Solis v. Hutcheson et al

Filing 116

ORDER Granting Summary Judgment 91 , Permanent Injunction and Denying Defendant's Motion for Declaratory Relief 105 . This Court shall retain jurisdiction over the parties and subject matter of this action for the purpose of enforcing this Order. Signed by Judge Edward J. Lodge. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (jp)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

THOMAS E. PEREZ, Secretary of the
United States Department of Labor,
Plaintiff,
Case No.: 1:12-CV-00236-EJL
v.
MATTHEW D. HUTCHESON,
HUTCHESON WALKER ADVISORS
LLC, GREEN VALLEY HOLDINGS
LLC, and the RETIREMENT SECURITY
PLAN AND TRUST, f/k/a PENSION
LIQUIDITY PLAN AND TRUST.

ORDER GRANTING SUMMARY
JUDGMENT, PERMANENT
INJUNCTION AND DENYING
DEFENDANT’S MOTION FOR
DECLARATORY RELIEF

Defendants.

The Secretary of the United States Department of Labor (the "Secretary") has
moved for summary judgment and a permanent injunction permanently barring Matthew
D. Hutcheson from acting as a fiduciary or service provider under the Employee
Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001, et seq. ("ERISA") and
ordering Jeanne B. Bryant of Receivership Management, Inc. to continue to serve as the
independent fiduciary to RSPT and the ERISA-covered plans that RSPT and Hutcheson
managed (the "Plans") (Dkt. 91). Hutcheson was granted an extension of time to respond
and he filed his response on June 29, 2016. The Secretary filed his reply brief on July 14,
2016. Hutcheson filed a Motion for Declaratory Relief (Dkt. 105) on July 11, 2016 and
that motion is also ripe for this Court’s review.

ORDER - 1

In the interest of avoiding further delay, and because the Court conclusively finds
that the decisional process would not be significantly aided by oral argument, this motion
shall be decided on the record before this Court without oral argument. Dist. Idaho Loc.
Civ. R. 7.1(d)(2)(ii). Based on the following findings of facts and conclusions of law, the
Court finds as follows:
I.

Summary Judgment and Permanent Injunction Standard:
The legal standards for summary judgment are well-established. Fed. R. Civ. P.

56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 247-48 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986).
The Secretary has authority to seek relief from breaching fiduciaries and those
who knowingly participate in their breaches under ERISA sections 409(a) and 502(a)(2)
& (5), 29 U.S.C. §§ 1109(a) and 1132(a)(2) & (5), to restore plan losses, to recover unjust
profits and to obtain other remedial and equitable relief as the court may deem
appropriate. See Herman v. S. Carolina Nat. Bank, 140 F.3d 1413, 1425-26 (11th Cir.
1998); Solis v. Couturier, No. 08-2732, 2009 WL 1748724 (E.D. Cal. June 19, 2009).
Courts have repeatedly found that, under ERISA's broad remedial provisions, injunctive
relief is appropriate. See, e.g., Donovan v. Mazzola, 716 F.2d 1226, 1238-39 (9th Cir.
1983), cert. denied, 464 U.S. 1040 (1984). Appropriate injunctive relief includes
removing existing plan fiduciaries and appointing independent fiduciaries to carry out the
proper administration and management of benefit plans. Mazzola, 716 F.2d at 1238-39;

ORDER - 2

Solis v. Vigilance, Inc., No. C-08-05083, 2009 WL 2031767, at *3 (N.D. Cal. July 9,
2009); Chao v. Zoltrix, No. C-07-00610, 2007 WL 2990429, at *3 (N.D. Cal. Oct. 11,
2007). It also includes permanent enjoining breaching fiduciaries from ever serving as
fiduciaries or service providers to ERISA plans. See Chao v. Malkani, 452 F.3d 290,
293-94 (4th Cir.2006) (breaching fiduciaries removed from all positions of authority);
Reich v. Lancaster, 55 F.3d 1034, 1054 (5th Cir. 1995); Martin v. Feilen, 965 F.2d 660
(8th Cir. 1992) (finding an abuse of discretion for district court not to issue injunction
barring individuals from providing fiduciary or other services to ERISA plans); Beck v.
Levering, 947 F.2d 639, 641 (2d Cir. 1991); Delgrosso v. Spang & Co., 769 F.2d 928,
937 (3d Cir. 1985).
II.

