Perez v. Truss Systems, LLC et al

Filing 23

ORDER granting 21 Motion for summary judgment; directing the Acting Secretary to file a proposed form of judgment no later than 5/5/2017. Signed by Judge Timothy J. Corrigan on 4/14/2017.(SRW)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
JACKSONVILLE DIVISION
EDWARD HUGLER, Acting Secretary
of Labor, United States Department of
Labor,1
Plaintiff,
v.

Case No. 3:15-cv-94-J-32JRK

TRUSS SYSTEMS, LLC, TRUSS
SYSTEMS, LLC PROFIT SHARING
PLAN, a benefit plan, ANDREA LYNN
MCCARTHY, an individual, and LISA
HALL, an individual,
Defendants.
ORDER
This ERISA case is before the Court on Edward Hugler, the Acting Secretary of
Labor’s Motion for Summary Judgment and accompanying exhibits (Doc. 21, 21-1, 212, 21-3, 21-4, 21-5, 21-6), which were filed on November 21, 2016. Defendants Truss
Systems, LLC, Truss Systems, LLC Profit Sharing Plan, Andrea Lynn McCarthy, and
Lisa Hall, who are all represented by counsel, failed to respond despite an order
advising them to file responses. (Doc. 22). For the reasons that follow, the Court
grants Plaintiff’s Motion for Summary Judgment as to Defendants Truss Systems,
LLC, Andrea Lynn McCarthy, and Lisa Hall.

Pursuant to Fed. R. Civ. P. 25(d), this Court has substituted the previous
Secretary of Labor Thomas E. Perez for the current Acting Secretary of Labor Edward
Hugler.
1

I.

FACTS2
Truss Systems, LLC (the “Company”) is a Florida limited liability corporation

located in Bunnell, Florida.

(Doc. 21-5 at 2 3 ).

The Company is a construction

company that builds and manufactures wooden roof and floor tresses for commercial
and residential buildings. (Doc. 21-3 at 22; Doc. 21-5 at 2). Defendants Andrea Lynn
McCarthy and Lisa Hall served as co-owners of the Company at all relevant times.
(Doc. 21-3 at 22). In 1996, the Company implemented the Truss Systems, LLC Profit
Sharing Plan (the “Plan”) to offer retirement benefits to participating employees and
to help retain their employment. (Doc. 21-1 at 2 ¶ 3; Doc. 21-3 at 22). The Plan was
a profit-sharing plan funded by discretionary employer contributions and thus subject
to Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C.
§ 1001 et seq. (Doc. 21-1 at 2 ¶ 4, at 3 ¶ 8).
The Company was the Plan Sponsor and Plan Administrator, but McCarthy, as
the Company’s president, acted as Plan Administrator on behalf of the Company,
exercising discretionary authority with respect to the administration of the Plan and
the disposition of Plan assets. (Doc. 21-3 at 21). McCarthy and Hall served as Co-

Plaintiff provided a Concise Statement of Material Facts in support of its
motion for summary judgment. (Doc. 21-1). The Statement is supported by specific
references to Defendants’ Answer, an affidavit, and admissions on file with the Court.
(Doc. 8; Doc. 21-2; Doc. 21-3). Because Defendants failed to respond to Plaintiff’s
Motion for Summary Judgment, this Court is relying on the Concise Statement of
Material Facts in Support of Plaintiff’s Motion for Summary Judgment. Also, by
failing to respond to Plaintiff’s Request for Admissions, Defendants have admitted the
matters set forth therein. Fed. R. Civ. P. 36(a)(3); Gutierrez v. Cable Equip. Servs.,
Inc., 620 Fed. Appx. 882 (11th Cir. 2015).
2

Page citations to documents in the Court file are to the page number listed in
the CM/ECF header.
3

