons, the Court finds Plaintiff has plausibly alleged that Defendant, through
failure to implement a compliant wellness program, has caused her monetary harm, and thus she
has suffered a concrete injury in fact under Article III. See Lipari-Williams, 339 F.R.D. at 524
("The standing requirement is satisfied here because Plaintiffs have alleged that Defendant caused
them monetary loss by imposing a fee that was unlawful"). Defendant's motion to dismiss Count
One for lack of standing is denied.
2. Merits Arguments—Count One
Defendant's second argument as to Count One is also unavailing. Defendant asks the
Court to find that tobacco use is not a health-status related factor under Section 1182 because the
statute does not explicitly say the words "tobacco use" in its eight-factor list. Dkt. No. 21-1 at 10.
While technically true, such a narrow reading of the statute strains credulity—especially in light
of the fact Defendant cites no case to support this interpretation.
Indeed, many district court decisions simply assume tobacco-based surcharges may
constitute health-factor discrimination without elaborating. See, e.g., Noel, 2026 WL 558118, at
*3; Koelbl v. Sherwin-Williams Co., No. 1:24-CV-02043, 2025 WL 3562641, *2 (N.D. Ohio Dec.
12, 2025); Chirinian, 2025 WL 2147271, *1. The Northern District of Texas recently took a
textualist approach to this question, carefully evaluating the ordinary meaning of the term
"medical history"—one of the eight factors listed in Section 1182 See Baker, 2026 WL 473252,
at *4 ("Other cases seem to assume tobacco-based surcharges constitute health-factor
discrimination. This Court prefers textualism to assumptions. So the Court lays the foundation
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 16 of 27

17
using its toolbelt of statutory interpretation"). Ultimately, in Baker the court concluded that
tobacco use is a health status-related factor because, inter alia, "[r]eading 'medical history' to
exclude tobacco use would ignore how the term is used in medicine and would improperly narrow
the statute." Id. Having been provided with no legal authority to the contrary, the Court finds
tobacco use is a health status-related factor.3
Defendant's third argument is that Defendant is permitted to offer premium discounts "in
return for adherence to programs of health promotion and disease prevention." Dkt. No. 21-1 at
10-11. However, as Plaintiff correctly argues, the complaint alleges that Defendant never offered
a wellness program (an allegation Defendant does not challenge in its present motion). See Dkt.
No. 23 at 14. Thus, it is of no consequence that Defendant can offer premium discounts—the
issue is whether Defendant actually offered an ERISA compliant program. The Court rejects
Defendant's third argument.
Defendant's fourth argument can be broken down into two prongs for purposes of
evaluation the merits of Count One: (1) Defendant is not required to offer a reasonable alternative
standard under Section 1182; and (2) even if the statute does require a reasonable alternative
standard, a reasonable alternative standard must be provided only for an individual for whom it is
unreasonably difficult due to a medical condition to refrain from tobacco, or for whom it is
medically inadvisable to attempt to refrain from tobacco. See Dkt. No. 21-1 at 11-13. Defendant
also contends that Count One fails to the extent Plaintiff claims violation of ERISA's notice
3 In one of its many responses to Plaintiff's numerous notices of supplemental authority,
Defendant takes issue with Baker's interpretation of "medical history." See Dkt. No. 35 at 2-3.
The Court disagrees that this interpretation tenders an "absurd result." Id. at 2. As explained in
Baker, "the statutory list also includes 'evidence of insurability (including conditions arising out
of acts of domestic violence).' Domestic violence is an (unlawful) activity rather than a medical
condition. Congress did not write a list that excluded activities." Baker, 2026 WL 473252, at *4
(footnote omitted).
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 17 of 27

