Chao v. Pinder, C.A. No. 01-007 GMS (D. Del. 1/31/2002)
| Decision Date | 31 January 2002 |
| Docket Number | C.A. No. 01-007 GMS. |
| Parties | ELAINE L. CHAO, Secretary of Labor, United States Department of Labor Plaintiff, v. JAY F. PINDER, P.I.P. DELIVERY & COURIER SERVICE, INC. and WILMINGTON BROKERAGE SERVICES COMPANY Defendants. |
| Court | U.S. District Court — District of Delaware |
P.I.P Delivery & Courier Service ("PIP") is a Delaware corporation formerly located in Newark, DE, with an employee benefit plan ("Plan") within the meaning of Section 3(3) of the Employment Retirement Income Security Act, ("ERISA"), 29 U.S.C. § 1002(3). It is therefore subject to the coverage of the Act pursuant to Section 4(a) of ERISA, 29 U.S.C. § 1003(a). Jay Pinder ("Pinder") is the owner and president of PIP. PIP has been insolvent since 1998 and has since made no contributions to nor distributions pursuant to the Plan. The Secretary of Labor, pursuant to Sections 502(a)(2) and (5) of the Act, 29 U.S.C. § 1132(a)(2) and (5) has the authority to enforce the provisions of Title I of ERISA by filing and prosecuting claims against fiduciaries and others who commit violations of ERISA. On January 4, 2001, the Secretary filed an action against Pinder and PIP. Pinder failed to move or respond, and on June 5, 2001, the Secretary filed a Request to Enter Default and a Motion for Default Judgment. On June 21, 2001, default was entered against the fiduciaries of the Plan (Jay Pinder, and P.I.P. Delivery & Courier Service).
Presently before the court is the Secretary's Motion for Default Judgment. In her motion, the Secretary seeks the entry of a default judgment removing PIP and Pinder from their positions as fiduciaries with respect to the plan and appointing an independent fiduciary to administer the Plan. This will enable the Secretary to effectuate its termination, including the distribution of Plan assets to the participants and beneficiaries. The Secretary also requests the court direct Wilmington Brokerage Services Company ("WBSC") to turn the assets of the Plan over to the independent fiduciary appointed by the court to administer the Plan and award the Secretary the costs of this action. Under the terms of the proposed Default Judgment, the present Plan fiduciaries would be removed and the plaintiff would supply the name of a proposed independent fiduciary within thirty (30) days of entry of the Default Judgment. The court agrees with the Secretary and will enter the requested relief for the reasons stated below.
On or about January 1, 1997, PIP established an employee benefit plan within the meaning of Section 3(3) of ERISA, 29 U.S.C. § 1002 (3) to provide supplemental retirement benefits to eligible participants. During the first half of 1998, PIP became insolvent and ceased operations. After February 1998, PIP stopped making contributions to the Plan. Additionally, since 1998, PIP has failed to file the annual statements required by 29 U.S.C. § 1024. As of Plan year 1999, there were thirty-seven (37) participants and $33,865.14 in Plan assets. Since PIP ceased operations, participants and beneficiaries of the Plan have not been able to obtain distributions from the Plan of their individual account balances. Under the terms of the Plan, it would be terminated when PIP discontinued contributions. Once the Plan is terminated, its terms require the trustee to distribute the Plan assets to the participants and beneficiaries. WBSC is the custodian for the assets held in the Plan.
When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules, and that fact is made to appear by affidavit or otherwise, the clerk shall enter the party's default. See Fed.R.Civ.P. 55(a). If the plaintiff's claim against defendant is for other than a certain sum, however, the plaintiff must apply to the court for a judgment by default. See Fed.R.Civ.P. 55(b)(2). Once the default has been entered, the well-pleaded facts of the complaint must be accepted as true. See Nishimatsu Const. Co., Ltd. v. Houston Nat. Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). In determining whether to enter a judgment of default, the court must set forth the factors it considered in reaching its decision. See Emasco Ins. Co. v. Sambrick, 834 F.2d 71, 74 (3d Cir. 1987).
As noted in the court's introduction, it is clear that the relief sought is for other than a sum certain. Thus, it is appropriate for the court, rather than the clerk, to enter the default. Accepting the well pleaded facts as true, the court concludes that the Secretary's request is reasonable under the circumstances. The court will now set forth the reasons for its decision to grant the judgment.
A fiduciary shall be removed if he breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by ERISA. See 29 § U.S.C. § 1109. Section 404(a)(1) of ERISA outlines several fiduciary duties. See 29 U.S.C. § 1104(a)(1). The Secretary asserts that defendants violated their duties under section 404(a)(1) because they failed to provide benefits to recipients, act prudently under the circumstances, or operate the plan in accordance with the applicable documents. The well pleaded facts clearly establish that PIP and Pinder did not act to provide benefits to recipients. PIP became insolvent in 1998 and ceased making contributions to the fund in 1998. Since PIP ceased operations, participants and beneficiaries of the plan have not been able to obtain distributions. The court, therefore, finds that PIP and Pinder violated their fiduciary duty under ERISA to provide benefits.
Moreover, the above conduct could be considered violative of ERISA's mandate to act with the care and diligence of a prudent person. See 29 U.S.C. § 1104(a)(1)(B). It is clearly unreasonable for a Plan administrator to refuse to disburse plan funds. PIP and Pinder also acted unreasonably in other ways. For instance, the failure to appoint an administrator after operations ceased can be considered unreasonable because it further delayed the disbursement of benefits. Additionally, PIP's failure to file any of the annual statements required by 29 U.S.C. § 1024 after 1997 can be construed as unreasonable because a reasonable plan administrator would comply with the governing statute. Finally, PIP and Pinder did not govern the plan according to its terms. See 29 U.S.C. § 1104(a)(1)(D). The terms of the Plan dictated that if the plan were terminated, the assets were to be disbursed to the beneficiaries. Although the Plan was terminated in 1998, no disbursement occurred.
Thus, the court finds that Pinder and PIP violated several duties under ERISA by failing to disburse benefits. When, as here, the plan assets are not properly distributed in accordance with the agreement, a trustee may be deemed to have failed to perform his fiduciary responsibilities. Under these circumstances, removal of the trustee is proper as appropriate equitable relief pursuant to 29 U.S.C. § 1132(a)(1)(B)(8)(B). The court, therefore, finds that the relief requested by plaintiff is appropriate and will remove PIP and Pinder as fiduciaries.
The Secretary also requests the court to direct WBSC to turn the...
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