2

Trustees of the Plan and were responsible for choosing the Plan’s investment options.
(Doc. 21-3 at 21). According to the Plan’s Plan Document, the Trustee “shall invest
and reinvest the Trust Fund without distinction between income or principal” in a
number of listed ways, including but not limited to investment of stocks, other common
trust funds, or real property; by depositing into savings and loan associations; or by
purchasing and selling put and call options. (Doc. 21-3 at 25).
In 2009, Company bank records from Raymond James and Sunshine Bank
established that starting January 28, 2009 through June 6, 2009, McCarthy made a
series of fifteen separate withdrawals from the Plan, totaling $111,624.67, via the
Company’s money market account at Raymond James. (Doc. 21-4 at 18). McCarthy
consulted with Hall, as the Co-Trustee, about the withdrawals from the Plan. (Doc.
21-3 at 6, 15-16). McCarthy transferred the money into the Company’s operating
account at Sunshine Bank and used the Plan’s assets to satisfy the Company’s payroll
obligations, pay Company vendors, and make payments regarding the loans on the
land and building owned by the Company. (Doc. 21-1 at 3 ¶ 9). McCarthy also used
the money to make payments regarding land owned by both McCarthy and Hall in a
separate corporate obligation. (Doc. 21-1 at 3 ¶ 9; Doc. 21-4 at 17). At the time of
these withdrawals, the Plan had twenty-two employee participants, including
McCarthy and Hall.4 (Doc. 21-4 at 18). The final withdrawal, on June 6, 2009, left
the Plan with a zero balance and no assets. (Doc. 21-4 at 19).

Prior to the withdrawals, McCarthy’s account within the Plan had a balance
of $34 and Hall’s account had approximately $23,000. (Doc. 21-4 at 18). The
remainder, some $88,000, was the pension money for other Company employees.
4

3

The

Employee

Benefits

Security

Administration

(“EBSA”)

began

an

investigation into the Company, and in June 2016, McCarthy was prosecuted
criminally for her conduct.

5

(Doc. 21-2 at 1-2).

McCarthy pled guilty to

embezzlement, is serving probation, and has been ordered to make restitution of
$40,306.01. (Doc. 21-2 at 2; Doc. 21-1 at 4 ¶ 13). To date, $71,080.83 has been restored
to the Plan.6 (Doc. 21-1 at 4 ¶ 13). However, the Plan has not been compensated for
the lost earnings and interest during the approximately seven years it was deprived
of the use of the withdrawn funds.

(Doc. 21-2 at 3).

EBSA determined that

$25,253.937 is the amount of lost earnings and interest owed to the Plan as a result of
McCarthy and Hall’s conduct. (Doc. 21-2 at 3).
The Secretary of Labor subsequently filed suit in this Court, alleging that
McCarthy breached her fiduciary obligations as Plan Administrator and that
McCarthy and Hall, through the Company, violated multiple provisions of ERISA,
namely § 403(c)(1), 29 U.S.C. § 1103(c)(1); §§ 404(a)(1)(A)–(B) & (D), 29 U.S.C. §§
1104(a)(1)(A)–(B) & (D); § 406(a)(1)(D), 29 U.S.C. 1106(a)(1)(D); and § 406(b)(1) & (2),

(Doc. 21-4 at 18).
United States v. Andrea Lynn McCarthy, U.S. District Court, Middle District
of Florida (Jacksonville Division), Case No. 3:15-cr-69-J-32JRK (assigned to the
undersigned).
5

At the sentencing hearing in Case No. 3:15-cr-69-J-32JRK, the Court accepted
evidence that as of that date, McCarthy and the Company had restored or offset
$71,080.83 to the Plan. (Doc. 21-2 at 2).
6

The EBSA arrived at this figure by calculating the lost earnings on the
$111,624.67 based on specific withdrawal dates and repayment dates for money that
has been repaid, using the IRS section 6621(a)(2), 26 U.S.C. § 6621(a)(2),
underpayment rate.
7

4

29 U.S.C. § 1106(b)(1) & (2). Defendants participated at first, with the filing of an
answer and affirmative defenses. (Doc. 8) Plaintiff served requests for admissions
on both McCarthy and Hall, but they did not respond.

Plaintiff now moves for

summary judgment. (Doc. 21).
II.

SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate if there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ.
P. 56(a). The moving party bears the initial burden of showing the court that there
are no genuine disputes of material fact. BVS Acquisition Co., LLC v. Brown, 649
Fed. Appx. 651, 658 (11th Cir. 2016) (citing Clark v. Coats & Clark, Inc., 929 F.2d 604,
608 (11th Cir. 1991)). Once the moving party satisfies its burden, the non-moving
party “must then go beyond the pleadings, and . . . designate specific facts showing
that there is a genuine issue for trial.” Barreto v. Davie Marketplace, LLC, 331 Fed.
Appx. 672, 673 (11th Cir. 2009) (citations and quotations omitted). If the non-moving
party fails to respond, the district court may not base the entry of summary judgment
on the mere lack of response and instead must consider the merits of the motion. U.S.
v. One Piece of Real Prop., 363 F.3d 1099, 1101 (11th Cir. 2004).

