Perez v. Coffman et al

Filing 24

ORDER signed by Judge J. P. Stadtmueller on 12/8/2016 GRANTING in part and DENYING in part 21 Plaintiff's Amended MOTION for Summary Judgment. Defendant Downey Inc. Profit Sharing Plan DISMISSED from this action. Defendants Coffman and Downey , Inc. removed from their positions as fiduciaries with respect to Downey Inc. Profit Sharing Plan. AMI Benefit Plan Administrators appointed as Independent Fiduciary for Plan. Within 30 days Defendants Coffman and Downey, Inc. to remit $3,250 f or fees and expenses to AMI; within 35 days Defendants Coffman and Downey, Inc. to provide copy of front and back of check to Regional Director. Defendants Coffman and Downey, Inc. to cooperate with AMI. US Marshal to deliver copy of judgment and this Order on each Defendant. See Order. (cc: all counsel)(cb)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
THOMAS E. PEREZ, Secretary of Labor,
Plaintiff,
v.

Case No. 15-CV-1394-JPS

GREGORY M. COFFMAN,
DOWNEY, INC., and
DOWNEY INC. PROFIT SHARING PLAN,

ORDER

Defendants.
On November 23, 2015, Plaintiff, the Secretary of Labor, filed a
complaint against Defendants Gregory M. Coffman (“Coffman”), Downey,
Inc. (“Downey”) and Downey Inc. Profit Sharing Plan (the “Plan”), alleging
that Coffman and Downey violated the fiduciary provisions of the Employee
Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq., with
regard to the Plan. (Docket #1). Before the Court is Plaintiff’s amended
motion for default judgment, which was filed on November 4, 2016. (Docket
#21). For the reasons stated below, the motion will be granted in part and
denied in part.
1.

BACKGROUND
Defendants failed to appear or otherwise defend this action after being

served with process. As a result, the Clerk of Court entered default against
them on June 24, 2016. Because the Clerk of Court has entered default against
Defendants, the Court must accept all of Plaintiff’s well-pleaded facts relating
to liability as true. Graham v. Satkoski, 51 F.3d 710, 713 (7th Cir. 1995). Those
facts are as follows.
Downey ceased operating in approximately May 2006. (Docket #1 ¶ 9).
On March 16, 2010, the Wisconsin Department of Financial Institutions

administratively dissolved Downey. Id. Coffman, as the sole trustee of
the Plan, is responsible for safeguarding the Plan assets and properly
disbursing those assets to Plan participants. Id. ¶¶ 5, 10. Downey, as the
Plan administrator, is responsible for administering the Plan, including
terminating the Plan and processing distributions to Plan participants. Id.
¶¶ 6, 11. Section 6.04 of the Plan provides that a participant whose
employment has been terminated shall be entitled to receive all of the
amounts allocated to his account. Id. ¶ 12. Section 6.05 of the Plan provides
that a terminated Plan participant is entitled to receive all of his benefits if
under $1,000 “as soon as administratively practicable after the end of the
Plan Year in which the Participant’s employment with the Affiliates
terminates.” (Docket #21-1 ¶ 4(e)). Generally, if the Plan participant’s benefits
exceed $1,000, his benefits commence as soon as administratively practicable
after the end of the second Plan year following his termination. Id.
According to the valuation for the period ending April 7, 2015, the
Plan had twenty participants and assets totaling approximately $35,665.90.
(Docket #1 ¶ 14). No individual or entity has taken fiduciary responsibility
for the operation and administration of the Plan and its assets since Downey
was administratively dissolved. Id. ¶ 16. Prior to January 23, 2009, at least one
participant requested a distribution of his or her Plan benefits. (Docket #21-1
¶ 4(f)). Similarly, in 2013, another Plan participant requested a distribution
of his or her Plan benefits. Id. Neither of these participants, nor any others
who are legally entitled to receive distributions, has been able to receive
them. Id. ¶ 17. Plaintiff alleges that Coffman and Downey’s failure to
administer or terminate the Plan since at least March 16, 2010, is a violation
of Defendants’ fiduciary duties under ERISA, 29 U.S.C. § 1104(a)(1)(A), (B),
and (D). Id. ¶ 18(a)–(c).
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In his amended motion for default judgment, Plaintiff seeks the
following forms of relief: (1) removing Coffman and Downey as fiduciaries
of the Plan; (2) permanently enjoining Coffman and Downey from violating
Title I of ERISA; (3) appointing AMI Benefit Plan Administrators, Inc.
(“AMI”) as an independent fiduciary to terminate the Plan; (4) ordering
Coffman and Downey to pay $3,250 for reasonable fees and expenses to be
incurred by AMI in terminating the Plan; (5) ordering Coffman and Downey
to cooperate with AMI; and (6) ordering all other appropriate and just relief.
Id. at 4–5; (Docket #22 at 3).1
2.

