Gold v. Coenen (In re Trans-Industries, Inc.)
| Citation | 609 B.R. 608 |
| Decision Date | 23 October 2019 |
| Docket Number | Case No. 06-43993 (Jointly Administered),Adv. Pro. No. 07-6790 |
| Parties | IN RE: TRANS-INDUSTRIES, INC., et al., Debtors. Stuart A. Gold, Trustee, Plaintiff, v. Joan Parker Coenen, in her capacity as representative of the estate of Dale S. Coenen, deceased, et al., Defendants. |
| Court | United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan |
Brian E. Etzel, Williams, Williams, Rattner & Plunkett, P.C., Birmingham, Michigan, Attorney for Plaintiff Stuart A. Gold, Trustee.
Martha J. Olijnyk, The Miller Law Firm, P.C., Rochester, Michigan, Attorney for Plaintiff Stuart A. Gold, Trustee.
Clyde B. Pritchard, Clyde B. Pritchard, P.C., Franklin, Michigan, Attorney for Defendant Kai Kosanke.
Joan Parker Coenen, Defendant, pro se.
AMENDED TRIAL OPINION**
In this adversary proceeding, the Chapter 7 Trustee asserts multi-million dollar breach of fiduciary duty claims against Dale S. Coenen ("Coenen") and Kai R. Kosanke ("Kosanke"), two alleged fiduciaries of the Debtor Trans-Industries, Inc.'s pension plan — the "Trans-Industries, Inc. Employees' 401(k) Profit Sharing Plan and Trust" (the "Plan").3 The Trustee brings these claims under the Employee Retirement Income Security Act ("ERISA").4 He does so in his capacity as successor to the Debtor, in its capacity as plan administrator of the ERISA Plan, based on 11 U.S.C. § 704(a)(11). The breach of fiduciary duty claims are based on (1) the Plan's purchase of 19,000 shares of Series A Preferred Stock of Trans-Industries, Inc. on June 5, 2001, referred to below as the "June 5, 2001 Transaction," which claim is referred to below as the "Acquisition Claim;" (2) the Plan's retention of that preferred stock for a period of several years thereafter, and the Plan's retention of the Debtor's common stock allegedly in amounts too great and for too long to be prudent (the "Retention Claims"); and (3) a series of transactions between the Plan, the Debtor, Coenen, and Delmar F. Fields ("Fields") in June 2005, which resulted in Coenen and Fields receiving lump sum cash distributions of the entire amount of their vested interests in the Plan, and which left the Plan unable to satisfy its obligations to all of the other Plan participants (the "Distribution Claim").
The Trustee filed a summary judgment motion against both Coenen and Kosanke, and Coenen filed a cross-motion for summary judgment (collectively, the "Cross-Motions for Summary Judgment").5 After the Court held a hearing on the Cross-Motions for Summary Judgment, in which counsel for Defendant Kosanke participated, Kosanke filed a motion seeking to join the summary judgment motion filed by Defendant Coenen, but only with respect to Coenen's arguments about the statute of limitations.6 The Court granted that motion and allowed Kosanke to "join" Coenen's summary judgment arguments about the statute of limitations.7
The Court issued an opinion ruling on the Cross-Motions for Summary Judgment,8 and entered an order which, in relevant part, dismissed with prejudice "[t]he Trustee's claims against Coenen and Kosanke consisting of (a) the Acquisition Claim; and (b) any Retention Claims that are based on actions or inactions that occurred before December 14, 2001, based on the statute of limitations (the "Summary Judgment Order").9 The Summary Judgment Order also dismissed with prejudice the Trustee's claims against Coenen, "to the extent they are based on any action or inaction that occurred on or after November 16, 2005, when Coenen ceased being a Plan fiduciary.10 After entry of the Summary Judgment Order, the Trustee's remaining claims against Coenen are (1) the Retention Claims that are based on actions or inactions that occurred between December 14, 2001 and November 16, 2005; and (2) the Distribution Claim. The Trustee's remaining claims against Kosanke are the Retention Claims that are based on actions or inactions that occurred on or after December 14, 2001 and the Distribution Claim.