In doing so,

summary judgment would be appropriate where the record, including “depositions,
documents, electronically stored information, affidavits or declarations, stipulations
(including those made for purposes of the motion only), admissions, interrogatory
answers, or other materials” show that there is no genuine dispute as to any material
fact and that the moving party is entitled to judgment as a matter of law. Fed. R.
Civ. P. 56(a) & (c)(1)(A). A fact is material if it is one that “might affect the outcome
5

of the suit under the governing law.” Furcron v. Mail Ctrs. Plus, LLC, 843 F.3d 1295,
1303 (11th Cir. 2016) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
“A material fact is genuine if the evidence is such that a reasonable jury could return
a verdict for the nonmoving party.” Id. (citations and quotations omitted).
III.

APPLICATION
The Secretary asserts that summary judgment is appropriate because the Plan

in question is an ERISA Plan; McCarthy, Hall, and the Company were Plan
fiduciaries; and McCarthy, with Hall’s approval, made unauthorized distributions
from the Plan to the Company totaling $111,624.67, causing the Plan to engage in
prohibited transactions. In addition, the Secretary submits that McCarthy and Hall,
as fiduciaries of the Plan, are liable for the losses to the Plan, including the lost
earnings and interest calculated by the Secretary.
A.

ERISA Requirements

Section 409(a) of ERISA states:
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 title shall be personally
liable to make good to such plan any losses to the plan
resulting from each such breach . . . and shall be subject to
such other equitable or remedial relief as the court may
deem appropriate, including removal of such fiduciary.
29 U.S.C. § 1109(a). Under ERISA’s statutory framework, the Secretary must
establish that (1) Truss Systems, LLC Profit Sharing Plan was a covered Plan; (2)
McCarthy, Hall, and the Company were fiduciaries; and (3) McCarthy and Hall
breached their fiduciary duties resulting in loss to the Plan.

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1.

The Plan was an ERISA Plan

ERISA defines a covered employee benefit plan to include “employee pension
benefit plan[s].” 29 U.S.C. § 1002(2)(A). An employee pension plan is defined as
“any plan, fund, or program” which is “established or maintained by an employer or
by an employee organization, or both, to the extent that . . . such plan, fund, or program
. . . provides retirement income.” Id.
The Truss Systems, LLC Profit Sharing Plan was a covered ERISA plan. The
Plan was established by the Company for the purpose of offering retirement benefits
to participating employees and was funded by discretionary employee contributions.
(Doc. 21-1 at 2 ¶ 4).
2.

McCarthy, Hall, and the Company were Plan Fiduciaries

Under ERISA, a fiduciary is “anyone . . . who exercises any discretionary control
or authority over the policy’s management, administration, or assets.” Mertens v.
Hewitt Assocs., 508 U.S. 248, 251 (1993) (citing 29 U.S.C. § 1002(21)(A)) (emphasis
added). In other words, a person does not have to be a named fiduciary by the benefit
plan to qualify as an ERISA fiduciary. Id. However, some offices or positions, such
as plan administrator or trustee of a plan, “must by the very nature of [the] position,
have ‘discretionary authority or discretionary responsibility in the administration of
the plan . . . . Persons who hold such positions will therefore be fiduciaries.’” Baker
v. Big Star Div. of the Grand Union Co., 893 F.2d 288, 290 n.2 (11th Cir. 1989) (quoting
29 C.F.R. § 2509.75-8 at D-3 (1988)). In addition, the Supreme Court has held that
an ERISA Plan’s “fiduciary” is defined “not in terms of formal trusteeship, but in
functional terms of control and authority over plans, thus expanding the universe of
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persons subject to fiduciary duties and to damages . . . .” Mertens, 508 U.S. at 262
(emphasis in original).
Here, it is undisputed McCarthy, Hall, and the Company were fiduciaries of the
Plan. McCarthy was a Co-Trustee and the named Plan Administrator on behalf of
the Company. As Plan Administrator, she was responsible for carrying out the daily
responsibilities of administering the Plan. Hall’s position as Co-Trustee of the Plan
also conferred fiduciary status, as the very nature of the position of Co-Trustee
required Hall to “perform one or more [fiduciary] functions.” See 29 C.F.R. § 5509.758 at D-3. Furthermore, pursuant to the Plan Agreement, as Co-Trustee Hall had the
authority to invest the Plan’s assets and confer with McCarthy as Co-Trustee with
regard to the investment of the funds. The Company, as Plan Administrator, is also
a fiduciary to the Plan by the very nature of its named position. Id. In addition,
during all relevant times McCarthy and Hall possessed the authority and discretion
to manage and control the Plan assets based on their functional positions in the
company. See Mertens, 508 U.S. at 262. Thus, the Court finds that McCarthy, Hall,
and the Company were Plan fiduciaries within the meaning of 29 U.S.C. § 1002(21)(A).
3.
McCarthy, Hall,
Fiduciary Duties

