Donovan v. Daugherty

Decision Date30 September 1982
Docket NumberCiv. A. No. 81-0470-H.
Citation550 F. Supp. 390
PartiesRaymond J. DONOVAN, Secretary of the United States Department of Labor, Plaintiff, v. Carroll DAUGHERTY, et al., Defendants.
CourtU.S. District Court — Southern District of Alabama

COPYRIGHT MATERIAL OMITTED

T. Timothy Ryan, Sol. of Labor, Monica Gallagher, Associate Sol., Norman P. Goldberg, Counsel for Litigation, Plan Benefits Sec. Div., Bobbye Spears, Regional Sol., U.S. Dept. of Labor, Forrest R. Foss, Atty., Plan Benefits Sec. Div., Washington, D.C., William R. Favre, Jr., U.S. Atty., Mobile, Ala., for plaintiff.

Thomas M. Galloway, Jr., and Lawrence M. Wettermark, Mobile, Ala., for defendants.

AMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW

HAND, Chief Judge.

This matter arose upon the Motion of the plaintiff, Secretary of the United States Department of Labor, for a summary judgment in his favor against all of the defendants. The Court has considered the pleadings, depositions, and exhibits on file and has fully considered all facts, documents, and arguments presented by the defendants. It appearing to the court that there is no genuine issue as to any material fact and that plaintiff is entitled to a judgment as a matter of law with respect to each of his claims against the defendants, the Court hereby makes the following Findings of Fact and Conclusions of Law:

FINDINGS OF FACT1

A. The Plans

1. The AFL-AGC Building Trades Pension Plan (the Pension Plan) was established in 1965 pursuant to the terms of collective bargaining agreements between local chapters of various unions comprising the Mobile, Alabama — Pensacola, Florida Building and Construction Trades Council (the Unions) and various employers comprising the Mobile Chapter, Associated General Contractors of America, Inc. (the Employers). (Agreed Facts, Par. 1).

2. The AFL-AGC Building Trades Welfare Plan (the Welfare Plan) was established in 1953 pursuant to the terms of collective bargaining agreements between the Unions and the Employers. It provides hospital, surgical and various death benefits. (Agreed Facts, Par. 2).

3. The Pension Plan and Welfare Plan (collectively the Plans) have been administered since their inception by a common group of six trustees, three appointed by the Unions and three appointed by the Employers. (Agreed Facts, Par. 3)

4. The duties of the trustees include discretionary control and authority for the overall operation and administration of the Plans. These duties include investing all assets of the Plans, determining the amount of and eligibility for benefits provided by the Plans, employing administrative, legal and other service providers, collecting contributions from employers, formulating and promulgating any and all rules necessary for the functioning of the Plans, and determining all questions of coverage and qualification for participation in and receipt of benefits from the Plans. (Agreed Facts, Par. 4).

B. The Trustees

5. The present trustees appointed by the Employers are N.J. Walton, J.C. Martin and W.C. Ernest. Mr. Walton has served as a trustee of the Plans since their inception; Mr. Martin since 1966; and Mr. Ernest since October, 1975. (Agreed Facts, Par. 5)

6. The present trustees appointed by the Unions are Robert Lowe, J.C. Reeves and Carroll Daugherty. Mr. Lowe has been a trustee of the Welfare Plan since 1963 and of the Pension Plan since its inception; Mr. Reeves has been a trustee of the Plans since 1966; and Mr. Daugherty was appointed to the Board of Trustees of each Plan in March, 1978. In addition, since July, 1978, defendant Daugherty has been the administrator of the Plans. (Agreed Facts, Par. 6).

C. The Illegal Payments

7. On September 20, 1977, the trustees of the Plans, by unanimous vote, authorized the Plans to make monthly payments to themselves for their services as trustees retroactively to July 1, 1977, (Exs. 55 & 109; Reeves Dep. 18-19) and to pay the Plans' administrator a salary. (Exs. 55 & 109). From that time through April 1981, each of the trustees, pursuant to monthly resolutions passed by the trustees at their monthly meetings, approved and authorized the payments referred to in paragraphs 12, 19, 27, 36, 37, and 43, infra.