Findings of Fact:
Based on the records in this case, the Court finds as follows:
1.

This Court has jurisdiction and venue is proper. Hutcheson resides in

Idaho. ERISA § 502(e)(1) & (2), 29 U.S.C. §§ 1132(e)(1) & (2).
2.

On April 10, 2012, Matthew D. Hutcheson was indicted by the Attorney

General of the United States in this Court on wire fraud theft from employee pension
benefit plans.
3.

Shortly before the indictment, Hutcheson and Hutcheson Walker Advisors

LLC ("HWA") had admitted, on an annual return that ERISA requires to be submitted to
the United States (a document called a "Form 5500"), to having taken part in a prohibited
transaction in violation of ERISA section 406, 29 U.S.C. § 1106.

ORDER - 3

4.

Between April 3, 2013, and April 15, 2013, Hutcheson was tried by a

criminal jury in this Court. United States v. Hutcheson, 1:12-cr-00093-WFN (D. Idaho).
In its case-in-chief, the Attorney General presented 25 witnesses and over 200 exhibits.
5.

On April 15, 2013, the jury returned a verdict finding Hutcheson guilty

beyond a reasonable doubt of 17 felony counts, including five counts of wire fraud
respecting RSPT.
6.

On July 31, 2013, the Court sentenced Hutcheson to 210 months of

incarceration and three years of supervised release, during which time Hutcheson "shall
not be employed in any capacity related to fiduciary duties or financial transactions nor
shall defendant perform any unpaid or volunteer activities in this area during the term of
supervised release without the permission of the probation officer." SOF ¶ 11.
Hutcheson was also ordered to repay RSPT (through the Independent Fiduciary)
$3,276,000. Id.
7.

On August 7, 2013, Hutcheson filed a notice of appeal to the U.S. Court of

Appeals for the Ninth Circuit. United States v. Hutcheson, No. 13-30218 (9th Cir.).
Crim. Dkt. 148. Following briefing, on May 7, 2015, the Ninth Circuit heard oral
argument on the appeal. On May 15, 2015, the Ninth Circuit affirmed this Court's
judgment and sentencing. On June 1, 2015, Hutcheson moved for rehearing. On July 9,
2015, the Ninth Circuit denied rehearing. App. Dkt. 62. On July 23, 2015, the Ninth
Circuit issued its mandate to this Court. Although Hutcheson continues to maintain in this
civil action there was legal error regarding rulings in his criminal case, such arguments

ORDER - 4

are not relevant to this civil proceeding and are rejected based upon the Ninth Circuit’s
affirmation of his convictions and sentence. There is no indication in the record that a
writ of certiorari, if requested, was ever granted so the Court finds all direct appeals have
concluded.
8.

The Court notes that Hutcheson filed a 28 U.S.C. Section 2255 writ of

habeas corpus motion on October 3, 2016. , Hutcheson v United States, 1:16cv442 (D.
Idaho). The Court does not find the filing of a writ of habeas corpus does not justify
continuing the stay in this matter and the Court will lift the stay previously entered.
9.

Meanwhile, on November 14, 2013, Green Valley Holdings LLC ("GVH")

was administratively dissolved, and, on February 21, 2014, HWA forfeited its existence.
10.

Throughout this time -- for nearly four years -- the Independent Fiduciary

has managed RSPT and the Plans without objection.
11.
III.

Hutcheson's estimated release date is October 28, 2028.