DISCUSSION
Based on the factual allegations in Plaintiff’s complaint, which the

Court must accept as true at this juncture, the Court finds that Defendants
Coffman and Downey have violated their fiduciary duties under ERISA as
Plaintiff alleges. See, e.g., Chao v. Wagner, Civil Action No. 1:07–CV–1259–JOF,
2009 WL 102220, at *1 (N.D. Ga. Jan. 13, 2009) (finding violation of ERISA
fiduciary duties where the defendants abandoned the plan). However, the
fact that the Court has found Defendants liable for ERISA violations does not
relieve Plaintiff of the responsibility to prove his right to the specific relief he
seeks. See e360 Insight v. The Spamhaus Project, 500 F.3d 594, 602 (7th Cir.
2007). The Court denied Plaintiff’s first motion for default judgment on this

1

In his complaint, the Secretary also sought an award of costs, but he
withdrew that request as part of his amended motion for default judgment.
(Docket #22 at 8 n.4). Likewise, Plaintiff has withdrawn the request he made in his
original motion for default that Coffman and Downey be enjoined from serving as
fiduciaries or service providers to any ERISA-covered plan in the future. Id.
Additionally, although the Plan itself was named as a Defendant in this action,
Plaintiff has made clear that he seeks no relief from the Plan. Id. at 1 n.1. As a result,
this order will fully resolve this case although no default judgment will be entered
as to the Plan.

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ground, finding that Plaintiff had not adequately supported his requests for
various types of injunctive relief. See (Docket #20 at 2). Plaintiff filed this
amended motion for default judgment at the Court’s request in order to cure
these deficiencies. Id. at 3.
The scope of equitable relief available to Plaintiff under ERISA is
broad. Section 1132 of the statute provides that the Secretary may bring an
action “for appropriate relief” under Section 1109 for ERISA violations. 29
U.S.C. § 1132(a)(2). Section 1109, in turn, provides in relevant part that
[a]ny 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 shall be subject to
such other equitable or remedial relief as the court may deem
appropriate, including removal of such fiduciary.
Id. § 1109(a). Injunctive relief is common in ERISA cases involving violations
of fiduciary duties, particularly since Section 1109 expressly grants authority
for the court to fashion appropriate equitable relief. See CIGNA Corp. v.
Amara, 563 U.S. 421, 439–40 (2011). In such cases, “the [c]ourt must require
a breaching fiduciary to restore a plan to the position it would have been in
but for that fiduciary’s illegal conduct.” Perez v. Kwasny, CIVIL ACTION NO.
14-4286, 2016 WL 558721, at *3 (E.D. Pa. Feb. 9, 2016). Although ERISA gives
courts wide discretion to grant injunctive relief, to be entitled to injunctive
relief, a plaintiff must generally demonstrate: (1) irreparable injury; (2)
inadequate remedies at law; (3) that the balance of hardships favors
injunctive relief; and (4) that the public interest would not be disserved. See
eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006).
Based on these considerations, the Court finds it appropriate to award
some, but not all, of Plaintiff’s requested relief. First, the Court will remove
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Coffman and Downey as fiduciaries of the Plan. 29 U.S.C. § 1109(a)
(providing that offending fiduciaries may be removed). Second, the Court
will appoint AMI as an independent fiduciary to terminate the Plan. Third,
since Defendants’ misconduct occasioned the need for AMI’s services, the
Court will order Coffman and Downey to pay $3,250 to AMI to compensate
its reasonable fees and expenses to be incurred in terminating the Plan.
(Docket #21-2) (AMI’s quote for services need to administer and terminate
the Plan). Finally, the Court will order Coffman and Downey to cooperate
with AMI as it works to terminate the Plan. Kwasny, 2016 WL 558721, at *3
(“With the [defendant’s] removal, a new Plan fiduciary must be installed.
This is an expense that would not have accrued but for the [defendant’s]
breaches. Therefore, it is just that [the defendant] pay the costs associated
with the fiduciary in order to make the Plan whole.”); Solis v. Hutcheson, Civil
Action No. 1:12–cv–236–EJL, 2012 WL 2151525, at *7 (D. Id. June 13, 2012)
(appointing independent fiduciary for the plan to replace the defendants and
ordering the defendants to cooperate with the independent fiduciary); Dairy
Fresh Corp. v. Poole, No. Civ.A. 96–0187–CB–C, 2001 WL 392684, at *1 (S.D.
Ala. Apr. 13, 2001) (same).2
The Court finds that these requests for injunctive relief are justified by
Defendants’ misconduct. First, Coffman and Downey failed to administer the
Plan, leaving Plan participants without the means to obtain their rightful
distributions. Plaintiff has provided evidence that at least two Plan

