Ehlen Floor Covering, Inc. v. Lamb

• Decision Date: 17 April 2012
• Docket Number: Case No. 2:07–cv–666–FtM–29DNF.
• Citation: 53 Employee Benefits Cas. 2728,859 F.Supp.2d 1285
• Parties: EHLEN FLOOR COVERING, INC., a Florida corporation, Edward Ehlen, an individual, Thomas Ehlen, an individual, Plaintiffs, v. Jeffrey LAMB, individually, Brian Youngs, individually, Thomas Wanderon, individually, LWY Associates, Inc., formerly known as Tax Accounting and Financial Associates, Inc., Independent Advisors of Florida, Inc., formerly known as Foundation Asset Management, Inc., the Graduate Group, Inc., a Florida corporation, Pacific Life Insurance Company, a Nebraska corporation, Innovative Pension Strategies, Inc., Eugene Gordon, individually and Joseph Penchansky, individually, Defendants.
• Court: U.S. District Court — Middle District of Florida

859 F.Supp.2d 1285

53 Employee Benefits Cas. 2728

EHLEN FLOOR COVERING, INC., a Florida corporation, Edward Ehlen, an individual, Thomas Ehlen, an individual, Plaintiffs,

v.Jeffrey LAMB, individually, Brian Youngs, individually, Thomas Wanderon, individually, LWY Associates, Inc., formerly known as Tax Accounting and Financial Associates, Inc., Independent Advisors of Florida, Inc., formerly known as Foundation Asset Management, Inc., the Graduate Group, Inc., a Florida corporation, Pacific Life Insurance Company, a Nebraska corporation, Innovative Pension Strategies, Inc., Eugene Gordon, individually and Joseph Penchansky, individually, Defendants.

Case No. 2:07–cv–666–FtM–29DNF.

United States District Court,

M.D. Florida,

Fort Myers Division.

April 17, 2012.

Dean Adrian Kent, Jason H. Baruch, Richard M. Hanchett, Roberta Casper Watson, Trenam Kemker, Tampa, FL, for Plaintiff.

Michael Joseph Corso, Henderson, Franklin, Starnes & Holt, PA, Fort Myers, FL, for Defendants.

Dominique E. Heller, Wiand Guerra King, PL, Tampa, FL, for Defendant The Graduate Group, Inc.

Brett J. Preston, Hill Ward Henderson, PA, Tampa, FL, Joshua P. Henry, Wells Marble & Hurst, PLLC, Jackson, MS, Kenna L. Mansfield, Jr., Wells Marble & Hurst, PLLC, Ridgeland, MS, Walter D. Willson, Wells, Marble & Hurst, P.L.L.C., Jackson, MS, for Defendant Pacific Life Insurance Company.

Peter B. King, Wiand Guerra King, PL, Tampa, FL, for Defendants The Graduate Group, Inc., Eugene Gordon and Joseph Penchansky.

John Eamon Johnson, Michael P. Silver, Shutts & Bowen, LLP, Tampa, FL, for Defendant Innovative Pension Strategies, Inc.

OPINION AND ORDER

JOHN E. STEELE, District Judge.

This matter comes before the Court on three motions for summary judgment: (1) Pacific Life Insurance Company's Amended Dispositive Motion for Summary Judgment and Incorporated Memorandum of Law (Doc. # 210; Doc. # 279); (2) Defendant Innovative Pension Strategies, Inc's Motion for Summary Judgment (Doc. # 236; Doc. # 280); and (3) Defendants The Graduate Group, Inc., Eugene Gordon, and Joseph Penchansky's Motion for Summary Judgment and Supporting Memorandum of Law (Doc. # 237).¹ Plaintiffs filed Responses. (Docs. 224; 253–255, 281–282.) Both parties filed affidavits, depositions, and other exhibits in support of their respective briefs.²

I.

Summary judgment is appropriate only when the Court is satisfied that “there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). “An issue of fact is ‘genuine’ if the record taken as a whole could lead a rational trier of fact to find for the nonmoving party.” Baby Buddies, Inc. v. Toys “R” Us, Inc., 611 F.3d 1308, 1314 (11th Cir.2010). A fact is “material” if it may affect the outcome of the suit under governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party bears the burden of identifying those portions of the pleadings, depositions, answers to interrogatories, admissions, and/or affidavits which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Hickson Corp. v. N. Crossarm Co., Inc., 357 F.3d 1256, 1259–60 (11th Cir.2004). To avoid the entry of summary judgment, a party faced with a properly supported summary judgment motion must come forward with extrinsic evidence, i.e., affidavits, depositions, answers to interrogatories, and/or admissions, which are sufficient to establish the existence of the essential elements to that party's case, and the elements on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. at 322, 106 S.Ct. 2548;Hilburn v. Murata Elecs. N. Am., Inc., 181 F.3d 1220, 1225 (11th Cir.1999). In ruling on a motion for summary judgment, the Court views all evidence and draws all reasonable inferences in favor of the non-moving party. Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007); Tana v. Dantanna's, 611 F.3d 767, 772 (11th Cir.2010).

II.

