Calhoun v. FDIC

• Decision Date: 23 January 1987
• Docket Number: Civ. A. No. 4-85-846-E.
• Citation: 653 F. Supp. 1288
• Parties: Larry CALHOUN v. FDIC and Landmark Bank Northwest.
• Court: U.S. District Court — Northern District of Texas

653 F. Supp. 1288

Larry CALHOUN v. FDIC and Landmark Bank Northwest.

Civ. A. No. 4-85-846-E.

United States District Court, N.D. Texas, Fort Worth Division.

January 23, 1987.

Chaplin & Drysdale, Washington, D.C., Thomas L. Farris, Fort Worth, Tex., for plaintiff.

Louis Weber, Brian Hurst, Jenkens & Gilchrist, Dallas, Tex., R.H. Wallace, Shannon, Gracey, Ratliff & Miller, Fort Worth, Tex., for defendants.

ORDER

MAHON, District Judge.

Defendants filed a motion to dismiss to which plaintiff responded with an opposition and cross-motion for summary judgment. A conference was held on the motions before the Honorable Eldon B. Mahon. After careful review of the briefs and affidavits attached thereto, the oral arguments, the pleadings, and the applicable law, the Court comes to the following decision.

Plaintiff was the sole owner, Chairman of the board, and chief executive officer of Northwest Bank in White Settlement, Texas (the Bank), a state-chartered bank whose deposits were insured by the FDIC. On May 23, 1985, the Texas Banking Commissioner declared the Bank insolvent, took possession of the Bank, and tendered the appointment as Receiver of the Bank to the FDIC. The FDIC accepted the appointment as Receiver of the Bank and on May 23, 1985, entered into a purchase and assumption agreement with Landmark Bank-Northwest (Landmark) whereby Landmark assumed the Bank's deposit liabilities and purchased certain of the Bank's assets. The FDIC as Receiver of the Bank conveyed the remainder of the Bank's assets, consisting almost exclusively of nonperforming commercial loans, to the FDIC in its corporate capacity for collection and in consideration of the FDIC's payment to Landmark of $23,943,000.00 for Landmark's assumption of the Bank's deposit liabilities.

On April 11, 1985, over a month before the Bank was closed, the Bank's board of directors met and voted to terminate its Thrift Incentive Plan and Trust (the Plan), liquidate its assets, and distribute the proceeds to the Plan participants, subject to receiving confirmation from the Bank's counsel of the propriety of the termination. The Bank's counsel confirmed the propriety of the termination, and at a meeting on April 17, 1985, the Bank's board voted to finalize the Plan's termination. According to the affidavit of Archie Freeman the board also voted to retain plaintiff's share of the Plan proceeds until further directions were received from counsel.

Upon assuming the Receivership of the Bank on May 23, 1985, the FDIC withheld payment of the insured deposits in Account Nos. 6502744 and 6502793 pursuant to its authority under the Federal Deposit Insurance Act, 12 U.S.C. § 1822(d). Section 1822(d) provides that:

The FDIC may withhold payment of such portion of the insured deposit of any depositor in a closed bank as may be required to provide for the payment of any liability of such depositor as a stockholder of the closed bank, or of any liability of such depositor to the closed bank or its receiver, which is not offset against a claim due from such bank, pending the determination and payment of such liability by such depositor or any other person liable therefor.

According to the affidavit of Ivy Walker the FDIC withheld payment of plaintiff's deposits pending determination of plaintiff's ultimate liability to the FDIC. At the date of the Bank's closing, plaintiff owed nearly $600,000.00 to the Bank under two promissory notes which were and are in default. In addition, the FDIC's preliminary investigation of the Bank's loan portfolio has already revealed $3,325,826.48 in documented losses caused by plaintiff's improper banking practices, and the FDIC expects to be able to document another $9,000,000.00 in losses attributable to plaintiff (not including the $600,000.00 in notes from Calhoun described above). According to the affidavit of Archie Freeman the FDIC has also discovered additional losses of approximately $6,000,000.00 attributable to plaintiff's appropriation of business opportunities from the Bank. As receiver, the FDIC is required to make an attempt to recoup these losses from plaintiff and his fellow officers and directors. The $53,353.82 in plaintiff's deposit accounts represent the only known source for collection of the judgment the FDIC may ultimately obtain against plaintiff. Until the final determination of plaintiff's liability to the FDIC is made, plaintiff's deposits remain in segregated, interest-bearing, FDIC-insured accounts.

