White v. Martin
| Decision Date | 03 September 2003 |
| Docket Number | No. Civ. 99-1447 JRTFLN.,Civ. 99-1447 JRTFLN. |
| Parties | Bradley WHITE, Plaintiff, v. Madeline L. MARTIN, individually as trustee and fiduciary of the Bob Martin Trucking, Inc. Profit Sharing Plan, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Steven E. Rau, Flynn, Gaskins & Bennett, L.L.P., Minneapolis, MN, Matthew B. Newman, Newman Law Office, Savage, MN, for plaintiff.
Mark D. Wisser, Anthony Ostlund & Baer, P.A., Minneapolis, MN, for defendant.
Plaintiff Bradley White ("White") brought this action against defendant Madelaine L. Martin ("Lyn Martin") individually and in a derivative capacity on behalf of all the participants of the Bob Martin Trucking, Inc. Profit Sharing Plan ("Plan"). Following a bench trial, the Court issued its Findings of Fact and Conclusions of Law on March 31, 2003. See White v. Martin, 286 F.Supp.2d 1029, 2003 WL 22145584 (D.Minn.2003) ("March 31 Order"). The Court found that Lyn Martin breached her fiduciary duty under § 404 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1104, and her co-fiduciary duty under ERISA § 405, 29 U.S.C. § 1105. The Court ordered that Lyn Martin was liable to the Plan for the losses that resulted from her breaches. The Court further ordered the parties to submit briefing on any appropriate interest rate to apply to the sums that Martin owes. The Court now considers that question, as well as plaintiff's application for an award and approval of attorneys' fees pursuant to ERISA § 502(g)(1), 29 U.S.C. § 1132(g)(1).
In its March 31 Order, the Court found against Lyn Martin on three grounds. First, the Court determined that Lyn Martin breached her fiduciary duty of prudence under ERISA § 404 by causing the Plan to engage in prohibited transactions that violate ERISA § 406, 29 U.S.C. § 1106. (See March 31 Order at 13-16.) These prohibited transactions were the Exercises of Guarantee by Wellington West Capital ("Wellington"), by which money was removed from the Plan's assets and transferred to Bob Martin's personal investment account, resulting in a loss to the Plan of $341,971.99. (Id. at 30.)
Second, the Court found that Lyn Martin breached her fiduciary duty by investing Plan assets through Wellington, a Canadian firm, thereby incurring a ten percent non-resident tax on certain dividends. (Id. at 20-21.) This resulted in a loss to the Plan of $3,470.75. (Id. at 21, 30.)
Third, the Court found that Lyn Martin breached her co-fiduciary duty under ERISA § 405 by permitting and failing to prevent Bob Martin from executing the Wellington Exercises of Guarantee, as well as a wire transfer in June 1998 that resulted in a loss to the plan of $100,000.00. (Id. at 26-27, 30.)
"The question of whether interest is to be allowed, and also the rate of computation, is a question of federal law where the cause of action arises from a federal statute." Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208, 1218 (8th Cir.1981). ERISA does not expressly authorize prejudgment interest, but such awards are permitted under ERISA § 502(a)(3)(B), which provides for "other appropriate equitable relief." 29 U.S.C. § 1132(a)(3)(B). See Mansker v. TMG Life Ins. Co., 54 F.3d 1322, 1330 (8th Cir. 1995). The decision whether to award interest thus lies within the district court's discretion. Id. at 1331. The Eighth Circuit has stated that prejudgment interest is designed "to serve at least two purposes: to compensate prevailing parties for the true costs of money damages incurred, and, where liability and the amount of damages are fairly certain, to promote settlement and deter attempts to benefit unfairly from the inherent delays of litigation." Stroh Container Co. v. Delphi Indus., Inc., 783 F.2d 743, 752 (8th Cir.1985). The court of appeals has held that prejudgment interest "should ordinarily be granted unless exceptional or unusual circumstances exist making the award inequitable." Id. At the same time, however, the Eighth Circuit has held that "a common thread throughout the prejudgment interest cases is unjust enrichment — the wrongdoer should not be allowed to use the withheld benefits or retain interest earned on the funds during the time of the dispute." Kerr v. Charles F. Vatterott & Co., 184 F.3d 938, 946 (8th Cir.1999). In Kerr, the Eighth Circuit held that a claimant should not receive prejudgment interest because the wrongdoer "did not keep the earnings or have use of [claimant's] funds during the delay period." Id. Cf. Stroh Container, 783 F.2d at 752 (); Short v. Central States, Southeast & Southwest Areas Pension Fund, 729 F.2d 567, 576 (8th Cir.1984); United States v. Motor Vessel Gopher State, 614 F.2d 1186, 1190 (8th Cir.1980).
