The Midwest Media Group Inc v. Benistar Employer Svc Trust Co Inc, 3:10-cv-00843

Background

Plaintiffs Midwest Media Group, Inc. and Digital Attic, Inc. are Illinois and Wisconsin corporations respectively, with two shareholder plaintiffs joined.
Defendants BESTCO and Crump marketed, administered, and sponsored the Advantage Plan and later the DBO Plan for employee welfare benefits.
The 1999 Advantage Plan Contract was signed by Midwest Media Group LLC and BESTCO; plan sponsor shifted to BISYS (and later to Digital under amendments).
In 2002, the plan was terminated and funds were transferred to the DBO Plan; IRS proposed regulations threatened disqualification of the Advantage Plan.
BISYS allegedly promised insurance coverage via Gulf Underwriters/Travelers to cover losses if the IRS ruled against the DBO Plan; Gulf policies existed from 2002–2005 with later claims of missing funds and denied coverage.
Plaintiffs allege Crump/BISYS breached contracts by charging unreasonable fees and failing to provide insurance coverage, while BESTCO is alleged to have been discharged from obligations in 2001.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Choice of law and statute of limitations	Connecticut law applies; six-year contract statute of limitations.	Limitations and choice may favor defendants; reliance on prior novation/ privity issues.	Connecticut law applies; six-year period governs contract claims.
Breach of the Advantage Plan by Crump – unreasonable fees	Crump charged unreasonable fees violating § 7.05 and § 1.02; damages alleged.	Some fees may not be connected to establishment/administration; limitations defense.	Action pleaded viable for termination/administration fees and § 1.02 violations; statute of limitations not barred as pleaded.
Breach of the Promise to Provide Audit Insurance by Crump – Second Gulf policy	Crump promised insurance; Second Gulf Policy delivered; denial of coverage breached.	Accrual occurred when policy procured; First Gulf time-barred; Second Gulf timely.	Second Gulf policy breach timely; First Gulf policy time-barred; partial survival of Count Two.
Breach of the Advantage Plan by BESTCO	BESTCO breached by mismanagement and promotional conduct.	Novation/ privity issues and plan sponsor replacement cut off liability.	Count against BESTCO dismissed with prejudice due to novation and statute limitations.

Key Cases Cited

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility pleading standard)
Ashcroft v. Iqbal, 129 S. Ct. 1937 (U.S. 2009) (requires plausible claims, not mere conclusory statements)
Hemi Group, LLC v. City of New York, 130 S. Ct. 983 (U.S. 2010) (accept as true pleaded facts; inferences in plaintiff's favor)
Erickson v. Pardus, 551 U.S. 89 (U.S. 2007) (liberal pleading standards under Rule 8)
Arista Records, LLC v. Doe, 604 F.3d 110 (2d Cir. 2010) (pleading standards; amplification required where needed)
Fulton v. Goord, 591 F.3d 37 (2d Cir. 2009) (plausibility standard is flexible)
Harley v. Indian Spring Land Co., 123 Conn. App. 800 (Conn. App. 2010) (consideration can be the relinquishment of a right; contract modification)
Spicer v. Spicer, 33 Conn. App. 152 (Conn. App. 1993) (novation considerations for contract substitution)
Rosenfeld v. I. David Marder & Assocs. LLC, 110 Conn. App. 679 (Conn. App. 2008) (timeliness of contract actions; accrual rule)
Tolbert v. Connecticut Gen. Life Ins. Co., 257 Conn. 118 (Conn. 2001) (accrual of insurance-type breach; damages timing)
American Express Centurion Bank v. Head, 115 Conn. App. 10 (Conn. App. 2009) (elements of breach of contract and damages)
Reichold v. Hartford Accident & Indemnity Co., 252 Conn. 774 (Conn. 2000) (most significant relationship approach for choice of law)
Norton v. Michonski, 368 F. Supp. 2d 175 (D. Conn. 2005) (statute of limitations treated as procedural)
Baxter v. Sturm, Ruger, and Co., Inc., 230 Conn. 335 (Conn. 1994) (statute of limitations application to contract claims)