Plaintiff alleges that this Court has subject matter jurisdiction of this case under ERISA to recover vested and nonforfeitable pension plan benefits due him under the Northwest Bank Thrift Incentive Plan and Trust. Defendant claims that plaintiff cannot establish jurisdiction under ERISA because (1) the Plan was terminated by the Bank's board before the FDIC became Receiver of the Bank and (2) the Bank's board withheld payment of plaintiff's insured deposits. Additionally, defendant claims that assuming that ERISA does apply, then the FDIC does not owe fiduciary duties to plaintiff under ERISA and the FDIC's withholding payment of plaintiff's deposits did not violate ERISA. Additionally defendants argue that the FDIC's withholding payment of plaintiff's deposits did not violate ERISA's non-alienability provision. Plaintiff further contends that the FDIC has unlawfully attached these benefits and has prohibited Landmark, the bank which now holds these funds as a deposit, from releasing them to plaintiff.

From the evidence presented, it is undisputed that the Bank's board of directors terminated the Plan no later than April 17, 1985, over a month before the Bank failed and the FDIC became Receiver. The Plan was properly terminated in accordance with the Plan's voluntary termination provisions. All managerial and discretionary acts with respect to the Plan and its assets were done by an administrative committee appointed by the Bank's board not the FDIC.

Plaintiff alleges that the FDIC became Plan Administrator or a "fiduciary" of the Plan as defined in ERISA, and thereby undertook the many fiduciary responsibilities toward Plan beneficiaries prescribed by ERISA. Aside from the fact that the Plan was terminated before the FDIC became Receiver of the Bank, Plaintiff's contention is refuted by the plain language of the statute and federal court rulings.

A "plan administrator" is defined by ERISA as the person designated by the plan itself, or the employer. 29 U.S.C. § 1002(16)(A). The Bank was the designated administrator under the Plan, but all administrative, managerial, and discretionary functions were performed by the Plan's trustee and an administrative committee appointed by the Bank's board of directors.

More importantly, the FDIC does not fall within the broader definition of a fiduciary under the Plan. ERISA defines a person as a fiduciary 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 the administration of such plan. Such term includes any person designated under section 405(c)(1)(B) 29 § 1105(c)(1)(B) .

29 U.S.C. § 1002(21)(A).

In O'Toole v. Arlington Trust Company, 681 F.2d 94 (1st Cir.1982), the First Circuit Court of Appeals held that a depository institution holding pension plan funds was not a fiduciary of the pension plans under ERISA, even when the institution exercised its common law setoff rights against the funds. The plaintiffs in O'Toole were the officers of three nursing homes and trustees of the pension plans established by the homes for their employees. The assets of the pension plans were on deposit with defendant Arlington Trust Company, which had several loans outstanding to the homes. Arlington Trust learned that the homes were in financial difficulty and offset the pension plans' deposits against the outstanding loans to the homes. Plaintiffs sued Arlington Trust in federal court to enjoin the offset, alleging subject matter jurisdiction under ERISA, 29 U.S.C. § 1132.

The district court dismissed the action for want of subject matter jurisdiction under ERISA, and the Court of Appeals specifically affirmed the dismissal on that ground. The Court of Appeals observed that jurisdiction under ERISA exists if a participant, beneficiary or fiduciary of an ERISA pension plan claims breach of the duties of a fiduciary, or if one of those parties seeks to enjoin an act that violates a provision of ERISA. O'Toole, 681 F.2d at 95; 29 U.S.C. §§ 1132(a)(2) and 1132(a)(3)(A).

The Court of Appeals first found that Arlington Trust was not a fiduciary within the meaning of ERISA, stated that:

ERISA defines an individual as a fiduciary to the extent he exercises discretionary control or authority over the plan, its assets, or its administration or renders investment advice. Id. § 1002(21)(A).

In addition, it creates an extremely specific scheme of duties and liabilities for fiduciaries. See id. § 1104 (fiduciary duties); § 1105 (liability for breach of co-fiduciary); § 1106 (prohibited transactions by fiduciaries). Appellee's responsibilities as the depository for the funds do not include the discretionary, advisory activities described by the statute-activities which in fact were performed by appellants. In the absence of these activities, it would be unfair to impose on appellee the responsibilities and liabilities created by the statute for fiduciaries. See Robbins v. First American Bank of Virginia, 514 F.Supp. 1183, 1189-91 (N.D.Ill.1981); cf. Hibernia Bank v. International Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers of America, 411

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