David P. Coldesina, D.D.S. v. Estate of Simper

• Decision Date: 19 May 2005
• Docket Number: No. 04-4006.,04-4006.
• Citation: 407 F.3d 1126
• Parties: DAVID P. COLDESINA, D.D.S., P.C., EMPLOYEE PROFIT SHARING PLAN AND TRUST, a domestic trust; David P. Coldesina, a trustee, Plaintiffs-Appellants, v. The ESTATE OF Greg P. SIMPER; Greystone Marketing, a Utah corporation, Defendants, Ted A. Madsen, an individual; Flexible Benefit Administrators, a Utah corporation; Kansas City Life Insurance Company, a Missouri corporation; Sunset Financial Services, Inc., a Washington corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

407 F.3d 1126

DAVID P. COLDESINA, D.D.S., P.C., EMPLOYEE PROFIT SHARING PLAN AND TRUST, a domestic trust; David P. Coldesina, a trustee, Plaintiffs-Appellants, v. The ESTATE OF Greg P. SIMPER; Greystone Marketing, a Utah corporation, Defendants Ted A. Madsen, an individual; Flexible Benefit Administrators, a Utah corporation; Kansas City Life Insurance Company, a Missouri corporation; Sunset Financial Services, Inc., a Washington corporation, Defendants-Appellees.

No. 04-4006.

United States Court of Appeals, Tenth Circuit.

May 19, 2005.

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Gary R. Guelker (and Peter Stirba, on the briefs), Stirba & Associates, Salt Lake City, UT, for Plaintiff-Appellant.

Sean D. Reyes (and Spencer A. Austin, on the brief), Parsons, Behle & Latimer, Salt Lake City, UT, for Defendants-Appellees, Kansas City Life Insurance Company and Sunset Financial Services, Inc.

Keith A. Call (and R. Brent Stephens, with him on the brief), Snow, Christensen & Martineau, Salt Lake City, UT, for Defendants-Appellees, Ted Madsen and Flexible Benefit Administrators, Inc.

Before TACHA, Chief Judge, KELLY, and MURPHY, Circuit Judges.

KELLY, Circuit Judge.

I. Introduction

This case concerns who, beyond the immediate wrong-doer, might be held responsible by an ERISA plan for a theft from that plan. Plaintiffs-Appellants, David P. Coldesina, D.D.S., P.C. Employee Profits Sharing Plan & Trust ("plan" or "the plan"), and Dr. David Coldesina, D.D.S., as plan trustee, are appealing from multiple summary judgment rulings where the district court dismissed their claims against two groups of defendants: (1) Flexible Benefits Administrators, Inc. ("Flexible Benefits") and Ted Madsen, collectively known as the accountant defendants, and (2) Kansas City Life Insurance Company ("KCL") and Sunset Financial Services, Inc. ("Sunset").

On appeal, the plan makes three arguments. First, the district court erred in dismissing its ERISA claims against the accountant defendants given their status as ERISA fiduciaries, or, in the alternative, if the accountant defendants are not ERISA fiduciaries, the district court erred in dismissing its state-law claims against them based on ERISA preemption. Second, the district court erred in dismissing its state-law claims against KCL and Sunset based on ERISA preemption. Finally, the district court erred in refusing to consider Dr. Coldesina's supplemental deposition offered by the plan in opposition to KCL's and Sunset's motion for summary judgment. We have jurisdiction under 28 U.S.C. § 1291, and, addressing each argument in turn, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

II. Background

As this case was resolved below on summary judgment, the facts are viewed in the light most favorable to the party opposing summary judgment, here the plan. Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000). Viewed as such, the record reveals the following.

In the early 1980's, Dr. Coldesina established an employee benefits plan for his dental practice, and he has served as the plan's trustee since its inception. In approximately 1992, Dr. Coldesina began talking to a personal friend, Gregg Simper, about changing the plan's investment strategy, and, as a result of these conversations, Mr. Simper became the plan's investment advisor. While advising the plan, Mr. Simper also operated his own company, Greystone Marketing, Inc., and was a general agent for KCL and a licensed broker-dealer for Sunset, an affiliate of KCL. His relationships with KCL and Sunset authorized him to market and sell the investment products of both companies, and indeed his advice to the plan was primarily, if not completely, based on these products.