18
requirements for the same reasons. See id. at 13. In addition to addressing Defendant's arguments
regarding whether a reasonable alternative standard and notice are required, Plaintiff argues in
response that the tobacco surcharge is facially unlawful because Defendant fails to offer any
wellness program in the first instance. See Dkt. No. 23 at 9-10, 14-23. The Court agrees.
As with the prior argument, Defendant puts the cart before the horse. Regardless of how
the Regulations implement the statutory goals of ERISA, Plaintiff's claim does not rest on
whether Defendant was required to provide a reasonable alternative standard to any participant
who did not meet the initial standard of being a nonsmoker or merely those who demonstrated
medical hardship. Instead, Plaintiff's claim is that she was required to pay an unlawful surcharge.
Therefore, the question is not whether Plaintiff would be entitled to a reasonable alternative
standard absent a showing of medical hardship, but whether Defendant's wellness program
complied with ERISA. If Defendant's wellness program failed to comply with the statutory
requirements, the imposition of the tobacco surcharge on any participant was a violation of
ERISA. See Noel, 2026 WL 558118, at *10 (engaging in a similar analysis and finding that
"[w]hether [the p]laintiff herself would be statutorily entitled to a reasonable alternative standard
is thus immaterial"); Wilson v. Whole Food Mkt., Inc., No. 1:25-CV-00085, 2026 WL 196517,
*11 (W.D. Tex. Jan. 20, 2026) ("Plaintiffs' claim does not depend on whether or not they were
even eligible to participate in the cessation program; rather, the question is whether the cessation
program is non-compliant, thereby rendering the surcharge Plaintiffs paid unlawful. Accordingly,
they were not required to allege medical hardship, and failure to do so does not warrant dismissal
of their unlawful surcharge claim").
Albeit, Defendant is correct that Section 1182 itself does not explicitly require a
reasonable alternative standard. See, generally, 29 U.S.C. § 1182. But, merely looking at Section
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 18 of 27

19
1182 in a vacuum would ignore 42 U.S.C. § 300gg-4, which was added to ERISA by
incorporation with the passing of the Affordable Care Act. See 29 U.S.C. § 1185d(a)(1). As
discussed, Section 300gg-4 requires that "[i]f any of the conditions for obtaining a premium
discount or rebate or other reward for participation in a wellness program is based on an
individual satisfying a standard that is related to a health status factor . . ." the wellness program
must (1) "be reasonably designed to promote health or prevent disease," (2) make available the
"full reward" to all similarly situated individuals, (3) make available that full reward "at least once
each year," and (4) "disclose in all plan materials describing the terms of the wellness program the
availability of a reasonable alternative standard." 42 U.S.C. § 300gg-4(j)(1), (j)(3). 4 As the
Court has determined tobacco use qualifies as a health status-related factor, the burden shifts to
Defendant to show its wellness program complies with ERISA. See Baker, 2026 WL 473252, at
*5 (citing Cunningham v. Cornell Univ., 604 U.S. 693, 704 (2025)).
The glaring problem with Defendant's arguments as to the merits of Count One is (taking
the allegations in the complaint as true, as the Court must) there is no wellness program at all. As
4 As the issues presented at this stage of litigation rise and fall entirely on the text of ERISA's
statutory provisions, with no need to look to the implementing Regulations, the Court does not
engage in a Loper Bright analysis. See Knight v. L H C Group Inc, No. 6:25-CV-00263, 2025
WL 4351515, *5 (W.D. La. Nov. 18, 2025), R&R adopted, 2026 WL 513477 (W.D. La. Feb. 24,
2026) ("It is [the defendant's] position that because [the p]laintiff fails to plead that it was
unreasonably difficult due to a medical condition for her to quit using tobacco products, her
reasonable alternative standard claim must fail . . . . [The defendant] asks this Court to essentially
disregard the DOL's 2013 regulation, which does not include the requirement that the alternative
standard be only for those individuals who cannot satisfy the applicable standard due to a medical
condition, citing Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2323 (2024). However, the
Court need not decide this finite issue at this stage . . . . [I]t is of no matter that Plaintiff elected
not to participate in the Plan's tobacco counseling program, and thus did not allege a personal
medical condition, because Plaintiff has plausibly, in a 31-page detailed Complaint, alleged that
the tobacco cessation wellness program, including LHC's 'reasonable alternative standard,' falls
short of ERISA and both the PHSA and the DOL's 2013 regulations") (internal citations and
quotation marks omitted) (emphasis in original).
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 19 of 27

