Hoeberling v. Nolan

• Decision Date: 19 May 1999
• Docket Number: No. 98-72059.,98-72059.
• Citation: 49 F.Supp.2d 575
• Parties: James C. HOEBERLING, Plaintiff, v. Charles T. NOLAN, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

49 F.Supp.2d 575

James C. HOEBERLING, Plaintiff, v. Charles T. NOLAN, Defendant.

No. 98-72059.

United States District Court, E.D. Michigan, Southern Division.

May 19, 1999.

David M. Black, Southfield, MI, for plaintiff.

George W. Burnard, Troy, MI, for defendant.

OPINION AND ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

ROSEN, District Judge.

I. INTRODUCTION

This case under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., is presently before the Court on a Motion for Summary Judgment filed by Defendant, Charles T. Nolan, on January 29, 1999. Plaintiff, James C. Hoeberling, a former participant in the now defunct Nolan and Hoeberling Employees' Profit Sharing Plan, seeks monetary damages in his individual capacity for Defendant's alleged breach of fiduciary duties owed to Plan participants under 29 U.S.C. § 1104. In the instant motion, Defendant argues, inter alia, that Plaintiff has failed to state a claim for which relief may be granted because ERISA does not authorize breach of fiduciary duty claims for monetary damages by participants suing in their individual capacity.

The Court held a hearing on Defendant's Motion on April 15, 1999. Having heard the oral arguments of counsel, and having reviewed the briefs and supporting documents submitted by the parties, the Court is now prepared to rule on Defendant's motion. This Opinion and Order sets forth the Court's ruling.

II. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff and Defendant in this action are both attorneys and former partners in a professional corporation known as Nolan and Hoeberling, P.C. Sometime around April 1973, the professional corporation adopted the Nolan and Hoeberling Employees' Profit Sharing Plan and Trust Agreement ("the Plan"), which was subsequently amended to qualify under ERISA. It is undisputed that Defendant served as a fiduciary of the Plan pursuant to 29 U.S.C. § 1002(21)(A).¹

In 1984, Plaintiff withdrew from Nolan and Hoeberling, P.C. Following Plaintiff's withdrawal, litigation ensued between the parties, resulting in a June 1, 1987 arbitration award which provided, "Those persons having vested interests in the pension and profit sharing plans will receive their accounts, all distribution to be in accordance with applicable Federal and State laws governing pension and profit sharing plans." After an extremely lengthy dispute, Defendant distributed to Plaintiff his vested account balance in two lump-sum payments: (1) $258,237.48 in February of 1996 and (2) $6,753.34 in May of 1996. It is undisputed that prior to the 1996 lumpsum payments, Plaintiff Hoeberling was a Plan participant and beneficiary of the trust. On January 23, 1997, Defendant filed Internal Revenue Service Form 5500-C/R and the Plan ceased to exist.

Along with the lump-sum payments, Defendant provided Plaintiff with an accounting of Plan investment activities as required by ERISA. Plaintiff contends that upon receiving the accounting, he learned for the first time that Defendant had invested 100% of Plaintiff's funds in a low paying certificate of deposit at a local bank.² Upon gaining this knowledge, Plaintiff sought relief in arbitration, claiming Defendant breached fiduciary duties under ERISA. On March 30, 1998, the arbitrator dismissed Plaintiff's ERISA claims, which were not properly part of the law firm dissolution claim, for lack of jurisdiction.

Plaintiff responded by initiating the instant case on May 19, 1998, alleging that Defendant breached fiduciary duties owed to Plan participants under ERISA by: (1) failing to act solely in the exclusive interest of Plan participants and beneficiaries as required by 29 U.S.C. § 1104(a)(1); (2) failing to invest plan assets in accordance with the "prudent man" standard, 29 U.S.C. § 1104(a)(1)(B); and (3) failing to diversify plan assets, 29 U.S.C. § 1104(a)(1)(C). [Complaint, ¶ 27]. Plaintiff further alleged that "Defendant is personally liable to Plaintiff under 29 U.S.C. § 1109(a) in such amounts exceeding $75,000 exclusive of interest and costs for all losses and profits which should have been made through proper performance of Nolan's fiduciary duties." [Complaint, ¶ 30].

