Professional Helicopter Pilots Ass'n v. Denison

• Decision Date: 28 September 1992
• Docket Number: Civ. A. No. 86-T-776-S.
• Citation: 804 F. Supp. 1447
• Parties: PROFESSIONAL HELICOPTER PILOTS ASSOCIATION, et al., Plaintiffs, v. Dana DENISON, et al., Defendants.
• Court: U.S. District Court — Middle District of Alabama

804 F. Supp. 1447

PROFESSIONAL HELICOPTER PILOTS ASSOCIATION, et al., Plaintiffs, v. Dana DENISON, et al., Defendants.

Civ. A. No. 86-T-776-S.

United States District Court, M.D. Alabama, S.D.

September 28, 1992.

COPYRIGHT MATERIAL OMITTED

George C. Longshore, Birmingham, Ala., for plaintiffs.

Alston A. Wallace, pro se.

Dana Dennison, pro se.

ORDER

MYRON H. THOMPSON, Chief Judge.

This case arises out of an employee welfare benefit plan established between an employer, DWS, Inc., and an employee bargaining group, Professional Helicopter Pilots Association (hereinafter referred to as "PHPA"). The plaintiffs consist of the following: PHPA, an organization representing flight instructors, whose members were eligible to participate in the plan; Contractor Flight Instructors Society, a nascent organization of flight commanders, whose members were also eligible to participate in the plan; and various trustees and participants in the plan. The plaintiffs charge that defendants Dana Denison and Alston A. Wallace, two corporate officers of DWS, breached their duties as fiduciaries of the plan, in violation of the Employee Retirement Income Security Act of 1974 (commonly known as "ERISA"), 29 U.S.C.A. § 1001-1461. This cause is now before the court on plaintiffs' motion for summary judgment. For reasons set forth below, the court concludes that the motion should be granted in part and denied in part.

I. BACKGROUND

In 1985, the United States Army awarded a contract to DWS to provide flight training services to students at a military installation. Denison was president of DWS and Wallace served as both executive vice-president and secretary. After being awarded the contract, DWS signed a collective bargaining agreement with PHPA. The agreement required that DWS maintain a pension plan. DWS agreed to withhold from the wages of each employee every two-week pay period an amount designated by the employee as his contribution to the plan. DWS was to deposit the withheld wages into the plan's fund and to invest the money in an investment account designated by the employee. The employees had three investment choices: a guaranteed income fund, an equity fund, or a life insurance program. DWS also agreed that it would deposit into the fund each pay period an amount equal to 1.5% of each employee's bi-weekly "base salary."

To implement the plan, PHPA and DWS executed a trust agreement. Wallace and Denison signed the trust agreement on behalf of DWS as the company's secretary and president, respectively. The plan named DWS as the plan's administrator.

DWS hired a pension management firm to perform the account functions associated with the plan. From payroll information, the firm identified the amount each employee designated to be withheld from his pay for contribution to the plan, and the firm calculated DWS's employer contribution for each employee to the plan. The firm also determined the total amount the plan was required to invest in each of the three investment accounts. The firm then sent instructions each month to DWS, as the plan administrator, indicating the amounts the plan was to allocate to the three investment accounts.

For the months of October 1985 through March 1986, DWS forwarded the required employee and employer contributions to the plan. However, for the months of April through June 1986, DWS made the appropriate payroll deductions but failed to deposit these withheld wages into the fund. DWS also failed to pay into the fund its employer contributions. The total amount DWS owed to the fund for these three months was $321,075.01. DWS eventually went into bankruptcy, leaving the fund with a deficit because of the unpaid employee and employer contributions.

Plaintiffs initiated this lawsuit in August 1986 shortly after they discovered that Denison and Wallace had failed to deposit employee and employer contributions to the fund as required by the trust agreement. Denison and Wallace responded by filing for personal bankruptcy, and this case was dismissed without prejudice to the right of the plaintiffs to petition for reinstatement should the bankruptcy courts allow this case to proceed again. In February 1992, plaintiffs moved to reinstate Count I of their complaint against Wallace and Denison to pursue their ERISA claim for breach of fiduciary duty. The court granted the petition for reinstatement.