Procedural Background
On May 15, 2012, the Secretary filed in this Court a civil complaint against

Hutcheson, HWA, and GVH alleging prohibited transactions and breaches of fiduciary
duties. Dkt. 1. The Retirement Security Plan and Trust, f/k/a Pension Liquidity Plan and
Trust was also named in the complaint as a Rule 19 party. Along with that complaint, the
Secretary filed an application for temporary restraining order and preliminary injunction.
Dkt. 2. On May 16, 2012, the Court granted the motion and entered a temporary
restraining order, removing Hutcheson, HWA, and GVH from any fiduciary positions

ORDER - 5

and appointing the Independent Fiduciary to have exclusive authority and control over
RSPT and the Plans, under the Employee Retirement Income Security Act of 1974, 29
U.S.C. §§ 1001, et seq. ("ERISA"). Dkt. 6. In that same order, the Court ordered the
parties to promptly submit any briefing respecting a preliminary injunction. Id.
On June 13, 2012, the Court entered a preliminary injunction. Dkt. 16. On July
13, 2012, Hutcheson filed his answer, objecting without elaboration to many of the
Secretary's contentions, but admitting that he was a fiduciary to RSPT and the Plans,
admitting that he had committed a prohibited transaction, and stipulating to the
appointment of an independent fiduciary. Dkt. 24. On July 17, 2012, the Attorney
General moved to intervene and stay discovery. Dkt. 26. On September 9, 2012, the
Court granted the motion to intervene and stayed the case pending resolution of the
criminal proceedings. Dkt. 31.
Because HWA and GVH are now defunct, the Secretary has dismissed his case
against them in a separate filing. Dkt 88.
The Court finds there are no genuine issues of material fact regarding the need for
a permanent injunction in this case. While Hutcheson continues to dispute facts related to
his criminal proceedings, the alleged disputed facts are not relevant to this Court’s
finding that it is undisputed that Henderson took part in a prohibited transaction in
violation of ERISA section 406, 29 U.S.C. section 1106. This admitted prohibited
transaction is a breach of fiduciary duties. Based on Hutcheson’s admissions to
breaching fiduciary duties to RSPT and its ERISA covered plans and the entire record in

ORDER - 6

this matter, the Court finds the requested relief by the Secretary is appropriate and
Hutcheson should not be allowed to serve as an ERISA fiduciary in the future. The Court
finds the record supports as a matter of law the granting of the motion for summary
judgment and request for a permanent injunction. Further, the Court finds Hutcheson’s
Motion for Declaratory Relief is not founded in the law and is deemed moot based upon
the granting of the Secretary’s Motion for Summary Judgment.

ORDER
Based upon the foregoing and the record in this case, and for good cause shown,
the Court LIFTS the stay based on the conclusion of the direct appeals in Hutcheson’s
criminal case, GRANTS the Secretary's Motion for Summary Judgment and Permanent
Injunction (Dkt. 91) and DENIES AS MOOT Hutcheson’s Motion for Declaratory
Relief (Dkt. 105). The Court further orders:.
1.

Hutcheson (including any alter-egos, agents, or other servants) is

permanently removed from all positions with RSPT and the Plans and is permanently
enjoined from acting as a fiduciary on behalf of any ERISA-covered benefit plan.
2.

Jeanne B. Bryant of Receivership Management, Inc. shall continue to serve

as the independent fiduciary to RSPT (the "Independent Fiduciary"), and shall continue
also to serve as the successor trustee and plan administrator of RSPT and the Plans and to
have full and exclusive fiduciary authority over the assets within RSPT's and the Plans'

ORDER - 7

custody or control. The Independent Fiduciary's ultimate goal shall be to wind down
RSPT and the Plans and make final distributions to participants and beneficiaries.
3.

Hutcheson and his fiduciaries, agents, employees, service providers,

depositories, banks, accountants, attorneys, and any other party acting in concert with
him or at his direction, are permanently enjoined and ordered to produce to the
Independent Fiduciary any books, records, or documents that relate to the administration
and operation of RSPT and the Plans, and to comply in good faith with the terms of this
Order.
4.

Hutcheson and his fiduciaries, agents, employees, service providers,

depositories, banks, accountants, attorneys, and any other party acting in concert with
him or at his direction, are permanently enjoined from expending, transferring,
hypothecating, secreting, or otherwise obligating or disposing of any assets of RSPT's or
the Plans' and from destroying, altering, or secreting any of RSPT's or the Plans' books,
records, or documents.
5.