As plan advisor, Mr. Simper also encouraged Dr. Coldesina to hire Ted Madsen, the sole owner and employee of Flexible Benefits, to replace the plan's then current administrator. Dr. Coldesina agreed to the change, and Flexible Benefits began assisting "in the administration of the . . . plan," and charging "administrative fees." Flexible Benefits prepared the plan's tax returns and other documents concerning plan participants' accounts and benefits, was involved in making disbursements to plan participants, drafting promissory notes for participant loans, and tracking plan loans to ensure repayment, and agreed to accept plan contributions and subsequently remit them on the plan's behalf as directed. Dr. Coldesina would write checks from the plan payable to Flexible Benefits, and then Mr. Madsen would deposit the checks into his business account on which he was the only signatory. This arrangement was adopted so that Mr. Madsen would not have to rely on Dr. Coldesina's handwritten ledger in tracking the plan's contributions.

It appears Mr. Madsen had little contact with Dr. Coldesina; as such, he interacted almost exclusively with Mr. Simper regarding plan activities and acted at Mr. Simper's direction. Initially, when Flexible Benefits started accepting plan monies into its account, Mr. Madsen would remit the plan funds payable to KCL for KCL insurance products. However, at Mr. Simper's direction, he subsequently began writing checks on behalf of the plan payable to Mr. Simper's company, Greystone Marketing, with the understanding that Mr. Simper would transfer the funds to the KCL. The explanation Mr. Simper gave for this change was that it helped him track the commissions he and his agents were earning within his marketing business, which Mr. Madsen did not challenge. Dr. Coldesina never authorized writing plan checks payable to Mr. Simper or his company, and apparently was not aware of this change.

Mr. Madsen also relied exclusively on Mr. Simper for the information he needed to prepare the plan's tax forms and annual plan participant account summaries, which Mr. Simper provided either orally or in handwritten notes. Again, Mr. Madsen never questioned Mr. Simper's informality or asked him for official verification, and he did not independently verify the information.

In 1999, becoming dissatisfied with the plan's investments, Dr. Coldesina decided to re-direct the plan's assets and asked Mr. Simper for the plan's account documentation to facilitate the change. Mr. Simper agreed to turn over the necessary documents; however, on the day he was supposed to do so he committed suicide, leaving a note that explained how and why he had misappropriated significant sums from the plan. Dr. Coldesina subsequently discovered that Mr. Simper had stolen over $600,000 from the plan. The plan then brought suit against all the parties involved asserting an ERISA claim and various state-law claims against Mr. Simper's estate and the accountant defendants and state-law claims for negligent supervision and vicarious liability against KCL and Sunset based on their agency relationship with Mr. Simper.

The accountant defendants moved for summary judgment arguing ERISA preempted the state-law claims against them and that the ERISA claim was not proper because they were not plan fiduciaries as defined by the Act. The district court granted their motion as to the state-law claims, but denied it as to the ERISA claim. However, after the ERISA claim was set for trial, the initial judge recused himself, and the new judge allowed the parties to file cross-motions for summary judgment concerning whether the accountant defendants were ERISA fiduciaries. Upon hearing the motions, the court ruled Mr. Madsen and Flexible Benefits were not plan fiduciaries and granted summary judgment in their favor on the ERISA claim as well.

KCL and Sunset also moved for summary judgment on the state-law claims asserted against them arguing they were preempted by ERISA. The district court again granted the motion finding that Mr. Simper's status as an ERISA fiduciary triggered the Act's preemption provisions. In so deciding, the district court refused to consider Dr. Coldesina's supplemental deposition offered by the plan suggesting as justification for the exclusion that the plan was trying to create a sham issue of fact. This appeal followed entry as final judgment.

III. Discussion

As noted, we review a grant of summary judgment de novo, applying the same legal standard as the district court. Willmar Elec. Serv., Inc. v. Cooke, 212 F.3d 533, 535 (10th Cir.2000). Summary judgment is only appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(c).

A.) Flexible Benefits & Mr. Madsen (the accountant defendants)

The plan asserts that the accounting defendants are fiduciaries as defined by ERISA and therefore dismissal of its ERISA claim against them was in error. Further, the plan concedes that if the accountant defendants are ERISA fiduciaries its state-law claims are preempted; however, if the accountant defendants are not deemed fiduciaries, the plan argues its state-law claims are not preempted. Whether a party is an ERISA fiduciary is a mixed question of fact and law. Hamilton v. Carell, 243 F.3d 992, 997 (6th Cir. 2001). However, where the parties essentially agree on the underlying facts, as is the case here, the only issue before us is the district court's legal conclusion, which we review de novo. Id.; see also Allison v. Bank One-Denver, 289 F.3d 1223, 1235 n. 2 (10th Cir.2002); Peckham v. Gem State Mut. of Utah, 964 F.2d 1043, 1047 n. 5 (10th Cir.1992). ERISA defines "fiduciary" in reference to the functions being performed for the plan. The statute 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...