20
such, setting aside any interpretation of the Regulations, Defendant has failed to comply with
ERISA's statutory requirements entirely. Simply put, the Court cannot evaluate the technical
compliance of a wellness program that does not exist, so Defendant's reasonable alternative
standards and notice arguments are irrelevant.
This case, therefore, presents a factual issue slightly different than the cases cited by the
parties in their submissions. Indeed, there are numerous recent district court decisions that
analyze a wellness program's compliance with ERISA's requirements of a "full reward,"
disclosure of a reasonable alternative standard, and frequency of the availability of the "full
reward." See, e.g., Bokma, 783 F. Supp. 3d at 895-97; Noel, 2026 WL 558118, at *9-13; Plesha.,
2026 WL 279321, at *4-6; Wilson, 2026 WL 196517, at *7-11 ; Chirinian, 2025 WL 2147271, at
*7-11; Mehlberg v. Compass Grp. USA, Inc., No. 24-CV-04179, 2025 WL 1260700, *4 (W.D.
Mo. Apr. 15, 2025); Baker, 2026 WL 473252, at *5-6. However, in each of these decisions there
was, at the very least, a wellness program to evaluate. Here, Plaintiff's allegation that Defendant
unlawfully levied a tobacco surcharge in the complete absence of a wellness program ends the
Court's inquiry at this stage of litigation.
Accordingly, the Court denies Defendants Rule 12(b)(6) motion to dismiss Count One.
D. 	Count Two
Defendant argues that Count Two must also be dismissed for lack of standing and failure
to state a claim. See Dkt. No. 21-1 at 19-25. Specifically, Defendant contends: (1) Plaintiff lacks
standing to bring Count Two "because she has not plausibly and clearly pled a concrete injury to
herself, for [the same reasons as Count One]; and (2) Plaintiff "has not plausibly alleged any
fiduciary breach or prohibited transaction, let alone any loss to the Plan" because (i) Defendant
was acting as a settlor determining which benefits its employees would receive, as opposed to a
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 20 of 27

21
fiduciary managing plan assets on behalf of its employees, and (ii) Plaintiff does not plausibly
allege that her "contributions were used for any purpose other than to offset Plan costs." Id.
1. Standing—Count Two
As with Count One, the Court finds Plaintiff has sufficiently alleged standing to pursue
Count Two. The allegations underlying this claim are that Defendant breached its fiduciary duty
by failing to, inter alia, "adequately and regularly review the terms of its tobacco wellness
program and the accompanying communications to participants to ensure they complied with
ERISA and the regulations" and collecting an "unlawful and discriminatory tobacco surcharge[.]"
Dkt. No. 1 at ¶ 71. Further, Plaintiff alleges that Defendant "administered a program that
disproportionately benefited itself at the expense of Plan participants" and "by withholding
unlawful tobacco surcharges from participants' paychecks and using those funds to reduce its own
financial obligations to the Plan, [Defendant] caused the Plan to engage in transactions that
constituted a direct or indirect exchange of Plan assets for the benefit of a party in interest—
namely, itself—and improperly used Plan assets for its own financial advantage." Id. at ¶¶ 73-74.
In sum, Plaintiff claims that Defendant had a duty to ensure compliance with ERISA and that its
failure to do so, in furtherance of their own financial benefit, caused her and other plan members,
as well as the Plan itself, injury.
Regardless of the merits of Count Two, Plaintiff has sufficiently alleged that she was
injured by Defendant's improper conduct for standing purposes. Plaintiff seeks various forms of
relief that would remedy the alleged harm, including "restoration of losses to the Plan and its
participants caused by Defendant's fiduciary violations" and "disgorgement of any benefits and
profits Defendant received or enjoyed from the use of the Plan's assets or violations of ERISA[.]"
Dkt. No. 1 at 29. For the same reasons she has standing to bring Count One, Plaintiff's allegations
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 21 of 27