The Court finds that awarding interest is not appropriate in this case, primarily because no unjust enrichment has occurred. Based on the evidence presented at trial, the Court found that Lyn Martin breached her fiduciary duties by permitting Bob Martin to withdraw funds from the plan, and by negligently making investments that incurred an unnecessary tax. While these breaches did cause the Plan to lose money, Lyn Martin never kept or had use of any of the funds. The funds lost to the Plan from Canada's non-resident tax went to the Canadian government, not Lyn Martin. The funds from the Exercises of Guarantee and the June 1998 wire transfer went directly to Bob Martin; no evidence was presented that Lyn Martin ever obtained or used any of these funds. Thus, as in Kerr, Lyn Martin was not unjustly enriched through her violations of ERISA, and therefore an award of interest is not appropriate.
Accordingly, the Court finds that the total amount of damages to which plaintiff is entitled from Lyn Martin is $187,085.95.1
Pursuant to the Court's March 31 Order, White has submitted an application for award of attorneys' fees.2 Section 502(g)(1) of ERISA permits the Court to grant reasonable attorneys' fees and costs to either party. 29 U.S.C. § 1132(g)(1). Although courts in this circuit formerly presumed that prevailing parties were entitled to attorneys' fees in ERISA cases, the Eighth Circuit recently held that no such presumption applies. See Martin v. Arkansas Blue Cross & Blue Shield, 299 F.3d 966, 971-72 (8th Cir.2002). The decision whether to award attorneys fees is thus committed to the Court's discretion. Hogan v. Raytheon Co., 302 F.3d 854, 857 (8th Cir.2002). In exercising this discretion, the Court considers five factors: (1) the degree of Lyn Martin's culpability or bad faith; (2) Lyn Martin's ability to satisfy an award of attorneys' fees; (3) whether an award of attorneys' fees could deter other persons acting under similar circumstances; (4) whether White sought to benefit all participants and beneficiaries of the Plan or to resolve a significant legal question regarding ERISA; and (5) the relative merits of the parties' positions. Lawrence v. Westerhaus, 749 F.2d 494, 496 (8th Cir.1984); Dasler v. E.F. Hutton, 698 F.Supp. 172, 175 (D.Minn.1988). These factors are general guidelines, and are "by no means exclusive or to be mechanically applied." Martin, 299 F.3d at 972.
Upon considering the Westerhaus factors, the Court determines that White should be granted reasonable attorneys' fees. First, although there is no significant evidence of bad faith by Lyn Martin, the evidence at trial did conclusively show that she breached her fiduciary duties to the Plan, thus establishing some culpability. Next, Martin concedes that she has the ability to pay any award against her. The Court also finds that an award of attorneys' fees in this case will serve a significant deterrent effect. It is true that Lyn Martin's breaches resulted largely from mismanagement, negligence, and possibly excessive trust in her ex-husband and co-fiduciary. While these factors might mitigate any finding of bad faith, however, they do not change the fact that Lyn Martin owed a duty to the Plan and its participants, a duty that she failed to keep. Awarding attorneys' fees in this case will serve as a deterrent and notice to other ERISA fiduciaries that they must remain scrupulously informed on all matters that relate to their fiduciary duties, so that they do not harm their plans or participants. The Court further finds that by this lawsuit, White clearly sought to benefit all participants and beneficiaries of the Plan; the damages he recovers will go directly into the Plan's assets and eventually be distributed to the participants. Finally, the Court notes that the relative merits of the parties' positions was decided in plaintiff's favor at trial. Plaintiff prevailed on the claims of fiduciary and co-fiduciary breach, although he did not prevail on his claim for administrative penalties against Lyn Martin. Based upon these factors, the Court concludes that White is entitled to reasonable attorneys fees under ERISA § 502(g)(1).
The Court must next determine what amount of fees is reasonable. "The most important factor in determining what is a reasonable fee is the magnitude of the plaintiff's success in the case as a whole." Jenkins v. State of Missouri, 127 F.3d 709, 716 (8th Cir.1997). In cases where the plaintiff has lost some issues that are unrelated to those on which the plaintiff has won, the Court must treat the unrelated issues as if they were separate cases, and cannot award fees based upon them. Jenkins, 127 F.3d at 716. However, claims that "involve a common core of facts or [are] based on related legal theories," deserve compensation even if they were not successful. Hensley v. Eckerhart, 461 U.S. 424, 435, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983); Emery v. Hunt, 272 F.3d...
To continue reading
Request your trial
-
Hammer v. Johnson Senior Ctr.
...if not bad faith. Phillips v. Brink's Co., No. 2:08-cv-31, 2009 WL 3681835, at *2 (W.D. Va. Oct. 31, 2009); White v. Martin, 290 F.Supp.2d 986, 990 (D. Minn. 2003) (“[A]lthough there is no significant evidence of bad faith by [the defendant], the evidence at trial did conclusively show that......