Two former employees of Saint Catherine Medical Center Fountain Springs sued the bankrupt hospital's former presidents, and the sponsor of two benefit programs, on Wednesday in federal court for allegedly allowing money to be diverted from three such plans.
Maryann Shadler, Pottsville, alleged that Daniel A. Colon and Merlyn Knapp allowed the hospital to use money intended for her 401(k) plan for other purposes in violation of their duties as trustees of that plan.
"Knapp and Colon took no steps to prevent, discourage or report (the hospital's) misappropriation of funds," the lawsuit alleges.
Also, Shadler and Janet Stavinski, Frackville, sued Specialty Health LLC, Ashland, for allegedly allowing the hospital to divert money from their short-term disability and medical/dental/vision insurance benefit plans toward other unspecified uses.
They asked the court to order a complete accounting of the plans and their assets, restitution of all losses, an injunction to require the defendants to correct their improper actions and payment of costs, expenses and attorney fees.
They also asked the court to allow the lawsuit to be certified as a class-action one on behalf of all former hospital employees who participated in the plans, a total they say numbers more than 100 people.
"We think we have a good chance to get it certified as a class action," Peter Winebrake, Dresher, one of the plaintiffs' lawyers, said Thursday.
Shadler and Stavinski are two of about 150 Saint Catherine employees who lost their jobs when the Butler Township hospital filed for bankruptcy April 9.
That proceeding is pending before U.S. Bankruptcy Judge John J. Thomas, Wilkes-Barre. On April 18, Thomas ordered the case changed from a reorganization by Chapter 11, under which the hospital had filed it, to a Chapter 7 liquidation.
While lawsuits against parties that file for bankruptcy are automatically halted under federal law, Shadler and Stavinski said theirs can proceed because they did not name the hospital as a defendant or make any claim against it.
A spokeswoman for William G. Schwab, Lehighton, the trustee in the Saint Catherine bankruptcy case, said Thursday that he had not received notice of Shadler and Stavinski's lawsuit.
Winebrake said that he probably will file a claim with the bankruptcy court on behalf of the plaintiffs against the hospital
Shadler and Stavinski alleged in that lawsuit that Colon and Knapp were fiduciaries with respect to the 401(k) plan and Specialty Health was a fiduciary with respect to the disability and insurance benefit plans.
As fiduciaries, Colon, Knapp and Specialty Health owed special obligations under the federal Employee Retirement Income Security Act of 1974 to the plaintiffs and all beneficiaries of the plans to act exclusively in their interest and for their benefit, according to the lawsuit.
"Defendants breached their fiduciary duties" by improperly monitoring the plans, failing to prevent misappropriation of contributions to the plans and not telling participants in the plans of the misconduct, according to the lawsuit. "Plaintiffs and other plan participants have suffered monetary loss and other damages."
Furthermore, as fiduciaries, the defendants are personally liable for all losses suffered by participants in the plans, the lawsuit reads in part.
Concerning the status as a possible class-action lawsuit, the plaintiffs alleged that they will fairly represent the class, have claims typical of other class members and have no interests against those members.
"Questions of law and fact are common to all class members, since this action concerns the legality of defendants' common conduct, as applied to all class members," the lawsuit reads in part.
Furthermore, a class-action lawsuit is the best way to resolve the litigation, according to the lawsuit.
"The complaint speaks for itself," Michael J. O'Connor, Frackville, another of the plaintiffs' lawyers, said Thursday, "It's a basic American principle that people should be paid for an honest day's work."