MRS-L-002034-18 10/17/2018 11:33:44 AM Pg 1 of 11 Trans ID: LCV20181810508 John M. Bowens, Esq. (009711973) SCHENCK, PRICE, SMITH & KING, LLP 220 Park Avenue PO Box 991 Florham Park, New Jersey 07932 (973) 539-1000 jmb@spsk.com Attorneys for Plaintiff, County of Morris COUNTY OF MORRIS, SUPERIOR COURT OF NEW JERSEY LAW DIVISION: MORRIS COUNTY Plaintiff, DOCKET NO. MRS-L- v. Civil Action FRENKEL BENEFITS, LLC, CRAIG HASDAY, ERIC LABASKA, and LAWRENCE KIRSCHNER individually, COMPLAINT, DESIGNATION OF TRIAL COUNSEL, RULE 4:5 AND 4:6-1 CERTIFICATIONS Defendant. Plaintiff, COUNTY OF MORRIS (hereinafter “Plaintiff”), by and through its attorneys herein, Schenck, Price, Smith & King LLP, 220 Park Avenue, Florham Park, New Jersey, by way of Complaint against the Defendants, FRENKEL BENEFITS, LLC, CRAIG HASDAY, ERIC LABASKA, and LAWRENCE KIRSCHNER individually (hereinafter “Defendants”), says: The Parties 1. The County of Morris (“County”) is a governmental entity organized and existing under the laws of the State of New Jersey. {02007865.DOCX;1 } MRS-L-002034-18 10/17/2018 11:33:44 AM Pg 2 of 11 Trans ID: LCV20181810508 2. Upon information and belief, Frenkel Benefits LLC, (all Defendants, collectively “Frenkel”) is a licensed insurance broker specializing in health care insurance. 3. Upon information and belief, Craig Hasday is the President of Frenkel. 4. Upon information and belief, Eric Labaska is the Senior Vice President of Frenkel. 5. Upon information and belief, Lawrence Kirschner is the Senior Executive Vice President of Frenkel. Facts Common To All Counts 6. The County issued a Request For Proposal (“RFP”) for an insurance broker for its Employee Benefits health insurance program requiring responses by January 13, 2015. 7. The RFP contained the following language: [t]he Consultant hired is to receive no commissions or other income associated with carrying out the responsibilities outlined in the scope of services. Company hired will also not be allowed to receive any contingent commissions, bonuses, additional fees, profit sharing and benefits in kind or any other type of compensation. To ensure transparency of costs, the disclosure of all payments as compensation for services provided under the terms of this RFP is required. The County will have the right to request, review and audit all records and documentation for compliance. Emphasis added. {02007865.DOCX;1 } 2 MRS-L-002034-18 10/17/2018 11:33:44 AM Pg 3 of 11 Trans ID: LCV20181810508 8. The Freeholder Board selected Frenkel as the County’s Broker at a meeting on February 2, 2015. The Freeholders by resolution of March 2, 2015, authorized a contract with Frenkel as the County’s health care broker. A contract was signed on March 23, 2015. The contract was extended by one (1) year, on two (2) separate occasions. 9. Contrary to the RFP, Frenkel received a commission of $235,000.00 for the policy year of 2016, from Cigna for enrolling the County’s health insurance coverage with it. Frenkel received an additional $19,206.00 in commissions for the 2017 policy year. 10. In order to receive this commission, Frenkel was obligated to execute a certification that the County had been advised of this commission and had approved it. 11. On June 20, 2016, Craig Hasday falsely executed a certification stating that Frenkel would notify the County of the commission and if the County did not approve of Frenkel’s receipt of it, would so notify Cigna. 12. The County never received such notification, nor did it ever approve of Frenkel’s receipt of the commission. 13. N.J.S.A. §17:22A-41.1. provides: a. An insurance producer licensed pursuant to P.L.2001, c.210 (C.17:22A-26 et al.) who sells, solicits, or negotiates health insurance policies or contracts to residents of this State shall notify the purchaser of the {02007865.DOCX;1 } 3 MRS-L-002034-18 10/17/2018 11:33:44 AM Pg 4 of 11 Trans ID: LCV20181810508 insurance, in writing, of the amount of any commission, service fee, brokerage, or other valuable consideration that the producer will receive as a result of the sale, solicitation or negotiation of the health insurance policy or contract. If the commission, fee, brokerage, or other valuable consideration is based on a percentage of premium, the insurance producer shall include that information in the notification to the purchaser. Emphasis Added. 