22
of injury arising from the unlawful imposition of the tobacco surcharge are sufficient to establish
standing for Count Two at the pleading stage. See Wilson, 2026 WL 196517, at *6 ("Plaintiffs
assert that Defendants breached their fiduciary duties in many ways, including by administering a
wellness program in a manner that violated ERISA and its implementing regulations, by assessing
and collecting the allegedly unlawful surcharge, by failing to act solely in the interests of
participants and beneficiaries, and by retaining the surcharges collected . . . . Because these
claims depend on whether Defendants have violated ERISA through its imposition of the tobacco
surcharge, Plaintiffs have standing to bring their fiduciary duty claims for the same reasons
described above"); Waggoner v. The Carle Found., No. 24-CV-2217 (C.D. Ill. Sept. 15, 2025),
Dkt. No. 27 at 18 n.3 (finding the plaintiff had standing to assert fiduciary duty claims based on
allegations "mirror[ing]" those regarding tobacco surcharge, as both allege concrete injury in the
form of monetary harm).5
Accordingly, the Court declines to dismiss Count Two for lack of standing.
2. 	Merits Arguments—Count Two
Plaintiff brings her breach of fiduciary duty claim pursuant to 29 U.S.C. § 1132(a)(2). See
Dkt. No. 1 at ¶ 78.
"A claim for breach of fiduciary duty under ERISA requires three elements: '1) defendant
was a fiduciary of the plan, 2) defendant was acting in that capacity, and 3) defendant breached a
fiduciary duty.'" Delker v. MasterCard Int'l, Inc., 21 F.4th 1019, 1025 (8th Cir. 2022) (citation
5 Although the District of Rhode Island reached the opposite conclusion in Williams v. Bally's
Mgmt. Grp., LLC, No. 1:25-CV-00147, 2025 WL 3078747, *6 (D.R.I. Nov. 4, 2025), this Court
agrees with the Southern District of New York and Western District of Texas that "Williams
'conflate[d] the merits of a fiduciary breach claim, which does require loss or harm to the Plan,
with the standing inquiry,'" Noel, 2026 WL 558118, at *8 (quoting Wilson, 2026 WL 196517 at
*6 n.7). Therefore, this Court also respectfully disagrees with Williams on the issue of standing.
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 22 of 27

