Browe et al v. CTC Corporation et al

Filing 221

OPINION AND ORDER Regarding Post-Trial Issues. Signed by Judge Christina Reiss on 10/18/2018. (pac) Filing date corrected on 10/19/2018 (jlh).

UNITED STATES DISTRICT COURT
FOR THE
DISTRICT OF VERMONT
DONNA BROWE, TYLER BURGESS,
BONNIE JAMIESON, PHILIP JORDAN,
LUCILLE LAUNDERVILLE, and
THE ESTATE OF BEYERL Y BURGESS,
Plaintiffs,

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V.

CTC CORPORATION and
BRUCE LAUMEISTER,
Defendants.

Case No. 2:15-cv-267

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OPINION AND ORDER REGARDING POST-TRIAL ISSUES
In this action, Plaintiffs Donna Browe, Tyler Burgess, Bonnie Jamieson, Philip
Jordan, Lucille Launderville, and the Estate of Beverly Burgess (collectively,
"Plaintiffs") assert Defendants CTC Corporation ("CTC") and Bruce Laumeister
(collectively, "Defendants") violated the Employee Retirement Income Security Act of
1974, 29 U.S.C. §§ 1001-l 191c ("ERISA").
After a multi-day bench trial, the court issued Findings of Fact and Conclusions of
Law dated June 22, 2018 (the "6/22/18 Decision"). In its 6/22/18 Decision, the court
granted Plaintiffs thirty days to specify their requested relief on the counts of their
Second Amended Complaint on which they prevailed. The court granted Defendants
thirty days thereafter to oppose Plaintiffs' request and to specify the contribution and
indemnification they seek from Plaintiff Launderville. The parties' supplemental briefing
was completed on August 15, 2018.
In their Supplemental Post-Trial Memorandum, Plaintiffs respond to the court's
6/22/18 Decision as follows. First, they contend that the court erred in making certain
findings of fact and reaching certain conclusions of law, including failing to find that they
asserted claims on behalf of CTC's 1997 deferred compensation plan (the "Plan").

Second, they allege that they are entitled to a payment of benefits because their benefits
are "nonforfeitable" under ERISA. Third, they assert the court should find Plaintiff
Launderville has no responsibility to indemnify Defendant Laumeister or to contribute to
any recovery on behalf of the Plan. And fourth, they allege they are entitled to
substantial statutory penalties against Defendants for their failure to comply with
ERISA's reporting and disclosure requirements.
Defendants oppose Plaintiffs' requests, arguing that they have failed to comply
with the court's request for a specification of the relief they seek on the counts on which
they prevailed and instead essentially seek untimely reconsideration of the court's
6/22/18 Decision.

I.

Factual and Procedural Background.
After adequate time for discovery, the court held a bench trial in both December of

2017 and March of 2018 at which both parties focused their efforts towards establishing
or negating whether the Plan was a nonqualified "top hat" plan under ERISA. They
further disputed whether Plaintiff Launderville was a Plan Administrator and, if so,
whether she was responsible for fiduciary violations of the Plan.
Prior to the court's bench trial, the parties were permitted to file proposed findings
of fact. Both parties submitted proposals. After trial, the parties were permitted to file
post-trial memoranda which were filed on or before March 26, 2018. The court thus
finds that the parties had ample time to address both factual and legal issues.
Plaintiffs' Second Amended Complaint describes their claims as follows:
This is an action arising under [ERISA] based on Defendants' wrongful
denial of benefits to the Plaintiffs, participants and beneficiaries of one
"CTC Deferred Compensation Plan" (the Plan). Rather than paying
Plaintiffs the benefits they were and are owed under the Plan, Defendants
CTC Corporation and Laumeister have, instead, raided the funds they were
charged with holding in trust, and spent the money for their own purposes.
These Defendants-fiduciaries under the meaning ofERISA-violated
their statutorily prescribed duties by perpetrating this unlawful scheme.
Defendants have also violated ERISA by, inter alia, maintaining a Plan
with multiple illegal terms, failing to provide accountings to Plaintiffs
under the Plan as required by law, and paying benefits to certain other Plan
2

participants, but not to the Plaintiffs (ERISA does not permit cherry picking
favored employees to receive benefits, while forcing others to go without).
(Doc. 105 at 1-2.)
In the description of the "parties," Plaintiffs are not identified as asserting claims
on the Plan's behalf. The Second Amended Complaint contains no allegations regarding
vesting or "nonforfeitable" benefits.
In Count I of their Second Amended Complaint, Plaintiffs allege a "Denial of
Benefits" claim and assert "[t]he failure and refusal to provide Plaintiffs the CTC Plan
benefits is a violation ofERISA, 29 U.S.C. § l 132(a)(l)(B)" and "[a]s a result of this
failure and refusal, Plaintiffs ... have suffered a denial of benefits and seek to be
awarded their benefits with interest and reasonable attorneys' fees." Id. at 14-15, ,r,r 8081. The court decided Count I in Defendants' favor, concluding that Plaintiffs failed to
establish their entitlement to benefits in accordance with the Plan's terms.
Count II seeks a declaratory judgment based upon Defendant Laumeister's alleged
disavowal of any obligations under the Plan "to provide the Plaintiffs with Plan benefits"
and requests an order to "enforce their rights under the terms of the Plan and to clarify
their rights to future benefits under the Plan, pursuant to ERISA[.]" Id. at 16-17, ,r,r 87,
94. The court denied this request as part of its 6/22/18 Decision because Plaintiffs did
not qualify for benefits under the terms of the Plan, but nonetheless granted Plaintiffs a
post-trial opportunity to specify their requested relief in conjunction with the claims on
which they prevailed.
In Count III, Plaintiffs allege "Fiduciary Violations," asserting Defendants must
"make good to the Plan all losses caused by breaches of their fiduciary duties, to restore
to the Plan all profits made through the use of Plan assets and for all other relief
permissible under ERISA[.]" Id. at 18-19, ,r 107. In Count IV, Plaintiffs allege
"Additional Fiduciary Violations" in the form of an "Illegal Plan" which they claim is a
"violation of [Defendant Laumeister's] fiduciary obligations owed to Plaintiffs." Id. at
19-20, ,r 111. They ask that "all profits ofLaumeister and CTC made through use of Plan
assets must be disgorged, in addition to other relief permissible under ERISA" and
3