and

the

Company

Breached

their

The Secretary asserts that McCarthy, Hall, and the Company breached their
fiduciary obligations in the following two ways: (1) by failing to discharge their duties
with respect to the Plan solely in the interest of the Plan participants and beneficiaries
by making unauthorized distributions from the Plan to the Company totaling
$111,624.67; and (2) by engaging in prohibited transactions, to wit causing the

8

Company to make direct transfers of Plan assets to and for the benefit of parties in
interest.
An ERISA fiduciary must discharge her duties “solely in the interest of the
participants and beneficiaries” for the “exclusive purpose” of “providing benefits to
participants and their beneficiaries” and “defraying reasonable expenses of
administering the plan.”

29 U.S.C. § 1104(a)(1).

Indeed, a fiduciary must make

decisions “with an eye single to the interest of the participants and beneficiaries” and
“avoid placing themselves in a position where their acts as officers or directors of their
corporation will prevent their functioning with the complete loyalty to participants
demanded of them as Trustees of a pension plan.” Deak v. Masters, Mates & Pilots
Pension Plan, 821 F.2d 572, 580-81 (11th Cir. 1987) (quoting Donovan v. Bierwirth,
680 F.2d 263, 271 (2d Cir. 1982), cert. denied, 459 U.S. 1069 (1982)). Fiduciaries are
liable for breach of these duties, and Section 409(a), 29 U.S.C. § 109(a), specifies the
remedies available against them: The fiduciary is personally liable for damages, for
restitution, and for “such other equitable or remedial relief as the court may deem
appropriate,” including removal of the fiduciary. Mertens, 508 U.S. at 252.
In her May 6, 2015 plea agreement entered in case 3:15-cr-69-J-32JRK (Doc.
21-4), McCarthy admitted to a series of prohibited transactions in breach of her ERISA
fiduciary duties. She admitted that as “Plan Trustee” and “Plan Administrator” she
“knowingly embezzled and stole and willfully converted to [her] own use, and the use
of another, moneys funds, credits, and assets of the Plan.” (Doc. 21-4 at 15).
McCarthy also admitted that she caused approximately $111,625.00 to be

9

electronically transferred from the Plan’s trust account into the Company’s money
market account. (Doc. 21-4 at 17). The admissions made in the plea agreement are
corroborated by the Affidavit of Norman Rivera, an employee of the EBSA (Doc. 21-2),
who supervised the investigation of this case. McCarthy admitted that once in the
money market account, “the funds were transferred via intra-banking transfers to the
Company’s operating account.” (Doc. 21-4 at 17). Once in the operating account,
McCarthy admitted to personally penning checks for various Company bills, including
payroll and vendors. (Doc. 21-4 at 17). Also included were checks payable to herself
and checks made payable for mortgage payments on land separately owned by both
McCarthy and Hall. (Doc. 21-4 at 17).
This conduct specifically violated the “Prohibited Transactions” section of
ERISA. 29 U.S.C. § 1106(a) states:
A fiduciary with respect to a plan shall not cause the plan
to engage in a transaction, if he knows or should know that
such transaction constitutes a direct or indirect . . .
(B) lending of money or other extension of credit between
the plan and a party in interest . . . [or the]
(D) transfer to, or use by or for the benefit of, a party in
interest, of any assets of the plan.
As Co-Trustee and Plan Administrator, McCarthy was a “party in interest”
under 29 U.S.C. § 1002(14)(A). By transferring the funds to satisfy various Company
debts, McCarthy violated 29 U.S.C. § 1106(a)(D).

