Useden v. Acker
Decision Date | 29 March 1989 |
Docket Number | No. 85-0002-Civ.,85-0002-Civ. |
Citation | 721 F. Supp. 1233 |
Parties | Neil A. USEDEN, as Trustee of the Air Florida System, Inc., Profit Sharing Plan and Trust, Plaintiff, v. C. Edward ACKER, Plan Fiduciary, Eli Timoner, Former Trustee, Donald Lloyd Jones, Former Trustee, Jon R.K. Tinkle, Plan Fiduciary, Florentino Gonzalez, Plan Fiduciary and Plan Administrator, William Hegler, Plan Fiduciary and Plan Administrator, Robert Leycock, Plan Fiduciary and Plan Administrator, AIR Florida System, Inc., Plan Sponsor, Air Florida, Inc., Plan Sponsor, System Service, Inc., Plan Sponsor, System Leasing Inc., Plan Sponsor, Air Florida-Sunshine Subsidiary, Inc., Plan Sponsor, Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., Plan Fiduciary, William C. Miesch, Plan Fiduciary, Great American Insurance Company, Plan Fiduciary and a Party in Interest, Great American Insurance Life Insurance Company, Plan Fiduciary and Party in Interest, American Financial Corporation, Plan Fiduciary and a Party in Interest, Sun Bank, N.A., Plan Fiduciary and a Party in Interest, Aetna Insurance Company, Insurer, Defendants. |
Court | U.S. District Court — Southern District of Florida |
Robert Shupack, Hollywood, Fla., Edward A. Kaufman, Miami, Fla., for plaintiff.
Irving Miller, Miami, Fla., Mitchell Fuerst, Miami, Fla., David Cooney, Ft. Lauderdale, Fla., Sanders Campbell, Reuben Ginsberg, Dallas, Tex., Joseph H. Lowe, Miami, Fla., for defendants.
ORDER ON MOTIONS FOR SUMMARY JUDGMENT
This cause was before the court on defendants, Sun Bank of Miami, N.A.'s, Sun Bank, Inc.'s (collectively "Sun Bank") Greenberg, Traurig, Askew, Hoffman, Lipoff, Rosen & Quentel's ("Greenberg, Traurig") motions for final summary judgment, Eli Timoner's ("Timoner") and Cesar Alvarez's ("Alvarez") motions for partial summary judgment, and Sanders Campbell's ("Campbell") motion for final summary judgment. In addition, plaintiff, Neil A. Useden, As Trustee for the Air Florida System, Inc. Profit Sharing Plan and Trust's ("Useden") partial motion for summary judgment against the above defendants, Oliver Kimberly and Donald Lloyd-Jones was before this Court.
For the reasons set forth below, this Court determines that defendants, Sun Bank's and Greenberg, Traurig's motions for final summary judgment are granted. In addition, Alvarez's motion for partial summary judgment with respect to the issue of punitive damages is granted. The Court reserves ruling on the motions for partial summary judgment on the issue of the statute of limitations.1 Plaintiff's motion for partial summary judgment and defendant, Campbell's motion for final summary judgment are denied. Finally, plaintiff's supplement to rule 10J statement of material and disputed facts and the affidavit of Donald Lloyd-Jones, served on Greenberg, Traurig on December 14, 1988 are hereby stricken from the record and plaintiff's motion for continuance or extension of time for filing affidavits and ore tenus motion to amend the complaint as to Sun Bank are hereby denied.
1. The Air Florida System, Inc. Profit Sharing Plan and Trust ("Plan") was established by Air Florida Systems, Inc. and Air Florida, Inc. (collectively "Air Florida") on September 12, 1977.2 The Plan was amended five times, with the last amendment effective on August 1, 1980.
2. Greenberg, Traurig, was at all times material, and is, a law firm practicing in Dade County, Florida. Greenberg, Traurig provided legal services to the Plan from its inception until December, 1982 and to Air Florida from the early 1970's until August, 1982.
3. Greenberg, Traurig drafted the Plan, which was patterned after a similar profit sharing plan instituted by Southwest Airlines. The characteristic feature of the Plan was that it was an eligible individual account plan, as defined by ERISA, and it was to invest exclusively in employer securities — that is stock of Air Florida or its affiliates. The employer securities acquired by the Plan were to be held by the Plan for extended periods of time and distributed to Plan participants entitled to receive benefits pursuant to the terms of the Plan.
4. Timoner was the named trustee of the Plan from its inception through July 10, 1982, when Timoner suffered a debilitating stroke, at which time Donald Lloyd-Jones ("Lloyd-Jones") assumed Timoner's responsibilities with regard to the Plan. Under the terms of the Plan, the Trustee of the Plan was authorized to borrow or raise money for the purposes of the Plan and was authorized to pledge all or any part of Plan assets to secure the repayment of such a borrowing.
