In re Iron Workers Local 25 Pension Fund

• Decision Date: 29 August 2011
• Docket Number: 07–cv–12368.,Case Nos. 04–cv–40243
• Citation: 811 F.Supp.2d 1295
• Parties: In re IRON WORKERS LOCAL 25 PENSION FUND.
• Court: U.S. District Court — Eastern District of Michigan

811 F.Supp.2d 1295

In re IRON WORKERS LOCAL 25 PENSION FUND.

Case Nos. 04–cv–40243

07–cv–12368.

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

Aug. 29, 2011.

Sharon S. Almonrode, Michael J. Asher, Sullivan, Ward, Southfield, MI, for Iron Workers Local 25 Pension Fund.

Eugene Driker, Morley Witus, Sharon M. Woods, Matthew J. Bredeweg, Barris, Sott, Detroit, MI, Thomas S. Gigot, Groom Law Group, Washington, DC, for Defendant.

John A. Streby, Flint, MI, Jenice C. Mitchell, Foley & Lardner, Detroit, MI, for Interested Parties.

MEMORANDUM ORDER FOLLOWING BENCH TRIAL

STEPHEN J. MURPHY, III, District Judge.

In January 2007, Watson Wyatt & Company (“Watson Wyatt”) agreed in principle to settle claims brought by the Iron Workers Local No. 25 Pension Fund (“Fund”) and its board of trustees. Pursuant to the settlement, Watson Wyatt agreed to pay the Fund $110 million in exchange for a release of all liability and dismissal of all claims with prejudice. Under the fee agreement in place between the Fund and its counsel—Anthony and Michael Asher and their law firm, Sullivan, Ward, Asher & Patton, P.C. (collectively “Sullivan Ward”)—counsel was entitled to receive approximately $36 million of the $110 million settlement.

In April 2007, at a hearing held in connection with the settlement, George Young, one of the Fund's trustees at the time, challenged the propriety of the contingency fee. He alleged that the fee was excessive and that the fee agreement had been created while Sullivan Ward was subject to a conflict of interest. Young sought to intervene in the action to prevent payment of the fee. After the hearing, and with consent of the parties, the Court ordered the fee portion of the $110 million settlement transferred to a separate savings account at Sullivan Ward's bank, and the funds placed in short-term treasury notes, until the Court had an opportunity to rule on Young's motion to intervene.

Shortly thereafter, in May 2007, Young, joined by Fund participant Harvey Weglarz and Fund beneficiary William Chakur, (“Plaintiffs”), filed a separate lawsuit against 1) Sullivan Ward; and 2) the Fund trustees at the time of the relevant decisions, James Hamric, James Edwards, Patrick Gleason, Steven Gulick, D. James Walker, Art Ellul, and J. Michael Rogers (“Trustees”). Plaintiffs make three allegations: 1) Sullivan Ward breached its fiduciary duties under ERISA; 2) the Trustees breached their fiduciary duties under ERISA; and 3) the Trustees caused the plan to engage in a transaction with Sullivan Ward that they knew was prohibited under ERISA.¹

After resolving the parties' pre-trial motions, see Opinion and Order of March 31, 2011 (docket no. 430), the Court conducted a ten-day bench trial between May 17, 2011, and June 8, 2011. Extensive testimony and documentary evidence was received by the Court during trial. (The final pretrial order alone runs 123 pages). This order sets forth the Court's findings of fact and conclusions of law pursuant to Civil Rule 52(a)(1).²

FINDINGS OF FACT³

The Fund and its Trustees

1. The Fund is a pension fund governed by ERISA that has approximately 5,000 participants and beneficiaries. Its headquarters are located in Novi, Michigan. The Fund receives contributions from its members' employers. Upon retirement, qualifying members receive pension benefits from the Fund.

2. As of May 2004, approximately 400 employers contributed to the Fund pursuant to the terms of the collective bargaining agreements between the employers and the Iron Workers Local No. 25 Union (“Union”). Contributions are submitted monthly, are pooled, and are later invested collectively. Proceeds from the investments are used to pay future pension benefits.

3. The Fund is governed by a six-person Board of Trustees. The Union elects three (the “Union Trustees”) and the Great Lakes Fabricators & Erectors Association elects three (the “Employer Trustees”).

4. Fund trustees receive no compensation for their service, but instead serve as volunteers. They are reimbursed for expenses they incur while conducting Fund business.

5. The Fund is governed pursuant to the Iron Workers Local 25 Pension Fund Declaration and Agreement of Trust of January 1, 2002, as amended (“Trust Agreement”). The Trust Agreement establishes and defines the powers of the trustees.