further request that Defendants "make good to the Plan all losses caused by breaches of
their fiduciary duties, [and] to restore to the Plan all profits made through the use of Plan
assets[.]" (Doc. 105 at 20-21, ,r,r 113-14.)
In Count V, Plaintiffs allege claims of self-dealing, asserting Defendants "dealt
with Plan assets in their own interest and/or exchanged property or extended credit from
Plan assets for their own use and benefit in violation of ERISA[]" and favored "certain
other employees[] [by] paying them Plan assets instead of the Plaintiffs[.]" Id. at 21,

,r,r 118-19.

They request Defendants "make good to the Plan all losses caused by

breaches of their fiduciary duties, which remain unpaid; to restore to the Plan all profits
made through the use of Plan assets and for all relief permissible under ERISA[.]" Id. at
22,

,r 123.

In Count VI, Plaintiffs allege Defendants failed to comply with ERISA's

reporting and disclosure requirements and ask the court to award "$100 per day to each
Plaintiff, from the date of each such violation, together with all other relief permissible
under ERISA." Id. at 23, ,r 127.
In their Prayer for Relief, Plaintiffs ask the court to order repayment to the Plan of
an amount necessary to make good all losses to the Plan caused by Defendants' breaches
of their fiduciary duties and to restore all profits made through Defendants' use of Plan
assets.
The court granted judgment in Plaintiffs' favor on Counts III through V, finding
that Defendant Laumeister and Plaintiff Launderville, as Plan Administrators, breached
their fiduciary duties to Plan Participants and beneficiaries. With regard to Count VI, the
court also granted judgment in Plaintiffs' favor, finding that Defendant Laumeister and
Plaintiff Launderville violated ERISA' s reporting and disclosure requirements. The court
granted judgment in Defendants' favor on the remaining counts and on their counterclaim
seeking a right of contribution and indemnification from Plaintiff Launderville. The
court "declined to award attorney's fees to either party at this time." (Doc. 216 at 62.)
Because at trial Plaintiffs did not address the issue of vesting, did not testify that
they were asserting claims on the Plan's behalf, identified no profits made by the Plan,
and identified no prejudice or other harm ( other than in proving their claims) which they
4

had allegedly suffered as a result of noncompliance with ERISA's reporting and
disclosure requirements, the court could not adequately discern the relief they requested.
Their claims appeared targeted solely to ensuring Plaintiffs received benefits under the
Plan without regard to the rights of other Plan Participants. Although they admitted they
did not qualify for benefits in accordance with the plain language of the Plan, they did not
address any alternative basis for their receipt.
Defendants, in tum, asked that Plaintiff Launderville be held liable for
contribution and indemnification, but did not address the amount or apportionment of
liability in the event the court concluded the Plan was not a "top hat" plan.
The parties have now completed their post-trial briefing but certain supporting
evidence for their competing requests remains absent from the record. The court treats
this as a failure of proof except where it would defeat ERISA' s purposes to do so.

II.

Conclusions of Law and Analysis.
A.

Whether the Court Should Alter its Findings of Fact and Conclusions
of Law.

In their Supplemental Post-Trial Memorandum, Plaintiffs effectively ask the court
to amend its 6/22/18 Decision to include new factual findings and conclusions of law.
Plaintiffs' proposed changes do not alter the court's conclusion that no Plaintiff
established his, her, or its entitlement to benefits under the terms of the Plan, 1 even
though proof of such compliance, if it existed, was presumably within their possession,
custody, or control. 2
In terms of a conclusion of law, the court did not err in finding that Plaintiffs
failed to establish entitlement to benefits under the Plan. Indeed, Plaintiffs tacitly

1

The court found that the claim by the Estate of Beverly Burgess presented the closest question,
and noted that it was Plaintiff Launderville who communicated that no benefits under the Plan
were available to the beneficiaries beyond Ms. Burgess's own IRA. No explanation for this
determination was offered by Plaintiff Launderville and Ms. Burgess's beneficiaries were unable
to find any proof of her participation in the Plan. The court thus treated this as a failure of proof.
2

Plaintiffs maintained almost no records of their Plan participation, limited records of their CTC
wages and bonuses, and no records of their contributions to their IRAs.
5

admitted as much. 3 See Weinreb v. Hosp.for Joint Diseases Orthopaedic Inst., 404 F.3d
167, 170 (2d Cir. 2005) ("A suit for benefits due under the terms of an BRISA-governed
plan necessarily fails where the participant does not qualify for those benefits"). The
court thus declines to alter or amend the 6/22/18 Decision in the manner requested by
Plaintiffs.
B.

Plaintiffs' Claims on Behalf of the Plan.

Plaintiffs argue that they brought claims on the Plan's behalf and are entitled to
relief on that basis. Although not a model of clarity, their Second Amended Complaint
requests relief on the Plan's behalf. At trial, however, Plaintiffs did not testify or claim
they were acting as representatives of the Plan. The court does not treat this as a failure
of proof because to do so would defeat ERISA's purposes.
Section 409(a) of ERISA, Liability for Breach of Fiduciary Duty, provides:
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
subchapter shall be personally liable to make good to such plan any losses
to the plan resulting from each such breach, and to restore to such plan any
profits of such fiduciary which have been made through the use of assets of
the plan by the fiduciary, 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. § l 109(a) (emphasis supplied). "A fair contextual reading of the statute makes
it abundantly clear that its draftsmen were primarily concerned with the possible misuse
of plan assets, and with remedies that would protect the entire plan, rather than with the
rights of an individual beneficiary." Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134,
142 (1985). Nonetheless, the Supreme Court has clarified that "ERISA specifically
3