23
omitted). "As the Supreme Court has explained, '[i]n every case charging breach of ERISA
fiduciary duty . . . the threshold question is . . . whether [the defendant] was acting as a fiduciary .
. . when taking the action subject to complaint.'" Sec'y of Lab. v. Macy's, Inc., No. 1:17-CV-541,
2021 WL 5359769, *18 (S.D. Ohio Nov. 17, 2021) (quoting Pegram v. Herdrich, 530 U.S. 211,
226 (2000)) (alterations in original). "A defendant acts in a fiduciary capacity when undertaking
discretionary acts with respect to plan management or administration, such as 'selecting
investments, exchanging one instrument or asset for another, and so on.'" Noel, 2026 WL
558118, at *13 (quoting Coulter v. Morgan Stanley & Co. Inc., 753 F.3d 361, 367 (2d Cir. 2014)
(per curiam)). "But 'ERISA's fiduciary duty requirement simply is not implicated where an
employer, acting as the Plan's settlor, makes a decision regarding the form or structure of the
Plan,' . . . 'such as establishing, funding, amending, or terminating a plan[.]'" Id. (quoting
Amatangelo v. Nat'l Grid USA Serv. Co., No. 04-CV-246S, 2011 WL 3687563, *6 (W.D.N.Y.
Aug. 23, 2011), aff'd sub nom. Argay v. Nat'l Grid USA Serv. Co., 503 Fed. Appx. 40 (2d Cir.
2012) (summary order); Coulter, 753 F.3d at 367) (internal citations omitted).
Even assuming, without deciding, that Defendant was acting in a fiduciary capacity, the
Court agrees with Defendant that Plaintiff's breach of fiduciary duty claim must be dismissed
because Plaintiff does not plausibly allege that the Plan suffered any losses from Defendant's
alleged fiduciary breaches, as required to bring a Section 1132(a)(2) action. 6
6 The Court is not necessarily convinced that Plaintiff has plausibly alleged that Defendant was
engaged in fiduciary conduct because mere accusations that a defendant is carrying out the Plan
as written (as opposed to accusations of improperly executing discretionary functions) do not state
a claim for breach of fiduciary duty. See Noel, 2026 WL 558118, at *13 ("[T]he distinction
between creation (a settlor function) and implementation (a fiduciary function) is illusory where
the [plaintiff] alleges only that a discriminatory wellness program was implemented as created . . .
. Because [t]here can be no breach of fiduciary duty where an ERISA plan is implemented
according to its written, nondiscretionary terms, . . . these allegations are deficient") (citations and
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 23 of 27

24
A suit under Section 1132(a)(2) is "brought in a representative capacity on behalf of the
plan as a whole," Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142 n.9 (1985), and therefore
"does not provide a remedy for individual injuries distinct from plan injuries," LaRue v. DeWolff,
Boberg & Assocs., Inc., 552 U.S. 248, 256 (2008). As such, a plaintiff must show that there was a
loss to the plan to bring a claim pursuant to Section 1132(a)(2). See Chirinian, 2025 WL
2147271, at *11 ("'[I]f individual plan participants suffer losses, but the plan does not, the trustee
is not personally liable for damages'") (quoting Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915,
919-20 (8th Cir. 1994)).
First, Plaintiff alleges that "[a]s a direct and proximate result of these fiduciary breaches,
members of the Class lost millions of dollars in the form of unlawful surcharges that were
deducted from their paychecks." Dkt. No. 1 at ¶ 77. Plaintiff fails to state a claim based upon this
allegation because individual injuries alone cannot support a Section 1132(a)(2) claim. See
LaRue, 552 U.S. at 256.
Second, Plaintiff contends that Defendant engaged in self-dealing, which meant, according
to Plaintiff, "the Plan ended up with fewer assets than it should have forcing all participants,
including [Plaintiff], to pay more out-of-pocket than they otherwise would have." Dkt. No. 23 at
25. However, the Court cannot accept this characterization. The Plan was not harmed by
Defendant offsetting its own contributions with the surcharge proceeds; the participants paying
the surcharge were the parties injured. As discussed, "'§ 1132(a)(2) does not provide a remedy for
individual injuries distinct from plan injuries.'" Noel, 2026 WL 558118, at *14 (quoting Williams,
2025 WL 3078747, at *5). Therefore, Plaintiff's allegations that Defendant used the surcharge
internal quotation marks omitted). It is not necessary to reach this issue, however, because the
Court finds Count Two must be dismissed even if Defendant was acting in a fiduciary capacity.
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 24 of 27