The Court held a trial on these remaining claims.11 During trial, the Plaintiff Trustee made an oral motion for a default judgment against Defendant Joan Parker Coenen, in her capacity as a representative of the estate of Dale S. Coenen, deceased ("the "Oral Default Motion").12 After holding a hearing on the Oral Default Motion and ruling on it,13 the Court entered an order (the "Default Order") which, in relevant part, granted a "default judgment ... in favor of the Plaintiff [Trustee]...., and against Defendant Joan Parker Coenen, in her capacity as representative of the estate of Dale S. Coenen, deceased ... as to liability only, on all of Plaintiff's claims that remain after the Court's entry of [the Summary Judgment Order]."14 The Default Order further stated that "[a]fter the completion of the trial that is currently underway, the Court will determine whether, and to what extent, Defendant Coenen is liable for damages, and the amount, if any, of such damages."15 Following a 6-day trial, the parties filed post-trial briefs.16
The Court has considered all of the oral and written arguments of the parties; all of the exhibits admitted into evidence at trial (the Trustee's Exhibit Nos. 1 through 106); and the testimony at trial of the following witnesses: Defendant Kosanke; David J. Witz ("Witz"), the Trustee's expert witness on fiduciary standards of care under ERISA; and Thomas Frazee ("Frazee"), the Trustee's expert witness on valuation and damages.
This Opinion states the Court's findings of fact and conclusions of law. For the reasons stated in this Opinion, the Court will enter judgment in favor of the Plaintiff Trustee and against Defendants Coenen and Kosanke on the Trustee's breach of fiduciary duty claims, to the extent those claims are based on the Plan's retention of the common stock of Trans-Industries, Inc. and on the distributions to Coenen and Fields. Put another way, the Court finds for the Plaintiff Trustee on the Retention Claim in part, and on the Distribution Claim.
The Debtor Trans-Industries, Inc. was "formed ... sometime in the late [19]60s for the sole purpose of acquiring Transign[, Inc.]."17 From its inception, until he was forced to resign in March 2005, Coenen was Chief Executive Officer ("CEO"), a Director, and Chairman of the Board of Directors of Trans-Industries, Inc. (the "Board").18 Although Coenen resigned as CEO and Chairman of the Board in March 2005, he remained a Director until November 2005.19 Kosanke was Chief Financial Officer ("CFO"), Vice President, and Treasurer of Trans-Industries, Inc. from 1989 until he left the company in April 2006.20 Fields worked in several positions for Transign, Inc. both before and after its acquisition by Trans-Industries, Inc. He was the President of Transign, Inc. at the time he was fired in August 2004.21
On December 31, 1989, Trans-Industries, Inc. created the "Trans-Industries, Inc. Employees' 401[ (k) ] Profit Sharing Plan and Trust," which had an effective date of January 1, 1989 (the "Plan").22 This was done by Trans-Industries, Inc. entering into an agreement with Coenen, as Trustee of an existing plan called the "Trans-Industries, Inc. Salaried Employees' Retirement Plan." That plan was a profit sharing plan and trust which Trans-Industries, Inc. had previously established, with an effective date of December 15, 1974, and which was later amended, restated, and renamed "Trans-Industries, Inc. Employees' Profit Sharing Plan and Trust," effective January 1, 1987.23 The agreement in 1989 was to amend that profit sharing plan and trust "in its entirety"; rename it the "Trans-Industries, Inc. Employees' 401[ (k) ] Profit Sharing Plan and Trust," and restate it so that, among other things, it provided for a pre-tax savings feature qualifying under Internal Revenue Code Section 401(k).24 Coenen signed the Plan on behalf of Trans-Industries, Inc., the employer, and as Trustee of the Plan.25 Kosanke and one other individual signed the Plan as witnesses.26
The Plan provided, in relevant part: "The ‘named Fiduciaries’ of this Plan are (1) the Employer, (2) the Administrator and (3) the Trustee."27 Coenen was the only individual who was designated by name as the Trustee of the Plan.28 Regarding the position of Administrator, the Plan stated, in relevant part:
There is no document in the record which indicates that an Administrator was appointed. So the Administrator of the Plan was the "Employer" – i.e. , the Debtor Trans-Industries, Inc.
Paragraph 7.2 of the Plan authorized the Trustee of the Plan:
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