See, e.g., Doc. 197 at 42-45 (cross-examination of Lucille Launderville) (Q. So, in other
words, the plan would require you to be employed by CTC Corporation until you reached age 65
and then retired; is that correct? A. That's what it says .... Q. Is that what you agreed to?
A. Yes .... Q. When you left the employ of CTC Corporation, had you reached your 65th
birthday? A. No .... Q. And you weren't terminated by CTC Corporation. You chose your
own termination; is that correct? A. Yes .... Q. [W]hen you agreed to be part of CTC
Corporation[' s] deferred compensation plan, you agreed that if you had-if you left CTC
Corporation before age 65, you would not be entitled to benefits under the CTC Corporation
plan; is that correct? A. At that time, yes. Q. Okay. And that's what you agreed to? A. Yes.).
6

provides a remedy for breaches of fiduciary duty with respect to the interpretation of plan
documents and the payment of claims, ... one that runs directly to the injured
beneficiary." Varity Corp. v. Howe, 516 U.S. 489, 512 (1996).
In its 6/22/18 Decision, the court found that "Mr. Laumeister and Ms.
Launderville breached their fiduciary duties to the 1997 Plan and to Plan Participants and
beneficiaries [. ]" (Doc. 216 at 62.) It invited Plaintiffs to specify their requested relief.
In response, Plaintiffs request, among other things, that the court "order repayment of the
entire Plan balance, at least $727,002, under Counts III-V." (Doc. 217 at 2) (internal
quotation marks and emphasis omitted). Plaintiffs further request the court to appoint an
administrator or receiver to take custody of the repaid fund assets, invest and manage the
funds, and to pay out vested benefits in accordance with ERISA.
As support for their requested relief, Plaintiffs assert that the court found Exhibit 3
"credible" from which they derive their request for $727,002. This overstates the court's
findings of fact in its 6/22/ 18 Decision. 4 At trial, Plaintiffs' expert witness, Richard
Heaps, testified that he was retained by Plaintiffs "to take a sum of money from a
document and project or to ... calculate what that total would be today if it had been
invested in a manner that typical private retirement funds are invested." (Doc. 196 at
152:22-25.) Mr. Heaps opined that in September 2017, the balance would have grown to
$727,002 using an initial amount of $261,368.14, with "no additional contributions or
withdrawals by anyone." Id. at 160:12-13. Mr. Heaps conceded that this assumption of
"no additional contributions or withdrawals by anyone" was inconsistent with the facts as
he understood them. Id. He was aware of additional contributions and withdrawals in
4

The court described Exhibit 3 as follows:
68. The court finds Plaintiffs' Exhibit 3 "worksheet" reliable for the following
purposes. First, to establish that Mr. Laumeister was the primary decision-maker
with regard to the 1997 Plan. Second, to reflect account balances adjusted to
reflect "Actual Mutual Discovery Balance at 03-18-97." Third, to confirm that it
was a document generated by [Wayne] Massari to project how the 1997 Plan
might perform under certain assumptions, several of which are inconsistent with
the 1997 Plan.

(Doc. 216 at 16.)
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subsequent years, but he could not identify the precise amount of either. He also could
not determine the manner in which Plan funds were invested and thus could not predict
the actual return on investment. 5 His additional calculations in Tables 2 and 3 reflected
further contributions and withdrawals to the Plan but were accompanied by the following
caveat: "The Plan did not call for any specific amount of future contributions. It is
unlikely CTC would have continued to do so given its financial condition. In addition,
contributions would have decreased as employment decreased." (Ex. 26 at 5.)
Mr. Heaps was not asked to opine regarding the profits to be restored to the Plan,
the amount of vested benefits in accordance with BRISA' s minimum vesting standards,
or the damages caused by any fiduciary or nondisclosure violations. To rebut Mr.
Heaps's testimony, Defendants introduced the testimony of expert witness Art Woolf,
who reviewed the Plan, Mr. Heaps's expert opinion, and Exhibit 3. Mr. Woolf opined
that "the plan was very light on specifics in terms of dollars and things like that. So it
was very hard for me to make a correlation." (Doc. 210 at 7-8.) Mr. Woolf further
pointed out that the Plan reflects none of the assumptions in Exhibit 3. He noted Mr.
Heaps's analysis, while reflecting actual withdrawals in Tables 2 and 3, did not project
withdrawals paid to Plan participants retiring at age sixty-five.
The court concluded that Mr. Heaps's Tables 2 and 3 were inconsistent with the
terms of the Plan and the known facts and essentially disregarded them. See Doc. 216 at
62-63. This left only Table 1 which includes facts and assumptions inconsistent with the
Plan, but which reflects the Plan fund balance as March 18, 1997. Rather than treat
Plaintiffs' evidence at trial as a failure of proof, the court uses reliable evidence of record
for purposes of fashioning an award consistent with BRISA.
As of March 18, 1997 the Plan fund was $261,388.14 (the "Base Amount") which
must be restored to the Plan. The court must next determine the extent to which the Plan
Administrators must restore to the Plan any investment gains thereon. See Donovan v.