Plaintiffs have now moved for summary judgment, claiming that Denison and Wallace are personally liable for the amounts still owed to the pension plan. Plaintiffs contend that Denison and Wallace breached their duties as fiduciaries of the plan by failing to segregate the trust fund money from DWS's corporate assets and by failing to notify DWS employees that contributions were not being made to the plan and to the investment accounts. Denison and Wallace admit that they failed to make the required contributions to the fund but deny that they breached any fiduciary duties.

II. SUMMARY JUDGMENT STANDARD

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment is appropriate where "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Once the party seeking summary judgment has informed the court of the basis for its motion and identified those undisputed facts necessary to support its claim, the burden shifts to the nonmoving party to call evidence to the attention of the court sufficient to demonstrate a genuine issue of material fact as to at least one element that the moving party has to prove at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); see also Tidmore Oil Co. Inc. v. BP Oil Co., 932 F.2d 1384, 1387-88 (11th Cir.), cert. denied, ___ U.S. ___, 112 S.Ct. 339, 116 L.Ed.2d 279 (1991). If the evidence favoring the nonmoving party is merely colorable, or is not significantly probative, summary judgment may be granted. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Furthermore, in deciding a motion for summary judgment, the court must consider all evidence in the light most favorable to the nonmoving party and resolve all reasonable doubts in favor of the nonmoving party. Earley v. Champion Int'l Corp., 907 F.2d 1077, 1080 (11th Cir.1990); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

III. DISCUSSION

The statutory basis for a suit claiming breach of fiduciary duty under ERISA is 29 U.S.C.A. § 1109. Simmons v. S. Bell Tel. & Tel. Co., 940 F.2d 614, 617 (11th Cir.1991). Section 1109 imposes personal liability on any fiduciary who breaches "any of the responsibilities, obligations, or duties imposed upon fiduciaries" by ERISA. Section 1109(a) further provides that fiduciaries who breach their duty "shall be personally liable to make good to such plan any losses to the plan resulting from such breach, and to restore to such plan any profits of such fiduciary which have been made through the 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." Because the primary purpose of ERISA's fiduciary provisions is to protect the integrity of the plan, persons who bring fiduciary claims under section 1109 must do so for the benefit of the plan as a whole. Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142-44, 105 S.Ct. 3085, 3090-91, 87 L.Ed.2d 96 (1985). Here, plaintiffs seek remedies that will benefit the plan as a whole. In addition, ERISA provides that a civil action may be brought "by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 1109." 29 U.S.C.A. § 1132(a)(2). The plaintiffs here are either participants or fiduciaries.

The critical two questions, therefore, presented to the court are, first, whether Denison and Wallace were fiduciaries of the plan and, second, if they were, whether they breached their fiduciary duties.

A. Were Denison and Wallace Fiduciaries of the Plan?

ERISA provides that a person is a fiduciary with respect to a plan to the extent that "(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 investment advice for a fee or other compensation, direct or indirect, with respect to any monies or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan." 29 U.S.C.A. § 1002(21)(A). Courts have held that, with this statutory language, Congress intended that the term "fiduciary" be construed broadly. See, e.g., Consolidated Beef Indus. v. New York Life Ins. Co., 949 F.2d 960, 964 (8th Cir.1991), cert. denied, ___ U.S. ___, 112 S.Ct. 1670, 118 L.Ed.2d 390 (1992); Blatt v. Marshall & Lassman, 812 F.2d 810, 812 (2nd Cir.1987).

In his answer filed to the plaintiffs' complaint, Denison admits that he was a fiduciary of the fund. He was not only named a trustee of the fund, but, in his capacity as trustee, he signed the checks which were forwarded each month as the trust money to the investment accounts. In addition, as president of DWS, Denison assumed many of the company's responsibilities as plan administrator. See 29 C.F.R. § 2509.75-8 at D-3 (1991) (bulletin published by the Department of Labor interpreting definition of fiduciary under ERISA to include plan administrator or trustee); see also Freund v. Marshall and Ilsley Bank, 485 F.Supp. 629, 635 (W.D.Wis.1979) ("By the very nature of their positions, plan trustees and a plan administrator are fiduciaries with respect to a plan").

In contrast to Denison, Wallace was not a named trustee or a named...