5. Timoner was also the Chief Executive Officer and Chairman of the Board of Air Florida from July 1971 through July 1977 and President and Chief Operating Officer of Air Florida from August 1977 through September 1981. From August 1977 to September 1981, C. Edward Acker ("Acker") was the Chief Executive Officer and Chairman of the Board of Air Florida. Acker left Air Florida in September 1981, at which time Timoner reassumed the positions of Chief Executive Officer and Chairman of the Board of Directors. In June 1982, Lloyd-Jones joined Air Florida and was appointed Chief Executive Officer and President. After Timoner's stroke, Lloyd-Jones assumed Timoner's corporate duties.
6. In November 1977, Neil A. Useden Associates, Inc. ("Useden Associates") entered into a Plan Service Agreement with Air Florida, where Useden Associates agreed to render certain services to the Plan. On May 8, 1984, plaintiff was appointed Trustee of the Plan. On January 2, 1985, plaintiff instituted this action. Greenberg, Traurig, Sanders Campbell and Oliver Kimberly were not named as defendants until September 1986.
7. Sun Bank of Miami, N.A. is, and at all times material was, a national banking association performing banking functions in Dade County, Florida.
8. Sun Bank, Inc. is located in Orlando, Florida and is a bank holding company which owns all of the outstanding shares of stock of Sun Bank of Miami, N.A. Sun Bank, Inc. has a separate board of directors and separate officers from Sun Bank of Miami, N.A. and did not make the loan that is the subject of this litigation.
9. Sun Bank was one of several banks that provided commercial banking services to Air Florida between 1977 and 1984. Beginning in early 1980, Sun Bank developed a commercial lending relationship with Air Florida and made several loans to Air Florida to enable it to purchase aircraft.
10. Edmund C. Timberlake ("Timberlake") was the commercial banking officer at Sun Bank who maintained contact with Air Florida with regard to its outstanding commercial loans and its commercial banking relationship. Pursuant to his role as commercial lending officer for the Air Florida account Timberlake continuously monitored Air Florida's financial status.
11. On November 11, 1977, Air Florida contributed 50,000 shares of Air Florida common stock to the Plan. On December 30, 1979, the Plan purchased 22,400 shares of Air Florida Series A Preferred Stock. At all times material, the Air Florida common stock did not pay either a cash or stock dividend. The Series A Preferred Stock, convertible into 2½ shares of common stock, paid a $.90 annual dividend per share. In addition, the preferred stock carried a "cheap stock" privilege, meaning that a preferred stock owner could purchase 1/8 of a share of common stock in exchange for $.50 of the $.90 dividend. Thus, subsequent to the December 31, 1979 purchase of Series A Preferred Stock, the Plan acquired 2,800 additional shares of Air Florida common stock through conversion of the Series A Preferred Stock dividends. As of May 1981, the Plan also had approximately $700,000.00 in cash as a result of cash contributions from Air Florida.
12. In late 1980 to early 1981, Great American Life Insurance Company ("GALIC") began to dispose of its substantial holdings of Air Florida stock. A significant number of shares were sold by GALIC to Solomon Brothers at a discount from the market price, and later resold by Solomon Brothers in the market. By late May 1981, GALIC's holdings were less than 10% of the outstanding shares of Air Florida stock.
13. In early 1981, Acker and Timoner became aware of GALIC's desire to dispose of certain Air Florida shares of preferred stock and convinced GALIC to sell those shares of stock to the Plan at the same discounted price of the sale of shares to Solomon Brothers.
14. Thus, the Plan purchased 76,000 shares of Series A Preferred stock from GALIC, which was the equivalent of 190,000 shares of common stock. The purchase price for the 76,000 shares of preferred stock was calculated based on the common share equivalent of 100,000 shares at $8.795 per share and 90,000 shares at $12.70 per share for a total purchase price of $2,022,500, averaging $10.65 per share.3
15. The purchase of the stock by the Plan occurred shortly after a public offering of Air Florida common stock in May 1981. In this public offering, Air Florida initially offered 2,000,000 shares. The offering was increased to 3,000,000 shares as a result of market demand. The offering sold at $13.50 per share. Moreover, additional stock owned by GALIC was sold in a public offering pursuant to demand registration rights owned by GALIC. In this offering, GALIC sold 1,900,000 shares. Thus, in the early part of 1981, 4,900,000 shares of Air Florida common stock were sold to the public.
16. The Plan paid for 76,000 shares of Series A Preferred Stock with existing cash and with the proceeds of a nine-month, short-term loan from Sun Bank in the amount of $1.6 million (the "Loan"). The Loan was originally secured by the 76,000 shares of preferred stock purchased, and 40,000 shares of Air Florida common stock owned by the Plan.
17. At the time the decision to purchase the stock was made, senior management of Air Florida, including Timoner, anticipated making a substantial cash contribution to the Plan in the first quarter of 1982 for the...
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