5

Mr. Heaps admitted that: "As of [September 18, 2017], I do not know how the Fund was to be
invested. I don't know what the Mutual Discovery Fund was." (Ex. 26 at 3.) It is not clear
whether this information was available to Plaintiffs in discovery.
8

Bierwirth, 754 F.2d 1049, 1056 (2d Cir. 1985) ("One appropriate remedy in cases of
breach of fiduciary duty is the restoration of the trust beneficiaries to the position they
would have occupied but for the breach of trust") (citing Restatement (Second) of Trusts

§ 205(c) (1959) (stating trustee is liable for "any profit which would have accrued to the
trust estate ifthere had been no breach of trust")). The court credits Mr. Heaps's
umebutted expert opinion as to how the Base Amount would increase or decrease in
value if prudently invested as a private retirement fund. See Ex. 26 at 3 ("[F]or Table 1, I
assume that the Fund yields would have been equal to that of all private retirement funds
as reported by the Center for Retirement Research (CRR) at Boston College.").
At the time of CTC's dissolution on October 6, 2014, Mr. Heaps opined that the
fund balance would have been approximately $643,376. This amount, however, ignores
an approximately ten year period (from 2004 until dissolution) during which CTC was
losing money and the number of its employees and Plan Participants was declining. See
Doc. 216 at 18-19, ,i,i 75-83. It also does not reflect known or reasonably anticipated
pay-outs from the Plan. Accordingly, as a matter of pure mathematics, it overstates
investment gain on the Base Amount.
In addition, both the $727,002 Plaintiffs request and the Table 1 Plan fund balance
of $643,376 at the time of CTC' s dissolution overly penalize Plan Administrators for a
good faith, mistaken belief that the Plan was a nonqualified "top hat" plan. The Plan
Administrators' fiduciary breaches were attributable to negligence and ignorance as
opposed to willful noncompliance with ERISA. There is also no evidence of material
personal gain by Plan Administrators. Any award of relief should reflect these realities
as well as CTC's dissolution.
In 2004, the Plan was terminated albeit without proper disclosures. Id. at 18, ,i 76.
On or about this time, Defendant Laumeister told Plaintiff Launderville "that because of
the deteriorating financial condition to CTC, the [P]lan was being terminated and the
funds would be used to pay business operating expenses." (Doc. 216 at 18.) At that
point in time, the Plan Administrators were on notice that they should investigate their

9

legal duties and responsibilities in light of Plan termination. They, however, instead
chose to use Plan assets without disclosing that use to Plan Participants.
In approximately 2006, Defendant Laumeister explained to CTC employees that
CTC was in dire financial straits and proposed a twenty percent pay-cut. By February
2008, the only remaining Plan Participants employed by CTC were Plaintiffs
Launderville and Browe, both of whom participated in the use of Plan assets for CTC's
operational expenses.
Based on the foregoing, when the Plan was terminated, Plan Participants should
have received Plan benefits provided they were vested in the Plan under one ofERISA's
minimum vesting schedules even if actual receipt was deferred until they reached the age
of sixty-five. In 2004, the Plan fund prudently invested could be expected to be $350,603
at year's end. The court concludes that in the absence of more reliable evidence, this
amount of investment gain should be restored to the Plan as a remedy for the Plan
Administrators' fiduciary breaches. The court acknowledges that this amount reflects
neither additional contributions nor withdrawals, both of which were probable. As
Defendant Laumeister was responsible for the destruction of records that might produce a
more accurate calculation, and as Plaintiff Launderville failed to keep her own records
beyond a few isolated documents, they cannot reasonably complain about imprecision.
For the foregoing reasons, the ORDERS that $350,603 be restored to the Plan (the
"Restoration Award") by the Plan Administrators as the proper of measure of harm
suffered by the Plan as a result of their breaches of fiduciary duty.
C.

Vesting and Remedies Based Thereon.

Although the 1997 Plan states that accrued benefits are not payable until a Plan
Participant retires from CTC at or after the age of sixty-five or dies while employed by
CTC, "[c]ourts must ... interpret plans to adhere to ERISA requirements." Fenwick v.
Merrill Lynch & Co., 2009 WL 426464, at *1 (D. Conn. Feb. 20, 2009) (citing Cent.
Laborers' Pension Fundv. Heinz, 541 U.S. 739, 742 (2004)). ERISA itself states that it

was intended "to protect ... the interests of participants ... and ... beneficiaries[] ... by
establishing standards of conduct, responsibility, and obligation for fiduciaries ...
10

and ... providing for appropriate remedies[] ... and ready access to the Federal courts."
29 U.S.C. § lO0l(b). Accordingly, notwithstanding the terms of a plan, under ERISA's
vesting provisions, one hundred percent of an employee's accrued benefit derived from
employer contributions in an individual account plan is "nonforfeitable" after six years of
service with the employer. 29 U.S.C. § 1053(a)(2)(B)(iii). "[T]he statutory definition of
'nonforfeitable' assures that an employee's claim to the protected benefit is legally
enforceable[.]" Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 512 (1981). The
Second Circuit has held that this provision of ERISA is "properly interpreted as imposing
two distinct types of minimum vesting requirements, one of which is independent of the
employee's years of service." Duchow v. NY State Teamsters Conference Pension &

Ret. Fund, 691 F.2d 74, 77 (2d Cir. 1982).
Plaintiffs' Second Amended Complaint is bereft of factual allegations regarding
compliance with ERISA's vesting standards. See 29 U.S.C. § 1053 (minimum vesting
standards). At trial, Plaintiffs introduced no testimony or other evidence regarding the
extent to which they were vested in the Plan. 6 In their Post-Trial Memorandum of Law,
Plaintiffs included a single sentence related to vesting: "By 1997, some, if not all, of the
[P]articipants of the Plan would have had vested rights, and ERISA's vesting provisions
and limitations on amendments would have prohibited changes in the Plan purporting to
strip many of those rights." (Doc. 213 at 2-3.) In their Supplemental Post-Trial
Memorandum, Plaintiffs offer vesting arguments but no vesting calculations. There thus
remains no evidence before the court regarding the extent to which Plan Participants are
entitled to benefits under ERISA's minimum vesting schedules.
The court's task in fashioning a remedy is further complicated by the reality that
CTC did not maintain employer contributions in individual accounts but maintained one
aggregate account with limited record keeping and wide-spread record destruction. Plan
Participants should not bear the burden of this noncompliance. The court thus offers Plan

6

The only evidence Plaintiffs introduced at trial with regard to vesting pertained to Plaintiff
Launderville's retirement plan at Plasan Industries. See Doc. 197 at 81 :10-11, 82:17 & 20; Doc.
209 at 30:9.
11

Participants a mechanism for establishing vesting under ERISA as a precondition to the
receipt of Plan disbursements from the Restoration Award. It does so on a per capita
basis in light of the absence of reliable documentation of individual account balances
(including documentation maintained by Plaintiffs); to avoid windfalls to high earning
employees; and to reflect a recovery on behalf of the Plan as a whole as opposed to
individual Plan Participants who could not establish with any specificity the
individualized amounts which they claim they are owed.