14. Frenkel never advised the County of the commission it received from Cigna, in direct violation of N.J.S.A. § 17:22A-41.1. 15. In furtherance of its scheme to have the County agree to have Cigna provide its employee health care coverage, Frenkel concealed, inter alia, information: a. that termination provisions in the Cigna policy would result in funds due upon termination of the Cigna Medical Plan by the County in excess of eight (8) million dollars in medical premiums; b. that the County would face a deficit position of more than six (6) million dollars; c. that the County is now responsible for all claim liability for all the County independent autonomous entities. 16. In addition, for 2018 Frenkel advised the County to place prescription coverage on a self-insured basis and that full credit for this transaction would be provided from administrative costs. {02007865.DOCX;1 } 4 MRS-L-002034-18 10/17/2018 11:33:44 AM Pg 5 of 11 Trans ID: LCV20181810508 17. As a result, the County is responsible for significant additional potential liability and additional fixed costs which were not disclosed at that time, including but not limited to, the following: a. that the County would face an increase in potential liability of $135,000.00 per employee; b. that the County’s stop-loss protection was dramatically reduced without a correspondent reduction in premium costs; c. that the County would face additional administrative fees of approximately $800,000.00; d. that the County would face additional cost containment fees of approximately $700,000.00. 18. As a result of the Defendants conduct, the County has suffered significant financial losses. COUNT I (Civil Conspiracy) 19. The Plaintiff repeats each and every allegation contained in the previous paragraphs as if set forth fully at length herein. 20. The Defendants created a scheme and artifice to defraud the County by inducing it to change its employee health care coverage to Cigna so that the Defendants would receive commissions of $235,000.00 for the period of January 1, 2016 to December 31, 2016 and $19,206.00 for the period of January 1, 2017 to December 31, 2017. In furtherance of this conspiracy, the Defendants concealed material facts regarding the financial costs attendant to the enrolling with Cigna. {02007865.DOCX;1 } 5 MRS-L-002034-18 10/17/2018 11:33:44 AM Pg 6 of 11 Trans ID: LCV20181810508 WHEREFORE, the Plaintiff, COUNTY OF MORRIS demands judgment against the Defendants, FRENKEL BENEFITS, LLC, CRAIG HASDAY, ERIC LABASKA, and LAWRENCE KIRSCHNER individually for: a. b. c. d. monetary damages; punitive damages; costs of suit; and such other relief as the Court deems just and appropriate. COUNT II (Common Law Fraud) 21. The Plaintiff repeats each and every allegation contained in the previous paragraphs as if set forth fully at length herein. 22. The Defendants purposefully concealed from the County the financial detriments to switching its employee health coverage. The Defendants did so with the intention that the county rely upon the misinformation and agree to place its coverage with Cigna, resulting in A financial windfall for the defendants. WHEREFORE, the Plaintiff, COUNTY OF MORRIS demands judgment against the Defendants, FRENKEL BENEFITS, LLC, CRAIG HASDAY, ERIC LABASKA, and LAWRENCE KIRSCHNER individually for: a. b. c. d. {02007865.DOCX;1 } monetary damages; punitive damages; costs of suit; and such other relief as the Court deems just and appropriate. 6 MRS-L-002034-18 10/17/2018 11:33:44 AM Pg 7 of 11 Trans ID: LCV20181810508 COUNT III (Consumer Fraud) 23. The Plaintiff repeats each and every allegation contained in the previous paragraphs as if set forth fully at length herein. 24. The Consumer Fraud Act. N.J. Stat. Ann. §§ 56:8-1, provides protection. The Defendants are licensed by the State of New Jersey and are subject to numerous statutory and regulatory provisions. Violations of those provisions presents a matter of public interest. 