45 F.3d 1017 (6th Cir. 1995), 93-3964, Schwartz v. Gregori

Docket Nº93-3964.
Citation45 F.3d 1017
Party NameDiane A. SCHWARTZ, Plaintiff-Appellee, v. Joseph S. GREGORI, M.D.; Joseph S. Gregori, M.D., Inc., Individually and as Employer and Administrator of Pension Plan and Trust, Defendants-Appellants, John J. Kuczek and Kuczek & Associates, Inc., Defendants.
Case DateJanuary 31, 1995
CourtUnited States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 1017

45 F.3d 1017 (6th Cir. 1995)

Diane A. SCHWARTZ, Plaintiff-Appellee,


Joseph S. GREGORI, M.D.; Joseph S. Gregori, M.D., Inc.,

Individually and as Employer and Administrator of

Pension Plan and Trust, Defendants-Appellants,

John J. Kuczek and Kuczek & Associates, Inc., Defendants.

No. 93-3964.

United States Court of Appeals, Sixth Circuit

January 31, 1995

Argued Nov. 29, 1994.

Rehearing and Suggestion for Rehearing En Banc Denied March

17, 1995.

Page 1018

Robert Samuel Hartford (argued and briefed), Timothy M. Reardon (briefed), Nadler, Nadler & Burdman, Youngstown, OH, for plaintiff-appellee.

Richard J. Thomas (argued and briefed), Richard N. Selby (briefed), Henderson, Covington, Stein, Donchess & Messenger, Youngstown, OH, for defendants-appellants.

Before: MILBURN and SUHRHEINRICH, Circuit Judges; and JOINER, District Judge. [*]

JOINER, District Judge.

Defendants Joseph S. Gregori and Joseph S. Gregori, M.D., Inc., appeal the judgment in favor of plaintiff Diane Schwartz for breach of fiduciary duty and retaliatory discharge under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Secs. 1001 et seq. The district court awarded Schwartz damages to compensate her for the financial losses caused by defendants' breach of fiduciary duty, together with prejudgment interest; back pay and front pay for retaliatory discharge; and attorney fees. The Gregori defendants challenge their liability for retaliatory discharge and the award of back pay and front pay. We affirm.


Joseph Gregori, a physician, and Diane Schwartz, a licensed x-ray technician, met through their employment in 1971. In 1975, Gregori started his own practice, formed Joseph S. Gregori, M.D., Inc., and hired Schwartz as his office manager and x-ray technician.

Page 1019

Defendant John Kuczek is a financial planner and insurance salesman, conducting business through Kuczek & Associates, Inc. Kuczek and Gregori are friends, and Kuczek performed financial planning services for Gregori. At Kuczek's suggestion, Gregori formed the Joseph S. Gregori, M.D., Inc. Employer's Pension Plan and Trust Agreement (the "plan") in 1975. Gregori individually served as trustee of the plan, and Gregori, Inc. served as administrator. Gregori, Schwartz and others were participants in the plan.

Gregori had no investment experience, and relied on Kuczek to make decisions for the plan. In 1983, Kuczek learned of a commodities investor, David Meek, whose funds supposedly were earning as much as 30 percent. Kuczek recommended to Gregori that the plan invest in Meek's funds. Gregori followed Kuczek's advice, investing $50,000 of plan assets in September 1983, and an additional $108,500 in December 1983. The latter investment was made following Kuczek's "due diligence" visit to Meek's office in Florida, where he learned that Meek's business had been in operation for only nine months. 1 Following the December investment, the amount invested in Meek's funds represented 45.6 percent of the total plan assets.

Meek issued weekly statements for a period of time which indicated that the funds were performing well. Over the next year, Gregori and Kuczek received two notices disclosing that Meek was a defendant in an action brought by the Commodities Futures Trading Commission (CFTC), and that an injunction had been issued requiring Meek to allow the CFTC to have access to the books and records of one of his funds. On both occasions, Kuczek called Meek and was assured that the problem was an inadvertent one which was being remedied. Kuczek did not confirm Meek's report with the CFTC or recommend that the plan's assets be withdrawn.

Meek stopped issuing weekly statements in July 1985, and shortly thereafter the CFTC froze all of his accounts. In 1987, Gregori and Kuczek learned that Meek had embezzled all of the invested funds, and that the weekly reports were fictitious. The parties stipulated that the total loss to the plan was $288,991.09, and that Schwartz's share of the loss was $19,728.15. Kuczek offered to make restitution to the plan for the loss, but Gregori refused the offer and "forgave" Kuczek because he had not caused the loss intentionally. The plan was terminated on March 31, 1988, and Schwartz received a lump sum payment representing her share of the plan assets then in existence. This payment did not compensate Schwartz for the losses attributable to the Meek investment.

Schwartz and Gregori had several discussions during this time period regarding the plan's losses. Gregori offered to repay the lost funds to Schwartz in the form of bonuses over a three-year period, but Schwartz refused the offer because the bonuses would have been taxable as income in the years they were received, and could not have been invested in a qualified retirement plan. Through counsel, Schwartz demanded that Gregori reimburse her for the loss and threatened legal action. Gregori responded by telling Schwartz that she would be out of a job if she sued him. Gregori also threatened to force Schwartz to quit by reducing her hours.

Schwartz filed suit on November 10, 1988, and effected service on November 14. Within days, Gregori advertised for an x-ray technician. On November 22, Gregori sent his attorney a draft letter terminating Schwartz, and asked the attorney to make necessary alterations or clarifications. Gregori terminated Schwartz on December 9, telling her that he planned to scale back his practice, implement computerization, and involve his wife in the administration of the office.

Schwartz's original complaint...

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