As co-owner of the Company,

McCarthy had a personal financial interest in making sure the Company’s debts were
paid. McCarthy was not authorized to use the Plan’s assets to satisfy the Company’s
business obligations. She was prohibited under both the Plan Agreement and ERISA
10

from transferring the Plan’s assets to the Company’s operating account to satisfy the
Company’s debts.
McCarthy’s conduct also violated 29 U.S.C. § 1106(b)(1), which states that a
fiduciary must not “deal with the assets of the plan in his own interest or for his own
account.” By transferring a portion of the Plan’s assets to pay mortgage payments on
land separately and personally owned by McCarthy and Hall, McCarthy breached her
fiduciary duty. McCarthy also personally penned checks payable to herself. The
complete depletion of the Plan’s assets for the Company’s business purposes and
McCarthy and Hall’s own personal and separate corporate obligation was
unquestionably a series of acts without “an eye single to the interests of the
participants and beneficiaries of the plan.” Deak, 821 F.2d at 580
Under ERISA, Hall’s conferral and/or failure to recognize and prevent
McCarthy from unlawfully withdrawing the Plan’s assets imposes liability on Hall as
a co-fiduciary.

Although it was McCarthy, and not Hall, who was prosecuted for

embezzlement of the Plan’s funds, Hall, by virtue of her status as a co-fiduciary under
29 U.S.C. § 1105, is liable for McCarthy’s breach of fiduciary responsibility. Section
1105(a) of 29 U.S.C. states:
In addition to any liability which he may have under any
other provisions of this part, a fiduciary with respect to a
plan shall be liable for a breach of fiduciary responsibility
of another fiduciary with respect to the same plan in the
following circumstances:
(1) if he participates knowingly in, or knowingly
undertakes to conceal, an act or omission of such other
fiduciary, knowing such act or omission is a breach;

11

(2) if, by his failure to comply with section 1104(a)(1) of this
title in the administration of his specific responsibilities
which give rise to his status as a fiduciary, he has enabled
such other fiduciary to commit a breach;
(3) if he has knowledge of a breach by such other fiduciary,
unless he makes reasonable efforts under the
circumstances to remedy the breach.
By virtue of Hall’s deemed admissions, there is evidence that McCarthy
consulted with Hall about the withdrawals from the Plan. (Doc. 21-1 at 5- 6, 14-16).
Between January 2009 and April 2009, Hall knew that McCarthy withdrew money
from the Plan and that the withdrawn funds would then be used to benefit the
Company. (Doc. 21-3 at 15). As such, Hall participated knowingly in McCarthy’s
breach of her fiduciary duty and is therefore liable under 29 U.S.C. § 1105(a)(1).
Furthermore, there is no evidence that Hall made any reasonable efforts to prevent or
remedy McCarthy’s conduct, as the Plan’s assets were completely depleted by June
2009. (Doc. 21-4 at 19). In fact, the record indicates that McCarthy gave Hall assets
from the Plan for Hall’s personal use. (Doc. 21-3 at 6). Thus, Hall’s knowledge of
McCarthy’s breach coupled with Hall’s failure to make reasonable efforts to remedy
the breach constitutes a violation of 29 U.S.C. § 1105(a)(3), and her use of Plan funds
to pay the separate mortgage obligation violates section 1106(b)(1).
Finally, as a fiduciary of the Plan, the Company violated 29 U.S.C. § 1106(b)(1)
when it used Plan assets to satisfy its own debts and obligations. Section 1106(b)(1)
provides that “[a] fiduciary with respect to a plan shall not deal with the assets of the
plan in his own interest or for his own account.” By using the wrongfully transferred

12

assets for its own general business purposes, the Company engaged in a prohibited
transaction constituting a breach of its fiduciary duty.
The Court, after reviewing the entire summary judgment record, determines
there is no evidence to refute the evidence presented by the Acting Secretary; thus,
there is no genuine issue of material fact which precludes the entry of summary
judgment in favor of the Acting Secretary.
Accordingly, it is hereby
ORDERED:
1.

Plaintiff’s Motion for Summary Judgment (Doc. 21) is GRANTED.

2.

No later than May 5, 2017 the Acting Secretary shall file a proposed form

of judgment.
DONE AND ORDERED in Jacksonville, Florida the 14th day of April, 2017.

k.
Copies:
Counsel of record

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