Samson v. Manlove et al
Filing
77
ORDER ADOPTING FINDINGS AND RECOMMENDATIONS in case 9:13-cv-00183-DLC-JCL - granting (17) Motion for Summary Judgment; ORDER ADOPTING FINDINGS AND RECOMMENDATIONS in case 9:13-cv-00212-DLC-JCL - granting (18) Motion for Summary Judgment. Signed by Judge Dana L. Christensen on 9/30/2014. Associated Cases: 9:13-cv-00183-DLC-JCL, 9:13-cv-00212-DLC-JCL (APP, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
MISSOULA DIVISION
RICHARD J. SAMSON, duly appointed
Chapter 7 Trustee, et aI.,
Plaintiff,
CV 13-183-M-DLC-JCL
(lead case)
(consolidated with)
CV-13-212-M-DLC-JCL
vs.
GEORGE MANLOVE, an individual, and
PAUL NISBET, an individual, as
Officers and Directors ofVann's Inc.; and
JOHN DOES 1-10,
Defendants.
ORDER
FILED
SEP 3,.0201;
RICHARD J. SAMSON, duly appointed
Chapter 7 Trustee,
Clerk, u.s. District Court
District Of Montana
Missoula
Plaintiff,
vs.
GEORGE MANLOVE, JILL
MANLOVE, PAUL NISBET, ROB
STANDLEY, and MARK HOPWOOD,
individuals; GMRP, LLC; JPEG, LLC;
GNlP, LLC; PAINTED SKY, LLC; and
JOHN DOES 1-10,
Defendants.
Plaintiff Richard J. Samson (''the Trustee"), trustee for the Chapter 7 estate
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ofVann's Inc. ("Vann's"), asserts claims against Defendants for breach of
corporate duties and breach of fiduciary duties pursuant to the Employee
Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq.l
The Trustee moves for partial summary judgment on the issue of his standing to
pursue the ERISA claims. Defendants George Manlove and Paul Nisbet
("Defendants") assert that the Trustee lacks standing.
United States Magistrate Judge Jeremiah C. Lynch issued findings and
recommendations on June 3, 2014, recommending the Court grant the Trustee's
motion for partial summary judgment. Defendants timely filed objections and are
therefore entitled to de novo review ofthe specified findings and
recommendations to which they object. 28 U.S.C. § 636(b)(1). The portions of
the findings and recommendations not specifically objected to will be reviewed for
clear error. McDonnell Douglas Corp. v. Commodore Bus. Mach., Inc., 656 F.2d
1309, 1313 (9th Cir. 1981).
For the reasons stated below, this Court adopts Judge Lynch's findings and
recommendations in full. The parties are familiar with the factual and procedural
background of this case, so it will not be repeated here.
1 Following the commencement ofthis action, the Trustee filed an adversary proceeding
against Defendants in the United States Bankruptcy Court for the District of Montana. That
adversary proceeding has since been withdrawn by the Trustee and consolidated with this action.
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I. Defendants' Objections
A. Vann's Fiduciary Status as the Plan Administrator
Defendants object to Judge Lynch's finding that Vann's was an ERISA
fiduciary because it possessed authority over the employee stock ownership plan
("ESOP") by its designation as the plan administrator. 2 Defendants argue that
designated plan administrators are not ERISA fiduciaries unless they qualify
through a functional test. This test, as maintained by Defendants, requires
designated plan administrators to actually exercise discretionary authority over the
plan to qualify as fiduciaries. Thus, Defendants argue, because Vann's did not
actually exercise authority over the plan, the Trustee, as Vann' s successor in
interest, was not a plan fiduciary and does not have standing to pursue the ERISA
claims. Defendants are mistaken.
Under ERISA,
[A] person is a fiduciary with respect to a plan to the extent (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, ... or (iii)
2 Section 704(a)11 of the Bankruptcy Code provides that if a debtor is serving as plan
administrator when it files for bankruptcy, the bankruptcy trustee shall continue to perfonn the
duties of the plan administrator. 11 U.S.C. § 704(a)(11). Further, a bankruptcy trustee serving as
a plan administrator who qualifies as an ERISA fiduciary has standing to pursue claims on behalf
of the ERISA plan participants. See McLemore v. Regions Bank, 682 F.3d 414,419-421 (6th
Cir.2012). Thus, here, if the Trustee qualifies as an ERISA fiduciary, then he has standing to
pursue the ERISA claims.
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he has any discretionary authority or discretionary responsibility in
the administration of such plan.