Hutcheson shall require his officers, employees, attorneys, agents, advisers,

and representatives, and all persons who serve in any capacity that involves decision
making authority for them, to act and discharge their duties in full compliance with the
terms of this Order and shall continue to require that they not take any action in the
discharge of such duties that is inconsistent with the terms of this Judgment and Order.
Hutcheson shall also continue to require his officers, employees, attorneys, agents,
advisers, representatives, and all persons who serve in any capacity that involves decision

ORDER - 8

making authority for them, as a condition of maintaining his relationships with them, to
continue to cooperate fully with the Independent Fiduciary in the performance of the
Independent Fiduciary's duties and responsibilities. In furtherance thereof, Hutcheson
shall provide a copy of this Order to all of his officers, employees, attorneys, agents,
advisers, representatives, and all persons who serve in any capacity that involves decision
making authority for them, within ten (10) days after the entry of this Order.
6.

The Independent Fiduciary shall continue to have exclusive responsibility

and authority to control and manage all assets of RSPT's and the Plans' and all assets
within RSPT's and the Plans' custody or control, including, but not limited to:
a.

The authority to exercise all fiduciary responsibilities relating to

RSPT and the Plans, including, but not limited to, the responsibility to act as the
administrator of RSPT and the Plans; provided, however, the fiduciary
responsibilities allocated to and reserved by an RSPT sponsor with respect to the
purchase, holding, or sale of any qualifying employer securities" within any of the
Plans shall continue to be the sole responsibility of such sponsor;
b.

Any and all authority given to trustees under the terms of the

documents governing RSPT and the Plans;
c.

Authority to amend the documents governing RSPT and the Plans;

d.

The exclusive authority to appoint, replace, and remove such

administrators, trustees, attorneys, agents, and service providers as the
Independent Fiduciary shall, in the Independent Fiduciary's sole discretion,

ORDER - 9

determine are necessary to aid the Independent Fiduciary in the exercise of the
Independent Fiduciary's powers, duties, and responsibilities to RSPT and the
Plans;
e.

Authority to wind down RSPT and the Plans and make final

distributions to participants and beneficiaries; and,
f.

Except as provided herein, the authority to delegate to such

administrators, trustees, attorneys, agents, and service providers such fiduciary
responsibilities as the Independent Fiduciary shall determine appropriate. The
Independent Fiduciary may not, however, delegate the authority to appoint,
replace and remove such administrators, trustees, attorneys, agents, and service
providers or the responsibility to monitor the activities of RSPT's and the Plans'
administrators, trustees, attorneys, agents, and service providers.
7.

The Independent Fiduciary shall continue to have full access to all

documents, books, records, personnel, files, and information of whatever type or
description in the possession, custody, or control of RSPT and the Plans. In addition, the
Independent Fiduciary shall continue to have full access to all documents, books, records,
personnel, files and information of whatever type or description relating to RSPT and the
Plans in the possession or control of Hutcheson or his fiduciaries, agents, employees,
service providers, depositories, banks, accountants, attorneys, and any other party acting
in concert with or at his direction.

ORDER - 10

8.

The Independent Fiduciary shall use reasonable efforts to maintain a bond

that conforms to the requirements of ERISA section 412, 29 U.S.C. § 1112. The cost of
such bond or bonds shall be paid by the RSPT and the Plans.
9.

The Independent Fiduciary shall not be discharged or terminated except on

order by the Court. Upon termination or discharge of the Independent Fiduciary, the
Secretary may, if necessary, recommend to the Court a successor independent fiduciary
for appointment.
10.

Subject to the terms of this Order and ERISA, the Independent Fiduciary

shall continue to delegate administrative activities to individuals or entities with the
capability to perform those activities in compliance with her fiduciary obligations under
ERISA.
11.

Concerning any activities which the Independent Fiduciary performs, the

Independent Fiduciary shall continue to be free to consult with the Secretary, the Internal
Revenue Service, other federal, state, and local governmental agencies, and any other
person or entity that the Independent Fiduciary believes appropriate in the conduct of the
Independent Fiduciary's duties, including attorneys, accountants, actuaries, and other
service providers.
12.

