289 F.3d 1223 (10th Cir. 2002), 99-1465, Allison v. Bank One-Denver

Docket Nº:99-1465
Citation:289 F.3d 1223
Party Name:Allison v. Bank One-Denver
Case Date:May 15, 2002
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

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289 F.3d 1223 (10th Cir. 2002)

John D. ALLISON; William C. Hopkins, Jr.; Galen G. McFayden; Kirk R. Peterson; Julie E. Peterson; John W. Latta; Nanette B. Latta; James T. Link, Plaintiffs-Counter-Defendants-Appellants,

v.

BANK ONE-DENVER, formerly known as Affiliated National Bank-Denver, formerly known as Denver National Bank, a national banking association, Defendant-Counter-Claimant-Appellee.

Roger K. Crosby, Trustee of the Trust created under the Crosby Group, Inc. Profit Sharing Plan, Plaintiff-Appellant,

v.

Bank One-Denver, formerly known as Affiliated National Bank-Denver, formerly known as Denver National Bank, a national banking association, Defendant-Appellee.

John D. Allison; William C. Hopkins, Jr.; Galen G. McFayden; Kirk R. Peterson; Julie E. Peterson; John W. Latta; Nanette B. Latta; James T. Link, Plaintiffs-Counter-Defendants-Cross-Appellees,

v.

Bank One-Denver, formerly known as Affiliated National Bank-Denver, formerly known as Denver National Bank, a national banking association, Defendant-Counter-Claimant-Cross-Appellant.

Roger K. Crosby, Trustee of the Trust created under the Crosby Group, Inc. Profit Sharing Plan, Plaintiff-Cross-Appellee,

v.

Bank One-Denver, formerly known as Affiliated National Bank-Denver, formerly known as Denver National Bank, a national banking association, Defendant-Cross-Appellant.

John D. Allison; William C. Hopkins, Jr.; Galen G. McFayden; Kirk R. Peterson; Julie E. Peterson; John W. Latta; Nanette B. Latta; James T. Link, Plaintiffs-Counter-Defendants-Appellees,

v.

Bank One-Denver, formerly known as Affiliated National Bank-Denver, formerly known as Denver National Bank, a national banking association, Defendant-Counter-Claimant-Appellant.

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Roger K. Crosby, Trustee of the Trust created under the Crosby Group, Inc. Profit Sharing Plan, Plaintiff-Appellee-Cross-Appellant,

v.

Bank One-Denver, formerly known as Affiliated National Bank-Denver, formerly known as Denver National Bank, a national banking association, Defendant-Appellant-Cross-Appellee.

Nos. 99-1465, 99-1466, 99-1487, 99-1490, 01-1208, 01-1211 and 01-1240.

United States Court of Appeals, Tenth Circuit

May 15, 2002

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James H. Marlow (Dwight A. Hamilton, Clyde A. Faatz, Jr. and Christopher J.W. Forrest, on the briefs), Hamilton & Faatz, P.C, Denver, Colorado, for the Appellants-Cross-Appellees Roger K. Crosby, Trustee of the Trust created under the Crosby Group, Inc. Profit Sharing Plan; John D. Allison; William C Hopkins, Jr., Galen G. McFayden, Kirk R. Peterson, Julie E. Peterson, John W. Latta, Nanette B. Latta; and James T. Link.

James R. Cage (and Rita J. Bonessa, on the briefs), Cage Williams Abelman & Layden P.C, Denver, Colorado, for the Appellee-Cross-Appellant Bank One-Denver.

Before TACHA, Chief Judge, KELLY, and HARTZ, Circuit Judges.

PAUL KELLY, JR., Circuit Judge.

Plaintiff-Appellant Roger K. Crosby ("Crosby Plaintiff'), as Trustee of the Crosby Group, Inc. Profit Sharing Plan (the "Plan"), and a group of Individual Retirement Account ("IRA") holders (collectively, the "Allison Plaintiffs"), filed suit against Defendant-Appellee Bank One-Denver ("Bank One") alleging violations of federal securities laws, Colorado securities laws, ERISA, 29 U.S.C § 1104(a), RICO, 18 U.S.C § 1961, the Colorado Organized Crime Control Act (COCCA), Colo.Rev. Stat. §§ 18-17-101 to 18-17-109, and violations of Colorado common law. Bank One asserted a counterclaim against the Allison Plaintiffs alleging a breach of an indemnity and hold-harmless agreement ("Indemnity Agreement"). The district court dismissed the RICO and COCCA claims prior to trial and they are not the subject of these appeals. After a full trial, the jury found in favor of the Crosby Plaintiff on its ERISA claim, but found in favor of Bank One on all of the Plaintiffs' remaining claims. In addition, the jury found that the Allison Plaintiffs had breached the Indemnity Agreement and assessed damages of one dollar against each Plaintiff. Subsequent to trial, the district court reversed its earlier conclusion that the jury' should determine the ERISA claim and instead made its own findings of fact and held the Bank liable for violation of ERISA, but cut-off Bank

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One's liability as of January 1, 1988. Before us are the parties' appeals and cross-appeals arising from the district court's rulings, including its post-judgment decisions regarding costs.1 We have jurisdiction pursuant to 28 U.S.C. § 1291 and we affirm in part, reverse in part, and remand for further proceedings.