6. According to § 5.2 of the Trust Agreement, the Trustees sit as a Joint Board, and are permitted to act on the Fund's behalf solely through the Board.

7. Section 1.5 of the Trust Agreement provides that the Joint Board of Trustees is “vested with the power to interpret this Trust Agreement and any Plan established thereunder, and its interpretation, if not in conflict with any applicable law or government regulation, shall be final and conclusive.” Moreover, “[t]he Joint Board of Trustees ... have the full discretionary authority to ... construe the terms of the Trust Agreement and the Plan, and any regulations, policies or rules issued thereunder.”

8. Similarly, § 5.3( o ) of the Trust Agreement permits the Joint Board to “[i]nterpret the Trust Agreement and any plan established thereunder and determine all questions arising in the administration, interpretation and application of such documents. All such determinations shall be conclusive and binding.”

9. Section 5.3( l ) permits the Joint Board to “[d]o all other acts, and take any and all other action, whether or not expressly authorized herein, which the Joint Board may deem necessary or proper for the protection of the property held hereunder, or to effectuate the purposes of this fund which is in compliance with applicable law.”

10. Specifically, the Joint Board is authorized by § 5.3(f) to “employ and retain ... legal assistants or employees as in its discretion the Joint Board may deem necessary or appropriate” and may “pay their reasonable expenses and compensation out of the Fund.”

11. Section 5.3(d) authorizes the Joint Board to “[c]ompromise, arbitrate, settle, adjust or release any law suit [sic] or legal proceeding, claim, debt, damage or undertaking due or owing from or to the Fund on such terms and conditions as the Joint Board may deem advisable.”

12. A quorum consisting of at least two Union Trustees and two Employer Trustees is required to transact business. Trust Agreement § 6.8.

13. Actions or decisions of the Joint Board must be made by a majority of the votes cast by the trustees attending a meeting and all meetings must be “conducted in accordance with Robert's Rules of Order, Newly Revised, unless waived by the Trustees present or there is a conflict between such procedures and the terms of th[e] Agreement.” Id. § 6.9.

14. A written record must be kept “of all business transacted and of all matters upon which voting shall have occurred”, and a copy of the record must be furnished to each trustee. Id. § 6.7.

15. In the summer of 2003, the Joint Board consisted of the following members: Union Trustees Patrick Gleason (Chairman), James Hamric, and Art Ellul; and Employer Trustees James Edwards, D. James Walker, Jr., and J. Michael Rogers (Secretary). In October 2005, Steven Gulick replaced Patrick Gleason as a Union Trustee, and James Hamric became Chairman. These seven trustees are defendants in this action.

16. The Trustees are sophisticated business people, several of whom owned and operated their own businesses in the steel industry before becoming trustees.

17. The Trustees received training regarding their fiduciary duties by attending classes sponsored by the International Foundation of Employee Benefit Plans, and presentations offered by the Fund's counsel, in addition to any training received through prior experience serving as a trustee for other organizations.

18. When the Trustees hired service providers, they did not always solicit bids from various firms before making a decision. In general, they did not solicit bids when a firm had provided services to the Fund before and the Trustees believed that it had provided excellent services.

The Law Firm and Fund Counsel

19. Sullivan, Ward, Asher & Patton, P.C., is a law firm incorporated under the laws of the State of Michigan as a professional corporation. Its principal office is located in Southfield, Michigan. Anthony and Michael Asher (father and son) are shareholders of Sullivan Ward and are licensed to practice law in Michigan.

20. Initially, the law firm practiced primarily in the field of professional malpractice. When Anthony Asher joined the firm, he brought with him a labor union practice. Currently, the firm represents approximately thirty to forty union funds, many of which are multi-employer funds.

21. Anthony Asher is the firm's CEO and has served as counsel for the Fund for more than 20 years. Michael Asher also served as counsel for the Fund during that time.

22. For their services to the Fund during the time period in question, the Ashers were paid a fee of $150 per hour.

23. As Fund counsel, the Ashers drafted plan documents and amendments to the Trust Agreement; represented the Fund before Internal Revenue Service and Department of Labor audits and investigations; assisted the trustees in negotiating contracts with Fund service providers, such as money managers and investment consultants; sought to compel employer compliance with Fund contribution promises made in CBAs; counseled the trustees on understanding and meeting their legal obligations under ERISA and other laws applicable to pension funds; communicated recent updates in law to the trustees; educated the trustees on the exercise of their duties under ERISA; and litigated matters on behalf of the Fund. The Ashers sought to provide a full range of legal services to the Fund insofar as those services were within the firm's range of competence.

24. As Fund counsel, the Ashers provided legal advice to the Trustees when requested, but did not offer unsolicited advice or opinions on every issue that came before the Trustees. The Trustees...