The Independent Fiduciary shall continue to cooperate fully with the

Secretary in the exercise of the Secretary's enforcement responsibilities under ERISA,
inter alia, by promptly providing such documents, information, and persons under the
Independent Fiduciary's control as the Secretary from time to time may request. Nothing

ORDER - 11

herein shall be construed to limit the rights the Secretary otherwise enjoys of access to
documents, information, or persons or to waive or restrict the exercise by the Independent
Fiduciary and any individual of his or her constitutional rights.
13.

The payment of administrative expenses and all fees to the Independent

Fiduciary and the Independent Fiduciary's assistants, attorneys, accountants, actuaries
and other necessary service providers are to be continued to be considered priority
administrative expenses of RSPT's and the Plans' and its related entities, superior to any
other class of expense or obligation of RSPT's and the Plans' or its related entities and the
Independent Fiduciary's second priority is to be the payment of legitimate claims.
14.

The terms of the documents governing RSPT and the Plans are hereby

amended to include the terms of this Order. This Order shall supersede any and all other
provisions in any documents governing RSPT and the Plans that are inconsistent with the
terms of this Order including, but not limited to, any plan documents, trust agreements
and/or shareholder agreements.
15.

RSPT's and the Plans' participants and beneficiaries of deceased

participants shall retain the right to access information about their accounts by telephone
and/or internet, and to direct the investment of their accounts, all in accordance with such
of RSPT's and the Plans' rules and procedures as may be duly established or modified
from time to time by the Independent Fiduciary.
16.

The reasonable expenses incurred in the administration of RSPT and the

Plans, including but not limited to the reasonable compensation of attorneys, accountants,

ORDER - 12

consultants or others retained in connection with the administration of RSPT and the
Plans and their termination, shall, in such manner as the Independent Fiduciary deems
appropriate, continue to be charged to and paid by RSPT and the Plans and allocated
among participants.
17.

RSPT and the Plans are authorized and directed to continue to pay the

reasonable compensation, fees, and expenses of Ms. Bryant and such person and firms
retained by the Independent Fiduciary in the performance of services to or for RSPT and
the Plans, subject to the following procedures:
a.

Before causing RSPT and the Plans to pay compensation, fees or

expenses to the Independent Fiduciary or any person or firms retained by the
Independent Fiduciary, the Independent Fiduciary shall provide written notice of
such compensation, fees or expenses, by filing a fee notice with this Court and by
serving a copy to the Secretary;
b.

The fee notice shall include a detailed invoice itemizing the

compensation, fees and expense to be paid by RSPT and the Plans;
c.

If within fifteen (15) days after filing of a fee notice, no objection to

the fee notice or payment by RSPT and the Plans of the compensation, fees, or
expenses described therein is filed with this Court, such compensation, fees, and
expenses shall be deemed reasonable expenses of the RSPT's and the Plans' and
shall be paid by the RSPT and the Plans without further action or approval of this
Court;

ORDER - 13

d.

If an objection to a fee notice or payment by RSPT and the Plans of

the compensation, fees, or expenses described therein is filed with this Court,
within fifteen (15) days after filing of such fee notice, the Court shall hold a
hearing on the matter and the compensation, fees, expenses described in the fee
notice shall be paid by RSPT and the Plans only to the extent approved by the
Court; and
e.

This paragraph shall not apply to fees and expenses of the funds

custodian or the third party administrator generated in the course of its
performance under its pre-petition service agreements.
18.

Nothing in this and Order shall be construed:
a.

To limit the powers and responsibilities of any officer or employee

of the United States under ERISA or any other law, or
b.

To relieve RSPT or the Plans, or any of their administrators,

fiduciaries, officers, trustees, custodians, attorneys, agents, employees, advisers,
providers of goods or services, consultants, representatives in any capacity, or
persons who serve in any capacity that involves decision making authority or
custody or control of the moneys, funds or assets of RSPT's or the Plans' of any
duty, responsibility, or liability under ERISA or any other law.
19.

ORDER - 14

This Order is a resolution as to Defendant Hutcheson on all claims.

20.

This Court shall retain jurisdiction over the parties and subject matter of

this action for the purpose of enforcing this Order.

DATED: December 15, 2016

_________________________
Edward J. Lodge
United States District Judge

ORDER - 15