25. The defendants made false and fraudulent representations, pretenses and promises to the County with the intention that the County rely upon them. The County did rely upon them to its detriments. WHEREFORE, the Plaintiff, COUNTY OF MORRIS demands judgment against the Defendants, FRENKEL BENEFITS, LLC, CRAIG HASDAY, ERIC LABASKA, and LAWRENCE KIRSCHNER individually for a. b. c. d. e. monetary damages; punitive damages; costs of suit; treble damages; and such other relief as the Court deems just and appropriate. COUNT IV (Breach of Fiduciary Duty) 26. The Plaintiff repeats each and every allegation contained in the previous paragraphs as if set forth fully at length herein. {02007865.DOCX;1 } 7 MRS-L-002034-18 10/17/2018 11:33:44 AM Pg 8 of 11 Trans ID: LCV20181810508 27. The Defendants had a fiduciary duty to the County which required that they act, at all times, in a manner beneficial to the County. 28. The Defendants breached that duty by making false and fraudulent representations to the County for the financial benefit of the Defendants. WHEREFORE, the Plaintiff, COUNTY OF MORRIS demands judgment against the Defendants, FRENKEL BENEFITS, LLC, CRAIG HASDAY, ERIC LABASKA, and LAWRENCE KIRSCHNER individually for: a. b. c. d. monetary damages; punitive damages; costs of suit; and such other relief as the Court deems just and appropriate. COUNT V (Breach of Contract) 29. The Plaintiff repeats each and every allegation contained in the previous paragraphs as if set forth fully at length herein. 30. The Defendants entered into a contract with the County pursuant to the RFP. That contract required that the sole remuneration to the Defendants would be the fee paid to them by the County. 31. The Defendants breached their contract with the county by accepting additional payment from Cigna. {02007865.DOCX;1 } 8 MRS-L-002034-18 10/17/2018 11:33:44 AM Pg 9 of 11 Trans ID: LCV20181810508 WHEREFORE, the Plaintiff, COUNTY OF MORRIS demands judgment against the Defendants, FRENKEL BENEFITS, LLC, CRAIG HASDAY, ERIC LABASKA, and LAWRENCE KIRSCHNER individually for: a. b. c. d. monetary damages; punitive damages; costs of suit; and such other relief as the Court deems just and appropriate. COUNT VI (Unjust Enrichment) 32. The Plaintiff repeats each and every allegation contained in the previous paragraphs as if set forth fully at length herein. 33. The Defendants were unjustly enriched by virtue of the commission paid by Cigna. 34. The Defendants secured a commission from Cigna for placing the county’s healthcare. WHEREFORE, the Plaintiff, COUNTY OF MORRIS demands judgment against the Defendants, FRENKEL BENEFITS, LLC, CRAIG HASDAY, ERIC LABASKA, and LAWRENCE KIRSCHNER individually for: a. monetary damages; b. punitive damages; c. costs of suit; and {02007865.DOCX;1 } 9 MRS-L-002034-18 10/17/2018 11:33:44 AM Pg 10 of 11 Trans ID: LCV20181810508 d. such other relief as the Court deems just and appropriate. SCHENCK PRICE SMITH & KING LLP Attorneys for Plaintiff By: John M. Bowens, Esq. John M. Bowens, Esq. Dated: October 17, 2018 DESIGNATION OF TRIAL COUNSEL The plaintiff hereby designates John M. Bowens, Esq. as trial counsel in this action. SCHENCK, PRICE, SMITH & KING, LLP Attorneys for Plaintiff, By: John M. Bowens, Esq. John M. Bowens, Esq. Dated: October 17, 2018 {02007865.DOCX;1 } 10 MRS-L-002034-18 10/17/2018 11:33:44 AM Pg 11 of 11 Trans ID: LCV20181810508 CERTIFICATION PURSUANT TO RULE 4:5-1 AND 4:6-1 JOHN M. BOWENS, ESQ., of full age, hereby certifies: 1. I am an attorney-at-law in the State of New Jersey and a partner with the law firm of Schenck, Price, Smith & King, LLP, attorneys for the Plaintiff in the within action. 2. I certify that the within Complaint was filed in the Morris County Superior Court Clerk’s Office in Morristown, New Jersey. 3. I certify that I have no knowledge of any other pending actions or proceedings concerning the subject matter of this action, and it is not anticipated at this time that any other party should be joined in this action. 4. I certify that confidential personal identifiers have been redacted from documents now submitted to the Court and will be redacted from all documents submitted in the future in accordance with Rule 1:38-7(b). 5. I certify that the foregoing statements made by me are true. I am aware that if any of the foregoing statements made by me are willfully false, I am subject to punishment. SCHENCK, PRICE, SMITH & KING, LLP Attorneys for Plaintiff, By: John M. Bowens, Esq. John M. Bowens, Esq. Dated: October 17, 2018 {02007865.DOCX;1 } 11