25
proceeds to offset its own contributions, see Dkt. No. 1 at ¶¶ 73, 75, does not state a claim for
breach of fiduciary duty because Plaintiff fails to allege injury to the Plan itself.
In support of this self-dealing argument, Plaintiff cites Grodotzke v. Seaford Ave. Corp.,
17 F. Supp. 3d 185, 193 (E.D.N.Y. 2014), where the court held the defendants "breached their
duties by commingling plan assets with company assets and using those monies to pay their
creditors instead of forwarding the plan assets to the Funds." See id. However, Grodotzke is
inapplicable because, here, there are no plausible allegations that Defendant used the surcharge
proceeds to pay third parties. Instead, Plaintiff claims Defendant contributed these funds into the
Plan and reduced its own contributions accordingly. See Dkt. No. 1 at ¶¶ 69, 73-75. Again, even
accepting these self-dealing allegations as true, this conduct caused harm to the individuals from
whom the surcharge was collected, but cannot reasonably be interpreted to have caused the Plan
itself any injury. See Noel, 2026 WL 558118, at *14 ("[The amount contributed to the Plan would
seemingly be the same, regardless of whether the contributions were coming from Defendants or
tobacco-using participants"); Chirinian, 2025 WL 2147271, at *12 ("[E]ven if collecting less
money from Plan participants meant that [defendant] would have to contribute more to the Plan,
from a balance-sheet perspective, the Plan is no worse off").
Third, Plaintiff argues that Defendant engaged in prohibited transactions because the
surcharge proceeds are Plan assets and Defendant misappropriated these Plan assets for its own
benefit. See Dkt. No. 23 at 28. However, "withheld wages do not become plan assets until 'the
earliest date on which such contributions or repayments can reasonably be segregated from the
employer's general assets,' which can be up to ninety days from the date that the funds were
withheld[.]'" Noel, 2026 WL 558118, at *15 n.14 (citing 29 C.F.R. § 2510.3-102(a), (c); Fisher v.
GardaWorld Cash Serv. Inc., No. 3:24-CV-00837, 2025 WL 2484271, *8 (W.D.N.C. Aug. 28,
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 25 of 27

26
2025)). Thus, even if the surcharge proceeds eventually became Plan assets, the complaint is
devoid of allegations that Defendant retained these funds beyond the ninety-day limitation.
Plaintiff merely alleges that the funds were used to offset Defendant's contributions to the Plan.
In other words, these employee contributions were contributed to the Plan, but Defendant was
required to pay less from its own accounts as a result. See Dkt. No. 1 at ¶¶ 74-75. Because the
complaint is devoid of allegations that the Plan explicitly provides that unpaid contributions are
Plan assets, Plaintiff has not adequately alleged a violation of 29 U.S.C. § 1106. See Fisher, 2025
WL 2484271, at *8 ("Case law considering the issue has generally determined that 'unpaid
employer contributions are not assets of a fund [or Plan] unless the agreement between the fund
and the employer specifically and clearly declares otherwise'") (citation and footnote omitted).
Plaintiff's argument that Defendant breached its duties by "fail[ing] to provide notice and
fail[ing] to review the terms of the surcharge scheme to ensure compliance with ERISA[,]" Dkt.
No. 23 at 26, fails to state a claim for the same reasons. See Noel, 2026 WL 558118, at *14
(rejecting similar argument because, inter alia, the plaintiff failed to allege harm to the plan).
For these reasons, the Court finds Plaintiff has failed to allege harm to the Plan and grants
Defendant's motion to dismiss Count Two pursuant to Rule 12(b)(6).
IV. CONCLUSION
After carefully considering the parties' filing, the record in this matter, and the applicable
law, the Court hereby
ORDERS that Defendant's motions to dismiss (Dkt. No. 21) is GRANTED in part and
DENIED in part;7 and the Court further
7 As a result of this Memorandum-Decision and Order, Plaintiff's breach of fiduciary duty claim
(Count Two) is dismissed. Plaintiff's claim for unlawful imposition of a discriminatory surcharge
(Count One) survives.
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 26 of 27

27
ORDERS that the Clerk shall serve a copy of this Memorandum-Decision and Order on
the parties in accordance with Local Rules.
IT IS SO ORDERED.
Dated: March 26, 2026
Albany, New York
Case 1:25-cv-00581-MAD-PJE Document 36 Filed 03/26/26 Page 27 of 27