On June 12, 1998, Defendant filed a Motion to Dismiss, arguing that because Plaintiff had accepted the balance of his account in 1996, he no longer had standing to pursue his breach of fiduciary duty claims as a "participant" of the Plan, as that term is defined by ERISA.³ In an Opinion and Order dated October 19, 1998, the Court denied Defendant's Motion to Dismiss on the grounds that relevant Sixth Circuit law instructed that an individual should not forfeit standing as a participant if misconduct or malfeasance by a plan fiduciary contributes to an individual's decision to terminate his rights under a plan, or if a plan fiduciary has unilaterally terminated an individual's interest in a plan without the individual's explicit or tacit consent.⁴

Following discovery, Defendant filed the instant Motion for Summary Judgment, which seeks dismissal of Plaintiff's case on the following four grounds: (1) a renewed argument that Defendant lacks standing as a participant of the Plan; (2) that Plaintiff's Complaint fails to state a claim for which relief may be granted because ERISA does not authorize breach of fiduciary duty claims for monetary damages by participants suing in their individual capacity; (3) that any breach of fiduciary duty claim is barred by the applicable statute of limitations; and (4) that as a co-trustee of the Plan, Plaintiff should not be allowed to profit from his own breaches of duty and negligence. Because the Court finds Plaintiff's second argument dispositive of the present case, the following analysis focuses on the issue of whether ERISA authorizes breach of fiduciary duty claims for monetary damages by participants suing in their individual capacity.

III. ANALYSIS

A. Legal Standards Applicable to the Instant Motion

Although Defendant captions the instant motion as a Motion for Summary Judgment, his argument with respect to the availability of monetary damages actually calls into question whether Plaintiff has stated a claim for which relief may be granted. Accordingly, the Court will analyze Defendant's argument under the standards appropriate for motions under Fed. R.Civ.P. 12(b)(6).

In considering a motion to dismiss under Rule 12(b)(6) for failure to state a claim upon which relief can be granted, the Court must accept the well-pleaded factual allegations set forth in the plaintiff's complaint as true. See, Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987) (citing Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)); Westlake v. Lucas, 537 F.2d 857, 858 (6th Cir.1976). However, the Court need not accept as true legal conclusions or unwarranted factual inferences. See, Morgan, supra; Westlake, supra. See also, Blackburn v. Fisk University, 443 F.2d 121, 124 (6th Cir.1971) (the court is "required to accept only well-pleaded facts as true, not the legal conclusions that may be alleged or that may be drawn from the pleaded facts.")

B. ERISA Does Not Authorize Breach of Fiduciary Duty Claims for Monetary Damages by Participants Suing in their Individual Capacity

ERISA sets forth the persons empowered to bring a civil action at 29 U.S.C. § 1132(a), which provides in pertinent part:

(a) Persons empowered to bring a civil action

A civil action may be brought —

(1) by a participant or beneficiary —

* * * * * *

(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan;

(2) by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 1109 of this title;

(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan;

In the present case, Plaintiff's breach of fiduciary duty claims would seem to fall squarely within the parameters of § 1132(a)(2), as an action by a Plan participant for appropriate relief under 29 U.S.C. § 1109, which provides:

Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary. A fiduciary may also be removed for a violation of section 1111 of this title.

29 U.S.C. § 1109(a). Defendant correctly points out, however, that a plan participant may not sue in his individual capacity under § 1109, which provides that a fiduciary "shall be personally liable to make good to such plan any losses to the plan resulting from each such breach." (emphasis added). See, Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134, 140, 105 S.Ct. 3085, 3089, 87 L.Ed.2d 96 (1985) (holding that recovery for a violation of § 1109 inures to the benefit of the plan as a whole, precluding suits by participants in their individual capacity).

Recognizing this principle, Plaintiff now argues that he can recover damages in his individual capacity for Defendant's alleged breach of fiduciary duties under the "other equitable relief" language of § 1132(a)(3)(B)(i). While such an argument would seem to deviate from the plain language of ERISA, the Supreme Court has expressly held that § 1132(a)(3) is "broad enough to cover individual...