29 U.S.C. § 1002(21)(a).
Thus, plan administrators are fiduciaries if they: (1) exercise discretionary
authority or control over the plan; or (2) they possess discretionary authority or
responsibility over management of the plan. Contrary to Defendants' argument,
exercise of discretionary authority is only one way for plan administrators to
qualify as fiduciaries. See Dall v. Chinet Co., 33 F. Supp. 2d 26,38-39 (D. Me.
1998). Mere possession of discretionary authority or responsibility by plan
administrators is also sufficient to establish fiduciary status. Id. at 39; 29 U.S.C. §
1002(21 )(a)(iii).
Here, the ESOP names Vann's as the plan administrator and its fiduciary.
In addition to this designation, the ESOP gives Vann's discretionary authority and
responsibility over the plan by allowing Vann's to: (1) appoint members of the
ESOP's administrative committee ("the Committee"); (2) review the performance
of the members of the Committee; and (3) amend or terminate the ESOP. Thus,
Judge Lynch is correct that Vann's qualifies as an ESOP fiduciary.
Defendants challenge Judge Lynch's finding that designated plan
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administrators automatically qualify as plan fiduciaries and cite3 multiple cases in
support of this challenge. The Court acknowledges that case law is far from clear
on this issue. Compare Robbins v. First Am. Bank ofVirginia, 514 F. Supp. 1183,
1189 (N.D. Ill. 1981) (fmding that some positions, such as plan administrators, are
by definition fiduciaries because these positions inherently require discretionary
fiduciary responsibilities) (citing 29 C.F.R. § 2509.75-8), with Cerasoli v. Xomed,
Inc., 47 F. Supp. 2d 401, 407-408 (W.D.N.Y. 1999) (finding that a plan
administrator's fiduciary status hinges on the amount of discretion given to the
plan administrator under the plan, not the individual's designation as the plan
administrator). However, the Court finds that these cases do not address the issue
of standing and are inapposite to the issue in this case: whether the Trustee, sitting
in the place ofVann's, is a fiduciary under the ESOP and thus has standing to
bring the ERISA claim. As stated above, in addition to being the designated plan
administrator and fiduciary, Vann's possessed discretionary authority and
responsibility over the ESOP. Thus, regardless ifVann's established its fiduciary
status through its designation as the plan administrator, or through the
3 The Court notes that Defendants fail to use pinpoint citations throughout the entirety
their brief. In addition to the frustration that this presents for the Court, these omissions are in
violation ofthis district's local rules. Local Rule of Procedure 1.5(c) requires "[p]inpoint citation
to paragraphs or pages of cases and to sections of statutes or acts ...." All future filings in this
Court must comply with Local Rules.
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discretionary authority and responsibility bestowed upon it by the plan, Vann's is
a fiduciary under the ESOP. Judge Lynch correctly detennined that the Trustee
has standing to bring the ERISA claims.
B. Exercise of Authority
Defendants object to Judge Lynch's alternative finding that Vann's was a
fiduciary because it exercised discretionary authority and control over the ESOP
by appointing the Committee to administer the ESOP. Defendants contend that
the Committee, and not Vann' s, actually exercised authority and control over the
plan and Judge Lynch erroneously conflates Vann's with the Committee.
Therefore, according to Defendants, Vann's is not a fiduciary to the ESOP. Again,
Defendants are mistaken.
Section 18 of the ESOP expressly names both the Board of Directors and
the Committee as fiduciaries under the ESOP. Further, the ESOP provides that
"[t]he Board of Directors shall have the following duties and responsibilities in
connection with the administration of the Plan: ... [m]aking decisions with
respect to the selection, retention or removal of ... the Committee." (Doc. 28-1 at
65.) Case law is clear that "a corporation acts through its board of directors to
effectuate is corporate duties." In re Enron Corp. Securities, Derivative & ERISA
Litig., 284 F. Supp. 2d 511, 660 (S.D. Tex. 2003) (citing Curtiss-Wright Corp. v.
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Schoonejongen, 514 U.S. 73, 80-81 (1995). Here, it is undisputed that Vann's,
acting through its Board of Directors, appointed Defendants to the Committee.
Therefore, Vann's exercised its authority and control over the ESOP by appointing
the Committee members. Accordingly, Judge Lynch is correct that the Trustee, as
Vann's successor in interest, has standing to bring the ERISA action.
There being no clear error in any of the remaining findings and
recommendations,
IT IS ORDERED that Judge Lynch's Findings and Recommendations (Doc.
42) are ADOPTED IN FULL.
IT IS FURTHER ORDERED that Plaintiffs motion for partial summary
judgment (Doc. 17) is GRANTED.
Dated this
30-& day of September 2
1 .
Dana L. Christensen, Chief Judge
United States District Court
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