Arakelian v. National Western Life Ins. Co.
| Citation | 755 F. Supp. 1080 |
| Decision Date | 12 October 1990 |
| Docket Number | Civ. A. No. 84-1953 SSH. |
| Parties | Robert ARAKELIAN, et al., Plaintiffs, v. NATIONAL WESTERN LIFE INSURANCE CO., et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
COPYRIGHT MATERIAL OMITTED
Daniel Kozma, Laurence E. Gold, Washington, D.C., for plaintiffs.
Richard Guy Vernon, Washington, D.C., for National Western Life Ins. Co.
James Ray Eyler, George Beall, Baltimore, Md., Steven J. Sacher, Washington, D.C., Will D. Davis, Austin, Tex., James Ray Eyler, Baltimore, Md., Richard Guy Vernon, Washington, D.C., for defendants.
John T. Coyne, David Patrick Durbin, Washington, D.C., for trustees Boswell, Howard & Andrews and Builders, Contractors.
Jeffrey J. Hines, Alvin I. Frederick, Baltimore, Md., for Benefits, Inc.
Gerald I. Katz, Mark J. Stone, Teresa Ann Keough, Vienna, Va., for United Masonry.
Tarrant H. Lomax, Washington, D.C., for Halco Engin. & Welcon, Inc.
This matter is before the Court on the motion for summary judgment of the three trustees (trustees) of the National Western Builders, Contractors, and Employees Retirement Trust and Pension Plan (Plan), namely, Andrews, Boswell, and Howard, plaintiffs' opposition, defendant trustees' reply and supplement, plaintiffs' response to the trustees' supplement, and the entire record. The Court grants defendant trustees' motion in part and denies it in part.
National Western established a pension plan which was marketed primarily to nonunion contractors who worked on projects affected by the Davis-Bacon Act. 40 U.S.C. § 276a et seq. For a more in-depth background of the Plan, see Arakelian v. National Western Life Insurance Co., 724 F.Supp. 1033 (D.D.C.1989); Arakelian v. National Western Life Insurance Co., 126 F.R.D. 1 (D.D.C.1989); Arakelian v. National Western Life Insurance Co., 680 F.Supp. 400 (D.D.C.1987). Plaintiffs allege in their complaint that National Western and its three trustees violated the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., in structuring, marketing, investing, and administering the Plan. The complaint names three other defendants who are not important in terms of the motion under consideration herein.
Defendant Richard Boswell was at relevant times a Vice President and Actuary of National Western. He has been a trustee since the inception of the Plan in 1977. He was appointed by National Western. Defendant John Howard also held significant positions at National Western. He has been Financial Vice President, Treasurer, and Assistant Secretary of National Western. National Western appointed Howard to be a trustee of the Plan in 1977. In 1981, defendant Richard Andrews joined National Western as Vice President of Qualified Plans. He was appointed by National Western to serve as a trustee at that time. None of the three received any separate compensation for their roles as Plan trustees.
The trustees previously filed a motion for summary judgment in combination with National Western which was resolved by this Court's October 1987 Memorandum Opinion. See Arakelian, 680 F.Supp. 400 (). Defendant trustees are interpreting that Opinion in a fashion to argue that the Court should grant summary judgment as to all of plaintiffs' claims against the trustees.
In the October 1987 Opinion, the Court held that "the trustees are not fiduciaries so far as investment decisions and surrender charges are concerned." Id. at 404. The Court held that the trustees were partially excluded from liability because of the definition of a fiduciary set forth in 29 U.S.C. § 1002(21)(A). Section 1002(21)(A) provides:
... a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in administration of such plan.
The Court found that the Plan instrument does not accord the trustees any discretionary authority over investment decisions, inasmuch as the Plan requires the trustees to invest all funds in National Western annuity contracts. In addition, the Plan does not name the trustees as fiduciaries, and the plaintiffs did not produce evidence showing that the trustees benefited financially from their roles. For these reasons, the Court held that the trustees were not liable for certain fiduciary breaches involving surrender charges and investment decisions.1 The Court did not intend to absolve the trustees of all responsibility by that ruling. The Court therefore now addresses each count in the complaint.