D.

Whether to Award Prejudgment Interest.

Although neither party has addressed the issue, the court must consider whether to
award prejudgment interest. In Wickham Contracting Co. v. Local Union No. 3, 955 F.2d
831 (2d Cir. 1992), the Second Circuit acknowledged that "discretionary awards of
prejudgment interest are permissible under federal law in certain circumstances." Id. at
833. In accordance with Second Circuit jurisprudence:
the award should be a function of (i) the need to fully compensate the
wronged party for actual damages suffered, (ii) considerations of fairness
and the relative equities of the award, (iii) the remedial purpose of the
statute involved, and/or (iv) such other general principles as are deemed
relevant by the court.
Id. at 833-34.

In this case, the court declines to award prejudgment interest. Although there is a
need to fully compensate Plan Participants and their beneficiaries, the record before the
court reveals that no Plan Participant anticipated the receipt of any benefits under the
Plan until 2015 when Plaintiff Launderville solicited Plaintiffs' participation in this
lawsuit. Having benefitted from the late discovery of their claims for statute of
limitations purposes, they should not now be heard that they relied upon the availability
of Plan benefits to their detriment. Moreover, the relative equities weigh strongly in
favor of limiting the Plan Administrators' liability in the unique circumstances of this
case. Wayne Massari, a competent, careful, and trusted CTC employee drafted the Plan
without sufficient guidance. Thereafter, CTC adopted and administered the Plan without
sufficient guidance. By adopting an egalitarian, merit-based approach to Plan
12

participation, Plan Administrators deprived the Plan of top hat status. Thereafter, they
used Plan assets to keep CTC operational and to ensure Plan Participants remained
employed. The Plan Administrators derived no personal gain or benefit from their failure
to comply with ERISA and generally acted in good faith.
"The relative equities may make prejudgment interest inappropriate when the
defendant acted innocently and had no reason to know of the wrongfulness of his actions;
when there is a good faith dispute between the parties as to the existence of any liability;
or when the plaintiff himself is responsible for the delay in recovery[.]" Id. at 834-35
(citations omitted). This is such a case.

E.

Disbursement of the Restoration Award.

The Restoration Award of $350,603 shall be deposited with an escrow agent no
later than ninety (90) days from the date of this Opinion and Order. The court will
appoint a special master to oversee the escrow account and GRANTS the parties twenty
(20) days to propose the names of no more than three individuals for appointment as a
special master. If no names are submitted, the court shall choose the special master
without further consultation with the parties. See Fed. R. Civ. P. 53(a)(l)(B) (stating the
court may appoint a special master to "make or recommend findings of fact on issues to
be decided without a jury").
The court further ORDERS that Plan benefits shall be awarded to each of the
eighteen Plan Participants on a per capita basis within a hundred and twenty (120) days
of this Opinion and Order, provided the Plan Participant or its beneficiaries submits a
declaration subject to the penalties of perjury attesting to satisfaction of the following
requirements: (1) he or she was a Plan Participant; (2) he or she was employed at CTC
full time for six years (and the dates of such employment) after March 18, 1997; and
(3) he or she has reached the age of sixty-five or the date on which he or she shall reach
that age. If any Plan Participant fails to submit a declaration in accordance with the
foregoing requirement, his or her portion of Plan benefits shall be forfeited and shall be
disbursed to other Plan Participants on a per capita basis.

13

Within sixty (60) days of this Order, Defendant Laumeister and Plaintiff
Launderville shall each provide a declaration subject to the penalties of perjury
documenting their efforts to notify Plan Participants of this Opinion and Order.

F.

Whether the Court Should Apportion Liability between Defendant
Laumeister and Plaintiff Launderville.

During the court's bench trial, Plaintiffs argued that Lucille Launderville was not a
Plan Administrator while Defendants contended that she was. The court decided this
issue in Defendants' favor, finding:
72. Ms. Launderville was provided with the 1997 Plan which states that
CTC's Directors are the Plan Administrators. She is identified in Plaintiffs'
Exhibit 14 as a person to whom questions about the Plan could be directed.
She proposed participants to the Plan, discussed potential Plan Participants
with Mr. Laumeister and Mr. Massari, and voted on certain decisions with
regard to the 1997 Plan.
(Doc. 216 at 17); see also Varity Corp., 516 U.S. at 498 (noting under ERISA "a person
is a fiduciary with respect to a plan, and therefore subject to ERISA fiduciary duties, to
the extent that he or she exercises any discretionary authority or discretionary control
respecting management of the plan, or has any discretionary authority or discretionary
responsibility in the administration of the plan") (quoting 29 U.S.C. § 1002(2l)(A)).
At trial, neither party requested the court to apportion blame as between Defendant
Laumeister and Plaintiff Launderville. In their Supplemental Post-Trial Memorandum,
Plaintiffs ask the court to relieve Plaintiff Launderville of any indemnification or
contribution obligation, citing§ 258 of the Restatement (Second) of Trusts in support of
this request.
"ERISA establishes both a duty ofloyalty and a duty of care. The Act's
legislative history indicates that the 'crucible of congressional concern was the misuse
and mismanagement of plan assets,' particularly self-dealing by plan managers." Lowen

v. Tower Asset Mgmt., Inc., 829 F.2d 1209, 1213 (2d Cir. 1987) (citation omitted). With
regard to breaches by a co-fiduciary, ERISA provides:
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
14