8. W.C. Ernest has been a 51% managing partner in the Ernest Construction Co. since before July 1, 1977. (Agreed Facts, Par. 8). In this position, he has been the person principally responsible for running the operation and affairs of that company. (Agreed Facts, Par. 8). In 1977, defendant Ernest's income from the Ernest Construction Co. was $94,725; in 1978 and 1979 he received approximately $500 a week from this company and in 1980, his income from the company was $60,388. (Agreed Facts, Pars. 9-13).

9. From sometime before July 1, 1977 continuously through at least November, 1981, Ernest Construction Co. has been a signatory to each of the collective bargaining agreements executed between the Unions and Employers and the employees of Ernest Construction Co. have been participants in the Plans. (Agreed Facts, Par. 14).

10. In addition to the income he received from Ernest Construction Co., defendant Ernest received income from other sources as follows:

a. The total income reported on line 21 of Ernest's Internal Revenue Service Form 1040 for 1977 was $130,926.00. This return reflected income from Ernest Construction Co. of $94,725.00, interest income of $549.00, dividend income of $983.00, rental income from properties located in Mobile, Alabama and Baton Rouge, Louisiana of $29,651.00, income from the rental of dock space in the amount of $525.00, and rental income from a Carrington Foods Building in the amount of $1,692.00. (Agreed Facts, Par. 9).

b. In 1978 and 1979 the Internal Revenue Service Partnership return Forms 1065 for Ernest Construction Co. reflected net losses. Ernest took a weekly draw from the capital account in the amount of approximately $25,000.00 for each of these two years. (Agreed Facts, Par. 10).

c. In 1978 the total income reported on line 21 of Ernest's Internal Revenue Service Form 1040 was $34,085.00. This return reflected approximately $5,000.00 in interest income, $1,600.00 in dividend income, $30,406.00 in rental income from the Mobile-Baton Rouge properties, $2,108.00 from the rental docks, $1,692.00 from the Carrington Foods Building and $600.00 in other land rentals.

d. In 1979 the total income reported on line 22 of Ernest's Internal Revenue Service Form 1040 was $21,060.00. This return reflected interest income of approximately $500.00, dividend income of approximately $400.00, $58,462.00 in rental income from the Mobile-Baton Rouge property, $9,185.00 from the rental docks, $3,600.00 from the Carrington Foods Building and land rental in the amount of approximately $250.00.

e. In 1980 Ernest's income reported on line 22 of Internal Revenue Service Form 1040 was $97,651.00. This return reflected income Ernest received from Ernest Construction Co. of $60,388.00, interest income of approximately $11,000.00, dividend income of approximately $1,000.00, oil royalties of $8,070.00, $22,755.00 from the rental docks and $9,192.00 from the Carrington Foods Building.

11. Ernest spends approximately fifty hours a week attending to his business affairs. Approximately sixty per cent of his time or thirty hours a week is spent on Ernest Construction Co. business. He spends approximately twenty per cent of his time or ten hours a week on a partnership known as Ernest-Corringan; five hours a week managing an enterprise known as Industrial Constructors; approximately two and one-half hours a week running a company known as Mobile Steel Fabricators; one hour a week running a 340 acre farm; and, in addition, he has some duties with an outfit known as Ernest Equipment Company. (Agreed Facts, Par. 16(b)).

12. From July 1, 1977 through April, 1981, defendant Ernest received monthly payments from the Plans as compensation for his service as a trustee. For the period July 1, 1977 through December, 1977, these payments equalled $4,312; in 1978, they totalled $8,262; in 1979, $8,262; and in 1980, $7,546. For the period January 1, 1981 through April 30, 1981, defendant Ernest received a total of $2,156 in payments from the Plans. He has not received any payments for any period after April 30, 1981. The total amount of payments received by defendant Ernest from July 1, 1977 through April 30, 1981 from the Plans was $30,538. (Agreed Facts, Par. 15).

13. Since July 1, 1977, defendant Ernest has not incurred any out of pocket expenses in carrying out his duties and responsibilities as a trustee of the Plans and none of the above listed payments from the Plans was a reimbursement for any actual expenses incurred by defendant Ernest (Ernest Dep. 14-15).