Count One alleges that the trustees violated the exclusive purpose rule by investing all of the Plan's assets in group annuity contracts underwritten and issued by National Western. (Complaint ¶ 23). The Court holds that since the Plan required the investment of all assets in National Western annuities, and the trustees had no discretion as to that decision, they are not liable for violating the exclusive purpose rule. See Bogert, Trusts and Trustees § 555 (2d ed. rev.1980, Supp. 1988)( that when an instrument gives complete or partial management powers to a named fiduciary or trustee, "these provisions do not involve questions of delegation of powers by one or more trustees because the trustee or trustees were never given or had such power to delegate.").
Count Two alleges that the trustees failed to discharge their duties with respect to the Plan and in the interest of the participants with the care, skill, prudence, and diligence that a prudent man acting in like capacity and familiar with such matters would. Thus, it is contended the trustees violated 29 U.S.C. § 1104(a)(1)(B). The trustees argue that they never had any discretion, never met, and never acted in any capacity that would make them fiduciaries for this purpose. Thus, they contend, they cannot be held liable for violating the prudent man and exclusive purpose rules.2 The trustees in a sense argue that since they did not act in a way that one would expect of a trustee, and since § 3.15 of the trust documents delegated all administrative powers to National Western, they cannot be held liable.3 The Court disagrees. The trustees held themselves out to be acting in the interests of the beneficiaries. They signed documents as trustees and they had substantial powers as set forth in § 3.3 of the Declaration of Trust. The fact that all the administrative functions of the Plan were delegated to the Plan administrator (National Western) did not and does not absolve the trustees of their duty to review and insure that the administrator was acting in the best interests of the participants.4 The Court thus finds that a great deal of material facts exist which controvert the trustees' motion for summary judgment on this claim.
Count Three alleges that the trustees violated their fiduciary duty by failing to diversify the investments of the Plan so as to minimize the risk of large losses as required by 29 U.S.C. § 1104(a)(1)(C). The Court held in its October 1987 Memorandum Opinion that the trustees had no discretion as to the investment of the funds; thus, summary judgment is granted as to Count Three.
Count Four alleges that the trustees violated the terms of the Plan documents by failing to limit the amount of contributions to the Plan which employers made in violation of 29 U.S.C. § 1104(a)(1)(D). The Court finds that genuine issues of material fact exist as to this count, and thus, the Court denies defendant trustees' motion as to Count Four.
In Count Five, plaintiffs allege that the trustees authorized the assessment of "surrender charges" and/or "early withdrawal penalties" against the account balances of participants in violation of 29 U.S.C. §§ 1053 and 1054(a) and (g). In the Court's October 1987 Memorandum Opinion, it was held that the trustees were not fiduciaries as to decisions regarding surrender charges. Accordingly, defendant trustees' motion for summary judgment is granted as to this count.
In Count Six, plaintiffs allege that trustees Boswell, Howard, and Andrews, as fiduciaries to the Plan, violated 29 U.S.C. § 1106(a)(1)(C) by investing Plan assets in group annuity contracts issued by National Western; purchasing with Plan assets group annuity contracts issued by National Western; and paying Plan assets to National Western in the form of premiums, commissions, fees, charges penalties, and/or compensation. Again, this leads the Court back to its October 1987 Opinion in which it held that the "trustees are not fiduciaries so far as investment decisions and surrender charges are concerned." Accordingly, summary judgment is granted as to Count Six.
The trustees also claim that they should be granted summary judgment on plaintiffs' claim that they aided and abetted in National Western's fiduciary breaches. The trustees argue that (1) this claim was not specifically set forth in the complaint, and thus it cannot be raised; and (2) that even if it can be raised, plaintiffs fail to make a factual or legal case of aiding and abetting.
The trustees admit that the aiding and abetting theory was raised in interrogatories and in various prior pleadings. However, they claim that the fact that it was not specifically listed in the complaint is a fatal flaw. Rule 8(a) of the Federal Rules of Civil Procedure requires that "a pleading which sets forth a claim for relief ... shall contain ... a short and plain...
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