Background

Crosby Plaintiff

In June 1984 the Crosby Group, Inc., an architectural and engineering firm, appointed Bank One (successor to Denver National Bank) to act as trustee of the Plan. Approximately eight months later, Bank One invested a portion of the Plan's assets in a limited partnership in which Hedged Investment Associates, Inc. ("Hedged") served as the general partner. James D. Donahue was the president of Hedged and was responsible for the limited partnership's day-to-day operations as well as its investment decisions.

In 1987, Bank One's sole investment manager in the office that serviced the Plan resigned, prompting the bank to discontinue managing assets for its trust department customers. In doing so, Bank One presented the Plan with the option of either converting to a "participant-directed" plan, or moving the Plan to another institution that would manage its assets. Aplee. App. at 102. The Plan's Advisory Committee, composed of Crosby Group officers and employees, held a meeting on December 29, 1987 and unanimously approved a proposal to permit self-direction of accounts by participants. VI Aplt.App. at 2319. Bank One's Trust Committee received the minutes of the Advisory Committee meeting and unanimously approved the participants' election to convert to a participant-directed plan. Id. at 2418-19. The Advisory Committee subsequently sent a memorandum to the Plan's participants indicating that they had the right to self-direct their accounts into one or more of six investment options, including Hedged. Aplee.App, at 104. As eventually directed, Bank One placed 100 percent of each participant's investment into Hedged. The Plan contained the following provision:

8.10 PARTICIPANT DIRECTION OF INVESTMENT.

A Participant shall have the right to direct the Trustee with respect to the investment or re-investment of the assets comprising the Participant's individual account only if the Trustee consents in writing to permit such direction. If the Trustee does consent . . . the Trustee and each Participant shall execute a letter agreement as a part of this Plan containing such conditions, limitations, and other provisions they deem appropriate before the Trustee shall follow any Participant direction . . . . The Trustee shall not be liable for any loss, or by reason of any breach, resulting from a Participant's direction of the investment of any part of his individual account.

VI Aplt.App. at 2356. Bank One admits that no Letter Agreement as provided for in section 8.10 of the Plan was executed. Aplee. Br. at 14.

Allison Plaintiffs

In 1987 each of the Allison Plaintiffs established an IRA with Bank One directing that 100 percent of his or her respective account's assets be invested in Hedged. Each Allison Plaintiff received and signed an Authorization for the Purchase of Limited Partnership Units ("Authorization"), VI Aplt.App, at 2324,an

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Adoption Agreement, id. at 2325, and a Custodial Agreement, id. at 2249-2258. The Authorization included the following provisions:

1. I have read and understand the provisions contained in the partnership prospectus or offering circular, and have determined that my retirement account and my circumstances meet the suitability requirements set forth in the Prospectus and the Financial Disclosure Statement. . . .

4. I agree to indemnify and hold [Bank One] harmless from and against any claim whatsoever that the investment is not prudent, proper, or otherwise in compliance with the terms and conditions of [ERISA], or any other applicable federal or state law . . . .

Id. at 2324.The Adoption Agreement, which incorporates the Custodial Agreement by reference, indicates by a checked box that Bank One would serve as the custodian and further that: "I/we having read the Custodial Agreement, understand if the Bank acts as Custodian . . . it will not have any discretionary investment responsibility . . . and would invest and reinvest . . . solely on my/our written direction . . . ." Id. at 2325.The Custodial Agreement contains two provisions relevant to this case:

6.03 Custodian Limitation on Liability. [Bank One] shall not be liable for the acts or omissions of Participant [and] shall not have any responsibility nor any liability for any loss of income or capital . . . relating to any investment . . . . which the Participant . . . directs [Bank One] to make.

Id. at 2255.

9.03 Indemnity of Custodian. The Participant indemnifies and saves harmless the Custodian from and against any and all loss resulting from liability to which the Custodian may be subjected by reason of any act or conduct (except willful misconduct or gross negligence) in its official capacities in the administration of this Fund or Plan, or both, including all expenses reasonably incurred in its defense. . . .

Id. at 2257.

Collapse of Hedged and Trial

In August 1990, Donahue informed investors that Hedged had sustained significant unforeseeable losses due to investments in uncovered calls on United Airlines stock options. Subsequently, Donahue and Hedged declared bankruptcy and Donahue pleaded guilty to...

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