2

Plaintiff requests “all other appropriate and just relief” in the event that the
Court finds that other equitable relief beyond what he suggests is needed to put the
Plan back in the position it occupied before Defendants’ violations. (Docket #22 at
15). The Court finds that the relief it will award suffices to remedy Defendants’
ERISA violations. Without any indication as to what other relief may be
appropriate, the Court sees no reason to go further.

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participants have requested distributions which have gone unfulfilled, and
at least one such request has been outstanding for over seven years.
Similarly, because Coffman and Downey refuse to carry out their duties with
respect to the Plan, there is no way to terminate the Plan. No legal remedy
would adequately address these problems. Instead, as the courts cited above
have recognized, it is appropriate in cases like this to remove the dilatory
fiduciaries and appoint another in their place.
Second, the Plan participants suffer irreparable injury when they are
denied access to their retirement funds for long periods. (Docket #21-1 ¶ 4(j)).
This delay also exposes the funds themselves to dissipation through falling
markets and administrative fees. Id. Third, the balance of hardships weighs
in favor of the Plan participants because they stand to lose their retirement
benefits. Conversely, the only harm Coffman and Downey will incur is
paying the AMI’s fees to terminate the Plan. Unlike many other cases of
ERISA fiduciary duty violations, Plaintiff does not seek a permanent
injunction barring these two Defendants from ever serving as ERISA
fiduciaries in the future. See, e.g., Perez v. Wallis, 77 F. Supp. 3d 730, 750 (N.D.
Ill. 2014). Instead, Plaintiff only wants them removed with respect to the Plan
at issue here. This further minimizes the harm Defendants will suffer from
the proposed injunctive relief. Finally, ensuring that ERISA-covered plans are
administered prudently and in a timely fashion is in the public’s interest.
Therefore, Plaintiff has sufficiently demonstrated that he is entitled to the
injunctive relief the Court has identified above. eBay, 547 U.S. at 391.
However, the Court will not, as Plaintiff requests, permanently enjoin
Coffman and Downey from violating Title I of ERISA in the future. This
vague, overbroad injunction against all future ERISA violations raises
concerns that such an injunction will be ineffectual and lead to unnecessary
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contempt proceedings. Perez v. Stratton, No. 14–cv–95–wmc, 2015 WL
1866101, at *3 (W.D. Wis. Apr. 23, 2015); Solis v. Seher, No. 3:12–CV–415 JD,
2013 WL 393291, at *3–4 (N.D. Ind. Jan. 31, 2013); Lineback v. Spurlino
Materials, LLC, 546 F.3d 491, 504 (7th Cir. 2008) (“Injunctions that ‘merely
instruct the enjoined party not to violate a statute’ generally are overbroad,
increasing ‘the likelihood of unwarranted contempt proceedings for acts
unlike or unrelated to those originally judged unlawful.’”) (quoting Int’l
Rectifier Corp. v. IXYS Corp., 383 F.3d 1312, 1315 (Fed. Cir. 2004)). Plaintiff
argues that the availability of contempt proceedings for Defendants’ future
ERISA violations will help incentivize their compliance. (Docket #22 at 13).
However, the Court believes that the proper remedy for ERISA violations is
provided in the statute itself. The Court cannot augment the remedies
Congress provided by holding its contempt power over Defendants’ heads
indefinitely. Moreover, Plaintiff fails to cite any case actually entering this
sort of injunction. He relies instead on general references to the usefulness of
civil contempt and his extensive duties to enforce ERISA, neither of which
satisfy this Court that this particular injunction is warranted on these facts.
3.