breach of fiduciary responsibility of another fiduciary with respect to the
same plan in the following circumstances:
ifhe participates knowingly in, or knowingly undertakes to
(1)
conceal, an act or omission of such other fiduciary, knowing such act
or omission is a breach;
(2)
if, by his failure to comply with section l 104(a)(l) 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; or
ifhe has knowledge of a breach by such other fiduciary,
(3)
unless he makes reasonable efforts under the circumstances to
remedy the breach.
29 U.S.C. § l 105(a). In this case, neither Plaintiff Launderville nor Defendant
Laumeister knowingly breached a fiduciary duty, but both affirmatively enabled each
other's breaches. Under ERISA, they are thus responsible for their own conduct and for
that of their co-fiduciary. The only question is whether this liability should be joint and
several or reflect some form of apportionment to reflect their relative culpability.
In Chemung Canal Trust Co. v. Sovran Bank/Maryland, 939 F.2d 12 (2d Cir.
1991 ), the Second Circuit held that ERISA does not preclude courts from allocating
responsibility so that a single fiduciary who is only partially responsible for a loss does
not "bear its full brunt." Id. at 16. The majority of the panel held that "the federal courts
have been authorized to develop a federal common law under ERISA, and in doing so,
are to be guided by the principles of traditional trust law." Id. In contrast, the dissent
observed that Congress was aware of "both the problem at hand and its potential
solution[]" and nonetheless "in crafting ERISA's interlocking, interrelated and
interdependent remedial scheme, failed to provide remedies in favor of breaching
fiduciaries." Id. at 19 (citation and internal quotation marks omitted).
There is currently "a circuit split as to whether one ERISA fiduciary may pursue a
contribution against a co-fiduciary[.]" Loo v. Cajun Operating Co., 130 F. Supp. 3d
1097, 1109 (E.D. Mich. 2015) (noting that "every district court in [the Sixth] Circuit to
face the issue has held that there is no right of indemnification or contribution between
15

co-fiduciaries") (internal quotation marks omitted). 7 This court is bound by the majority
decision in Chemung Canal Trust to conclude that contribution is authorized under
ERISA and to be guided by trust law in determining its application.
In determining the relative responsibilities of the Plan Administrators, the court
considers the fact that "the principal statutory duties imposed on the trustees relate to the
proper management, administration, and investment of fund assets, the maintenance of
proper records, the disclosure of specified information, and the avoidance of conflicts of
interest." Russell, 473 U.S. at 142-43. ERISA requires a fiduciary to exercise "the care,
skill, prudence, and diligence" of a "prudent [person] acting in a like capacity[.]" 29
U.S.C. § l 104(a)(l)(B). Its legislative history reflects the following considerations:
The principles of fiduciary conduct are adopted from existing trust law, but
with modifications appropriate for employee benefit plans. These salient
principles place a twofold duty on every fiduciary: to act in his relationship
to the plan's funds as a prudent man in a similar situation and under like
conditions would act, and to act consistently with the principles of
administering the trust for the exclusive purposes previously enumerated,
and in accordance with the documents and instruments [g]overning the fund
unless they are inconsistent with the fiduciary principles of the section.
H.R. Rep. No. 993-533, at 4651 (1974) (quoted in Russell, 473 U.S. at 152 n.6 (Brennan,
J., concurring)).

7

Compare Kim v. Fujikawa, 871 F.2d 1427, 1432-33 (9th Cir. 1989) ("[S]ection 409 ofERISA,
29 U.S.C. § 1109, only establishes remedies for the benefit of the plan. Therefore, this section
cannot be read as providing for an equitable remedy of contribution in favor of a breaching
fiduciary[] ... implying a right of contribution is particularly inappropriate where[] ... the party
seeking contribution is a member of the class ... whose activities Congress intended to regulate
for the protection of ... ERISA plans[] ... and where there is no indication in the legislative
history that Congress was concerned with softening the blow on joint wrongdoers.") (internal
quotation marks omitted), and Travelers Cas. & Sur. Co. ofAm. v. JADA Servs., Inc., 497 F.3d
862, 867 (8th Cir. 2007) ("[W]e hold that ERISA does not create a right of contributions for
Travelers against IADA Services, another fiduciary."), with Chemung Canal Tr. Co. v. Sorvan
Bank/Maryland, 939 F.2d 12, 16 (2d Cir. 1991) (allowing contribution remedy based on
"traditional trust law"), and Free v. Briody, 732 F.2d 1331, 1337 (7th Cir. 1984) ("We believe
that in the case of ERISA Congress intended to protect trustees from being ruined by the actions
of their co fiduciaries, both because the language of ERIS A provides protection for co-trustees
and because Congress evidenced an intent to apply general trust principles to the trustee
provisions of ERISA").
16

The court also considers§ 258 of the Restatement (Second) of Trusts which
provides:
[W]here two trustees are liable to the beneficiary for a breach of
trust, each of them is entitled to contribution to the other, except that
(a)

if one of them is substantially more at fault than the other, he
is not entitled to contribution from the other but the other is
entitled to indemnity from him; or

(b)

if one of them receives a benefit from the breach of trust, the
other is entitled to indemnity from him to the extent of the
benefit; and for any further liability, if neither is more at fault
than the other, each is entitled to contribution.

Restatement (Second) of Trusts§ 258(1). Comment d of§ 258 of the Restatement
(Second) of Trusts offers the following factors for determining whether one fiduciary is
substantially more at fault than the other:

In determining whether one trustee is so substantially more at fault that he
should bear the whole of the loss resulting from a breach of trust, the
following factors are to be considered: (1) whether he fraudulently induced
the other to join in the breach of trust; (2) whether he intentionally
committed a breach of trust and the other was at most guilty of negligence;
(3) whether because of his greater experience he controlled the conduct of
the other, as in the case where he was an attorney and the other was a
person without business experience who was accustomed to rely upon his
judgment; (4) whether he alone committed the breach of trust and the other
is liable only because of an improper delegation, or failure to exercise
reasonable care to prevent him from committing a breach of trust, or
neglect to take proper steps to compel him to redress the breach of trust.
Id. cmt. d.

In this case, Defendant Laumeister and Plaintiff Launderville facilitated each
other's breaches of the Plan's terms in selecting Plan Participants without adhering to the
requirements of a top hat plan and by authorizing Plan distributions to Plan Participants
who had not satisfied Plan requirements. Each facilitated CTC's use of Plan assets for
payment of CTC 's operating expenses. Each failed to apprise Plan Participants of the
Plan's termination. Although Plaintiffs argue that Plaintiff Launderville did not benefit
from the use of Plan assets for CTC's operating expenses, neither did Defendant
Laumeister who made substantial personal loans to CTC which were not repaid, who
17

received no tax deduction or tax credit for Plan contributions, and who could have
personally retained CTC profits as opposed to using them to fund the Plan. While
Defendant Laumeister made the decision to use Plan funds to pay CTC's operating
expenses, Plaintiff Launderville facilitated that practice and interposed no objection to it.
As CTC was losing money at the time, she, rather than Defendant Laumeister, had a
greater financial interest in CTC's continued operations. Neither Defendant Laumeister
nor Plaintiff Launderville acted with any greater degree of culpability than negligence,
neither acted in bad faith, and there was no intent to defraud.
In other ways, however, Plaintiff Launderville and Defendant Laumeister are not
similarly situated. Defendant Laumeister was the primary decision-maker for the Plan,
its exclusive source of funding as CTC's sole shareholder, and the individual who
decided to offer the Plan in the first instance. As an experienced and highly educated
corporate executive, he was arguably in a better position to ascertain the Plan's
compliance with "top hat" requirements and ERISA, and to seek legal advice if he was
uncertain. At all times, he held a superior position to Plaintiff Launderville and was able
to exert control over her Plan decision-making.
Plaintiff Launderville was primarily responsible for identifying CTC employees
who merited Plan participation and communicating with Plan Participants once Wayne
Massari left CTC's employ. It was Plaintiff Launderville who denied Beverly Burgess's
beneficiaries' claim for benefits on Ms. Burgess's behalf. See Russell, 473 U.S. at 142
("It is of course true that the fiduciary obligations of plan administrators are to serve the

interest of participants and beneficiaries and, specifically, to provide them with the
benefits authorized by the plan."). She provided no explanation for her decision to deny
this claim, and described no factual or legal investigation she undertook to make that
determination. See 29 U.S.C. § 1133 (requiring "adequate notice in writing to any
participant or beneficiary whose claim for benefits under the plan has been denied, setting
forth the specific reasons for such denial, written in a manner calculated to be understood
by the participant[]" and affording "a reasonable opportunity" for a "full and fair review
by the appropriate named fiduciary of the decision denying the claim"); see also Varity
18

Corp., 516 U.S. at 511 (observing that "a plan administrator engages in a fiduciary act
when making a discretionary determination about whether a claimant is entitled to
benefits under the terms of the plan documents."). She essentially blamed Defendant
Laumeister for this decision and he blamed her. Both had a duty to ensure that they were
making this important Plan determination correctly.
Although Plaintiff Launderville lacked Defendant Laumeister's education and
experience, she was President of CTC, oversaw its daily operations, and had considerable
decision-making authority. She was thus not a powerless neophyte forced to accede to
Defendant Laumeister' s control and she was neither defrauded nor deceived by him
regarding any fiduciary breach. When faced with the prospect of losing her benefits
under the Plan by leaving CTC's employment for another position before age sixty-five,
Plaintiff Launderville sought to protect her own interests as opposed to the interests of the
Plan or other Plan Participants. See id. at 506 ("ERISA requires a 'fiduciary' to
'discharge his duties with respect to a plan solely in the interest of the participants and
beneficiaries."') (quoting 29 U.S.C. § l 104(a)(l)). She notified Plan Participants that she
believed they may have a claim against Defendants only when her own efforts to secure
benefits directly from Defendant Laumeister proved unsuccessful. In doing so, it is not
clear that she disclosed her role in Plan administration. 8
On balance, the court finds Defendant Laumeister more culpable than Plaintiff
Launderville but not substantially more at fault such that he, alone, should bear the full
brunt of the Restoration Award. The court therefore declines to relieve Plaintiff
Launderville of all responsibility for contribution and indemnification.
To fairly reflect their respective liability, the court hereby ORDERS a 60/40
apportionment of liability. Defendant Laumeister is hereby ORDERED to contribute
$210,361.80 of the Restoration Award and Plaintiff Launderville is hereby ORDERED to
contribute $140,241.20 of the Restoration Award. The court further ORDERS that
Plaintiff Launderville may receive her per capita distribution under the Plan consistent
8

The court has raised the issue of joint representation with Plaintiffs' counsel and was advised
that all Plaintiffs waived any conflict of interest.
19

with this Opinion and Order. To hold otherwise would ignore her dual status as a Plan
fiduciary and Plan Participant.
G.

Whether Plaintiffs are Entitled to Damages Because of the Absence of
a Summary Plan Document and Other Plan Disclosures.

In light of the Plan Administrators' failure to comply with ERISA's reporting and
disclosure requirements, Plaintiffs suggest a "possible statutory penalty for each
participant[]" at $100 per day for each day of a six year limitation period or $766,500.
(Doc. 213 at 7.) They point out that Defendants never provided a Summary Plan
Document ("SPD") and that periodic account statements were provided at irregular
intervals and not at all after Wayne Massari's stroke. Each Plan Participant, however,
received a copy of the Plan and signed a statement that he or she had reviewed it as part
of the Plan application. Plaintiffs identify no prejudice or damages suffered because of
the absence of an SPD.
An ERISA benefit-plan administrator has a duty to provide an SPD to its
participants setting forth information such as the name and type of benefit
plan, the plan's requirements with respect to eligibility for participation and
benefits, and circumstances that may result in disqualification, ineligibility,
or denial or loss of benefits. In fulfilling this duty, an administrator must
also make reasonable efforts to ensure each plan participant's actual receipt
of the plan documents. Moreover, where there is a conflict between the
terms of the plan itself and the SPD, the terms of the SPD govern. This rule
makes sense because the statute contemplates that the summary will be an
employee's primary source of information regarding employment benefits,
and employees are entitled to rely on the descriptions contained in the
summary.