The Court dismissed plaintiffs' original twelve-count complaint (Doc. # 2) in an Opinion and Order (Doc. # 58) which found plaintiffs' claims were preempted by the Employee Retirement Income Security Act of 1974 (ERISA). Plaintiffs then filed a four-count Second Amended Complaint (the Second Amended Complaint) on June 30, 2009.³ (Doc. # 117.) Count I of the Second Amended Complaint alleges a breach of fiduciary duty by all defendants for failing to carry out their responsibilities required by ERISA § 502, 29 U.S.C. § 1132, engaging in self dealing, and knowingly participating and/or concealing known acts and omissions by their co-defendants in connection with their dealings with the Ehlen Floor Coverings Retirement Plan. Specifically, plaintiffs allege that Pacific Life, TGG and IPS failed to carry out their administrative responsibilities, including obtaining Plan modifications necessary to comply with IRS requirements. Counts II through IV are alleged as alternative counts against IPS only ⁴ for state law claims of negligence (Count II), violation of Florida's Deceptive and Unfair Trade Practices Act (Count III), and misrepresentation (Count IV).

Plaintiffs Edward and Thomas Ehlen are officers, directors, and employees of plaintiff Ehlen Floor Coverings, Inc. (Ehlen Floor) (collectively plaintiffs). Prior to the implementation of the 412(i) plan at issue in this case, defendant Thomas Wanderon (Wanderon) served as Edward Ehlen's personal accountant and as Ehlen Floor's business accountant. Sometime in the late 1990s, defendant Jeffery Lamb (Lamb) succeeded Wanderon as Edward Ehlen's personal accountant and Ehlen Floor's business accountant. Lamb introduced Ehlen Floor to defendant Brian Youngs (Youngs), who worked as Ehlen Floor's financial advisor. Wanderon supervises defendants Lamb and Youngs, and all three are principals of defendants LWY Associates, Inc. f/k/a/ Tax, Accounting and Financial Associates, Inc. (TAFA) and its wholly owned subsidiary, Independent Advisors of Florida, Inc. f/k/a Financial Asset Management (FAM). Both TAFA and FAM are jointly owned by Wanderon, Lamb, and Youngs.

In or about 2000, Ehlen Floor began looking at alternatives to its Welfare Benefit Plan because its deductions were no longer tax deductible. Lamb, together with Youngs, recommended that Ehlen Floor implement a 412(I) ⁵ plan proposal (the Plan) ⁶ for its employees with an effective date of January 1, 2002. After Ehlen Floor, Lamb, and Youngs came to the conclusion that Ehlen Floor should implement a 412(I) plan, Youngs contacted a Pacific Life Insurance Company representative because Youngs was not very familiar with the implementation of 412(I) plans.

Defendant Pacific Life Insurance Company (Pacific Life) develops and markets insurance policies and annuities specifically for the purpose of funding 412(I) plans. The policies and annuities that funded the Plan were part of a package called Flex XII and Quest II (the Products). Pacific Life maintains that it does not market 412(I) plans themselves; plaintiffs, Lamb, Wanderon, and Youngs assert that Pacific Life marketed these products specifically for the use in 412(I) plans, and repeatedly assured customers that the Products were legal for use in these types of plans. Additionally, Pacific Life produced an opinion letter which stated that its Products would more likely than not comply with IRS regulations. (Doc. # 224, pp. 8–9.)

In order to incorporate Pacific Life's products into a 412(I) Plan, Pacific Life required a client to engage a third party administrator. Pacific Life created an internal list of contacts that were approved third party administrators. (Doc. # 255, p. 4.) Defendants The Graduate Group (TGG) and Innovative Pension Strategies, Inc. (IPS) were among the providers on Pacific Life's internal third party administrator list.

TGG is a company that assists insurance brokers in marketing insurance products, including those for use in 412(I) plans. Defendant Eugene Gordon (Gordon) is the primary owner of TGG. (Doc. # 117, ¶ 5.) Defendant Joseph Penchansky (Penchansky) was an employee of TGG during the relevant time period. ( Id. at ¶ 6.) Both Gordon and Penchansky acted on behalf of TGG with regards to the Plan ( Id. at ¶¶ 5–6), but neither Gordon nor Penchansky ever directly communicated with Ehlen Floor.

Youngs engaged TGG to prepare and design the pension proposal, which Youngs and Lamb then presented to Ehlen Floor. (Doc. # 237, p. 5.) TGG created the initial plan design, including selecting the Pacific Life products and allocating the contributions in the Plan. Youngs asserts that he relied on TGG regarding the products and contribution amounts because he was unfamiliar with 412(I) plans. Youngs was the agent of record for the sale of the Pacific Life Products, and received 90% of the commissions. Gordon received 10% of the commissions as compensation for assisting Youngs in the sale of the Products to Ehlen Floor. (Doc. # 237, p. 7.) Penchansky, working as an independent contractor with TGG, prepared the owner's report to the Plan. (Doc. # 239, p. 9.) While no TGG representatives ever had any direct contact with Ehlen Floor, most of the communication regarding the Plan went through TGG. It is disputed whether TGG requested that all communications regarding the Ehlen Floor Plan go through it.

In 2003, after TGG created the initial plan design, IPS began providing administrative services to the Plan. (Doc. # 255, p. 4.) TGG, through Youngs, presented Ehlen Floor with an Administrative Services Agreement with IPS (the Agreement) for the provision of certain services related to the Plan. ( Id. at p. 5.) Ehlen Floor and IPS entered into the Agreement on December 20, 2002. The Agreement specifically provides that IPS is “to provide administrative services” and “perform certain administrative services...