CONCLUSION
The Court finds, for the reasons stated above, that Plaintiff is entitled

to a default judgment for Defendants’ violations of their fiduciary duties
under ERISA. The Court will award injunctive relief against Defendants
sufficient to make the Plan whole again and facilitate its termination. The
Court will also order that a copy of the judgment and this order be served on
each Defendant by the U.S. Marshals.
Accordingly,

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IT IS ORDERED that Plaintiff’s amended motion for default
judgment (Docket #21) be and the same is hereby GRANTED in part and
DENIED in part;
IT IS FURTHER ORDERED that Defendant Downey Inc. Profit
Sharing Plan is DISMISSED from this action;
IT IS FURTHER ORDERED that Defendants Gregory M. Coffman
and Downey, Inc. are removed from their positions as fiduciaries with
respect to the Downey Inc. Profit Sharing Plan;
IT IS FURTHER ORDERED that AMI Benefit Plan Administrators,
Inc., located at 100 Terra Bella Drive Youngstown, Ohio 44505 is hereby
appointed as the Independent Fiduciary for the Plan to administer and to
terminate the Plan consistent with the Plan’s governing documents, the
Internal Revenue Code, and ERISA. AMI shall have the following powers,
duties, and responsibilities:
(a) AMI shall have responsibility and authority to collect, liquidate,
and manage assets of the Plan for the benefit of the eligible participants and
beneficiaries of the Plan who are entitled to receive such assets, until such
time that the assets of the Plan are distributed to the eligible participants and
beneficiaries of the Plan and the Plan is fully terminated;
(b) AMI shall exercise reasonable care and diligence to identify
and locate each participant and beneficiary of the Plan who is eligible to
receive a payment under the terms of this default judgment and to disburse
to each such eligible participant or beneficiary the payment to which he or
she is entitled. AMI shall comply with the guidance in EBSA Field
Assistance Bulletin 2014-01, Fiduciary Duties and Missing Participants in
Terminated Defined Contribution Plans (Aug. 21, 2014), available at

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http://www.dol.gov/ebsa/regs/fab2014-1.html, in attempting to locate
participants and for handling missing participants;
(c) AMI shall have full access to all data, information, and calculations
in the Plan’s possession or under its control, including that information
contained in the records of the Plan’s custodial trustees and other service
providers, bearing on the distribution of benefit payments, participant
account balances and current plan assets;
(d) AMI may retain such persons and firms, including but not limited
to accountants and attorneys, as may be reasonably required to perform its
duties hereunder;
(e) AMI shall initiate the termination of the Plan in accordance with
ERISA within thirty (30) days of entry of this order. AMI’s responsibilities
shall include, but not be limited to, causing the distribution of the Plan’s
assets to the Plan participants and filing all appropriate documents with the
various government agencies. The Plan shall be terminated within ninety (90)
days of entry of this order. Within thirty (30) days from the date that the Plan
is fully terminated, AMI shall provide satisfactory proof of such termination,
including proof of issuance of the Plan’s participant distributions, to the
Regional Director of the U.S. Department of Labor, Employee Benefits
Security Administration (“Regional Director”), 230 S. Dearborn St., Suite
2160, Chicago, Illinois 60604;
IT IS FURTHER ORDERED that within thirty (30) days of entry of
judgment herein, Defendants Gregory M. Coffman and Downey, Inc. shall
remit $3,250.00 for fees and expenses that will reasonably and necessarily be
incurred in administering and terminating the Plan by issuing a cashier’s
check made payable in the name of the Plan to AMI Benefit Plan
Administrators, Inc. at the address of 100 Terra Bella Drive, Youngstown,
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Ohio, 44505. Within thirty-five (35) days of entry of judgment herein,
Defendants Gregory M. Coffman and Downey, Inc. shall provide a copy of
the front and back of the above-referenced check to the Regional Director;
IT IS FURTHER ORDERED that Defendants Gregory M. Coffman
and Downey, Inc. are ordered to cooperate with AMI in its duties to
administer and terminate the Plan; and
IT IS FURTHER ORDERED that a copy of the judgment herein and
this order shall be served on each Defendant by the U.S. Marshals.
The Clerk of the Court is directed to enter judgment accordingly.
Dated at Milwaukee, Wisconsin, this 8th day of December, 2016.
BY THE COURT:

J.P. Stadtmueller
U.S. District Judge

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