Weinreb, 404 F.3d at 170 (citations and internal quotation marks omitted).
The Second Circuit has held that "an ERISA claim premised on the complete
absence of an SPD also requires a showing of likely prejudice." Id. at 171. "Where a
plan administrator fails to fulfill its statutory duty of furnishing an SPD, but where the
evidence shows that the claimant had actual knowledge of the requirement at issue, any
error is necessarily harmless." Id. at 171-72. The Second Circuit reasoned that
"[a]lthough ERISA's SPD requirement places the burden of communicating eligibility

20

conditions on the employer, it would be unfair to hold the employer liable when a
claimant fails to adhere to a known plan requirement[.]" Id. at 172 (citations omitted).
In this case, the absence of an SPD did not cause any prejudice or damages
because Plaintiffs received a copy of the Plan itself which specified the terms on which
Plan benefits would become available. Although they are correct that Defendants'
destruction of Plan records rendered it more difficult to establish their claims, they
proffered no explanation for their destruction of their own Plan records.
The most glaring failure to comply with ERISA's disclosure requirements was the
failure to notify Plan Participants that CTC was effectively terminating the Plan and
using Plan assets for its operating expenses. See Varity Corp., 516 U.S. at 505 (observing
that "plan administrators often have, and commonly exercise, discretionary authority to
communicate with beneficiaries about the future of plan benefits"); see also 29 U.S.C.
§ 1426 (setting forth notice and suspension of benefits requirements for insolvent ERISA
plans). However, Defendant Laumeister announced to CTC employees that CTC was in
dire financial straits and he did not seek to affirmatively deceive Plan Participants
regarding the status of the Plan. Instead, he believed he could use Plan assets without
regard to ERISA.
Similarly, Defendants' destruction of CTC's records took place at a time when
Defendants had no notice of any claims and no reason to believe CTC had outstanding
obligations under the Plan. See Doc. 216 at 19, ,r,r 83-85. There was no apparent motive
to frustrate Plan Participants' ability to prove their claims and no reason why Plan
Participants could not have maintained their own Plan documents if they reasonably
believed they were entitled to benefits under the Plan.
In light of the totality of the circumstances, the court agrees that there should be a
consequence for the Plan Administrators' failure to comply with ERISA's reporting and
disclosure requirements but concludes that Plaintiffs' suggestion of a statutory penalty of
$766,500 per Plan Participant is exorbitant and unsupported by the factual record. The
court awards $2,000 in statutory penalties to be paid by Defendant Laumeister ($1,000)

21

and Plaintiff Launderville ($1,000) in addition to the Restoration Award. 9 This amount
shall be placed in the escrow account described herein within ninety (90) days of this
Opinion and Order and distributed on a per capita basis to Plan Participants who comply
with the terms and conditions of this Opinion and Order. In addition, as neither party has
addressed the issue of attorney's fees, the court grants them fourteen (14) days in which
to do so. 10
CONCLUSION
For the foregoing reasons, the court hereby GRANTS the following relief:
1. ORDERS a Restoration Award in the amount of $350,603 to be
deposited with an escrow agent no later than ninety (90) days from the date
of this Opinion and Order;
2. GRANTS the parties twenty (20) days to propose the names of no more
than three individuals for appointment as a special master;
3. ORDERS that Plan benefits shall be awarded to Plan Participants on a
per capita basis within a hundred and twenty (120) days of this Order
pursuant to the terms and conditions listed herein;
4. ORDERS Defendant Laumeister and Plaintiff Launderville to each
provide a declaration subject to the penalties of perjury documenting their
efforts to notify Plan Participants of this Opinion and Order sixty (60) days
of this Order;
5. ORDERS a 60/40 division of liability with Defendant Laumeister
hereby ORDERED to contribute $210,361.80 of the Restoration Award and

9

Although Plaintiffs have argued that Plaintiff Launderville was not employed by CTC during
the applicable limitations period and cannot be held liable for any reporting or disclosure
violations under ERISA, she did not assert a statute of limitations defense in response to
Defendants' counterclaim and has thus waived that argument. See Davis v. Bryan, 810 F.2d 42,
44 (2d Cir. 1987) ("The statute oflimitations is an affirmative defense under Fed. R. Civ. P. 8(c)
that must be asserted in a party's responsive pleading at the earliest possible moment and is a
personal defense that is waived if not promptly pleaded.") (internal quotation marks omitted).
10

"In most lawsuits seeking relief under [ERISA], a reasonable attorney's fee and costs are
available to either party at the court's discretion." Hardt v. Reliance Standard Life Ins. Co., 560
U.S. 242,244 (2010) (internal quotation marks omitted). The Supreme Court has disavowed the
Courts of Appeals' use of a five factor test, reasoning that "[b ]ecause these five factors bear no
obvious relation to [29 U.S.C.] § 1132(g)(l)'s text or to our fee-shifting jurisprudence, they are
not required for channeling a court's discretion when awarding fees under this section." Id. at
254-55.
22

Plaintiff Launderville hereby ORDERED to contribute $140,241.20 of the
Restoration Award;
6. ORDERS that Plaintiff Launderville may receive her per capita
distribution under the Plan consistent with this Opinion and Order; and
7. AWARDS $2,000 in statutory penalties to be paid equally by Defendant
Laumeister ($1,000) and Plaintiff Launderville ($1,000), in addition to the
Restoration Award, to be placed in the escrow account within ninety (90)
days of this Opinion and Order;
8. GRANTS the parties fourteen ( 14) days to address the issue of
attorney's fees and costs.
~

SO ORDERED.

Dated at Burlington, in the District of Vermont, this J_!_ day of October, 2018.

Christina Reiss, District Judge
United States District Court

23