14. Except for one highly speculative incident, since July 1, 1977, the income received by defendant Ernest from Ernest Construction Co. has not been reduced by any of his activities as a trustee of the Plans (Ernest Dep. 58-70).

15. Defendant N.J. Walton was a 50% partner in J.S. Walton Co. from before July 1, 1977 until July 1, 1980 when the company ceased doing business as a partnership and was succeeded by J.S. Walton & Co., Inc. During the period when he was a partner in the company, Walton was responsible, along with one other person, for running its day-to-day operations. In 1977, his income from the partnership was $363,433; in 1978, $88,885; in 1979, $469,946; and in 1980, $239,051. In 1980, he received $36,000 in income from J.S. Walton & Co., Inc. for his duties as president. As president, Walton was the highest paid person in the corporation. (Agreed Facts, Par. 17).

16. From July 1, 1977 through July 1, 1980, J.S. Walton Co. was a signatory to each of the collective bargaining agreements executed between the Unions and Employers. During this entire period, the employees of J.S. Walton Co. were participants in the Plans. On July 1, 1980, J.S. Walton Co. ceased to be a signatory to such...

To continue reading

Request your trial
29 cases
  • Nichols v. Board of Trustees of Asbestos Workers Local 24 Pension Plan
    • United States
    • U.S. Court of Appeals — District of Columbia Circuit
    • December 11, 1987
    ...note 86, 240 U.S.App.D.C. at 140, 744 F.2d at 155; Sly v. P.R. Mallory & Co., 712 F.2d 1209, 1211 (7th Cir.1983); Donovan v. Daugherty, 550 F.Supp. 390, 403 (S.D.Ala.1982), we cannot accept the District Court's holding that ERISA's specific disclosure requirements implicitly replace the ent......
  • Useden v. Acker
    • United States
    • U.S. District Court — Southern District of Florida
    • March 29, 1989
    ...of the conspiracy, and had letters relating to the conspiracy drafted in his office and typed by his secretary); Donovan v. Daugherty, 550 F.Supp. 390 (S.D.Ala.1982) (plaintiff alleged that the plan's attorney knowingly participated in, and was personally enriched by a decision by the plan'......
  • Trs. of the Upstate N.Y. Eng'rs Pension Fund v. Ivy Asset Mgmt.
    • United States
    • U.S. District Court — Southern District of New York
    • September 16, 2015
    ...Mgmt., Inc., 829 F.2d 1209, 1220 (2d Cir.1987)(citing Thornton v. Evans, 692 F.2d 1064, 1077–78 (7th Cir.1982); Donovan v. Daugherty, 550 F.Supp. 390, 410–11 (S.D.Ala.1982)) (parentheticals omitted). The court has noted that[a]uthority for recovery against non-fiduciaries is derived from tr......
  • Foltz v. US News & World Report, Inc.
    • United States
    • U.S. District Court — District of Columbia
    • January 15, 1986
    ..."at least to the extent they profit from the breach." McDougall v. Donovan, 539 F.Supp. 596, 598 (N.D.Ill. 1982); Donovan v. Daugherty, 550 F.Supp. 390, 410-11 (S.D.Ala.1982). Because personal gain is most often a concommitant of participation in a breach, most cases dealing with the issue ......
  • Request a trial to view additional results
1 books & journal articles
  • Liability of Fiduciaries Under Erisa
    • United States
    • Colorado Bar Association Colorado Lawyer No. 21-2, February 1992
    • Invalid date
    ...v. Kuba, 631 F.Supp. 1063, 1072 (D. Conn. 1986); Schoelholtz v. Doniger, 628 F.Supp. 1420, 1428 (S.D.N.Y. 1986); Donovan v. Daugherty, 550 F.Supp. 390, 409-10 (S.D. Ala. 1982). 24. See, e.g., Davidson v. Cook, 567 F.Supp. 225, 236 (E.D. Va. 1983); Marshall v. Kelly, 465 F.Supp. 341, 350-51 ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT