Longo v. Trojan Horse Ltd.

208 F.Supp.3d 700

Garibaldi LONGO, et al., Plaintiffs,

v.TROJAN HORSE LTD., et al., Defendants.

No. 5:13-CV-418-BO

United States District Court, E.D. North Carolina, WESTERN DIVISION.

Signed September 20, 2016

Mark S. Fistos, Steven R. Jaffe, Farmer, Jaffe, Weissing, Edwards, Fistos & Lehrman, P.L., Fort Lauderdale, FL, S. Michael Dunn, Stephen A. Dunn, Emanuel & Dunn, Raleigh, NC, for Plaintiffs.

L. P. Hornthal, Jr., L. Phillip Hornthal, III, Hornthal, Riley, Ellis & Maland, LLP, Elizabeth City, NC, Robert H. Bernstein, Greenberg Traurig, LLP, Florham Park, NJ, for Defendants.

Glen Burnie Hauling, Inc., pro se.

Trojan Horse Ltd 401(K) Plan, pro se.

Brian Hicks, pro se.

ORDER

TERRENCE W. BOYLE, UNITED STATES DISTRICT JUDGE

This cause comes before the Court on plaintiffs' motion to certify class and cross-motions for summary judgment filed by plaintiffs and defendant Ascensus Trust. A hearing was held on the matter before the undersigned on September 2, 2016, at Raleigh, North Carolina. For the reasons discussed below, plaintiffs' class is certified and summary judgment is entered in favor of plaintiffs on all claims.

BACKGROUND

Plaintiffs filed this putative class action regarding the alleged failure of defendants to make contributions to a "defined contributions plan," or 401(k) plan (the Plan), of which plaintiffs are beneficiaries. Plaintiffs, participating employees of defendants Trojan Horse and Glen Burnie Hauling, allege that since January 1, 2009, eligible participants have contributed a portion of their wages to the Plan, but that beginning in May or June 2012, defendants have failed to make deposits into the plan, notwithstanding that they have continued to deduct and withhold the regular contributions from plaintiffs' wages. Plaintiffs filed this action under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 et seq.

On September 11, 2013, plaintiffs voluntarily dismissed their claims against Ascensus Trust, Inc. and Frontier Trust Company. [DE 44]. The Court on January 15, 2014, denied a motion to dismiss filed by Trojan Horse, Ltd., Glen Burnie Hauling, Inc., and related defendants (Trojan Horse defendants). [DE 53]. Subsequent to the Court's order on dismissal, counsel for the Trojan Horse defendants was permitted to withdraw, and clerk's default under Rule 55 of the Federal Rules of Civil Procedure was entered against defendants Trojan Horse, Glen Burnie Hauling, Trojan Horse Ltd 401(k) Plan, Brian Hicks, and Sherry Korb. [DE 65]. Following a period of discovery, plaintiffs moved to join Capitol Expressways, Inc., BDH Logistics LLC, and Ascensus Trust Company as defendants; plaintiffs further stipulated to dismiss their claims against defendants Stubbs and Korb without prejudice. [DE 75 & 77]. The Court permitted joinder of Capitol Expressways, BDH, and Ascensus Trust as defendants and the filing of an amended complaint on April 2, 2015. [DE 79].

Plaintiffs' amended complaint alleges claims for recovery of benefits under 29 U.S.C. § 1132(a)(1)(B), breach of fiduciary duties under 29 U.S.C. § 1132(a)(2), injunctive and other equitable relief under 29 U.S.C. § 1132(a)(3), and for attorneys' fees under 29 U.S.C. § 1132(g). Clerk's default has been entered against defendants Capitol Expressways and BDH. [DE 108]. By order entered November 12, 2015, the Court denied Ascensus Trust's (Ascensus) motion to dismiss. [DE 109]. Specifically, the Court held that the Trust Agreement at issue expressly provided that Ascensus would be responsible for ensuring that Plan contributions were made and that Ascensus was a fiduciary. Id.

The case is now before the Court on plaintiffs' motion to certify this action as a class action and on cross-motions for summary judgment filed by plaintiffs and defendant Ascensus.

DISCUSSION

I. CROSS-MOTIONS FOR SUMMARY JUDGMENT

A motion for summary judgment may not be granted unless there are no genuine issues of material fact for trial and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If that burden has been met, the non-moving party must then come forward and establish the specific material facts in dispute to survive summary judgment.

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). In determining whether a genuine issue of material fact exists for trial, a trial court views the evidence and the inferences in the light most favorable to the nonmoving party. Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). However, "[t]he mere existence of a scintilla of evidence" in support of the nonmoving party's position is not sufficient to defeat a motion for summary judgment; "there must be evidence on which the [fact finder] could reasonably find for the [nonmoving party]." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). When ruling on cross-motions for summary judgment,¹ a court considers each motion independently to determine whether judgment under Rule 56 may be entered. See, e.g., Rossignol v. Voorhaar , 316 F.3d 516, 523 (4th Cir. 2003).

Accordingly, the Court has considered the motions filed by plaintiffs and Ascensus and the exhibits thereto,² as well as the statements of undisputed material facts filed pursuant to Local Civil Rule 56.1. There is no dispute in this matter that contributions were not deposited with the Plan as required. Rather, Ascensus argues that as a matter of law it should not be liable for the fact that contributions were not collected or deposited according to the terms of the Plan.

A. Fiduciary status

As the Court has previously held, Ascensus is a fiduciary in regard to the making of employee contributions to the Plan. [DE 109]. In considering Ascensus' motion to dismiss based on its non-fiduciary status, the Court considered the Plan documents and held that whether Ascensus had discretion to interpret or construe the terms of the Plan had no bearing on what the Court found to be its fiduciary obligation to ensure that the Plan receives the funds to which it is entitled or to enforce the Plan Administrator's obligation to deposit contributions to the Plan. Id. at 7. Ascensus has not submitted any evidence or argument which persuades the Court that's its prior ruling on Ascensus' fiduciary status with respect to Plan contributions was in error.

ERISA demands that a fiduciary "discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries." 29 U.S.C. § 1104(a)(1). Ascensus relies on the limiting language in the plan which would, it contends, cabin any fiduciary duty it may have had to the proper handling of funds once deposited and transferred to it. Indeed, the Plan expressly states that Ascensus shall have no duty or responsibility for determination of the accuracy or sufficiency of any contributions to the plan or for the collection of contributions. [DE 147-14 at 6]. However, "[t]here is more to plan (or trust) administration than simply complying with the specific duties imposed by the plan documents or statutory regime; it also includes the activities that are ordinary and natural means of achieving the objective of the plan." Varity Corp. v. Howe, 516 U.S. 489, 504, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996) (internal quotation and citation omitted).

In the context of ERISA, "trust documents cannot excuse trustees from their duties under" the statute. Cent. States, Se. & Sw. Areas Pension Fund v. Cent. Transp., Inc., 472 U.S. 559, 568, 105 S.Ct. 2833, 86 L.Ed.2d 447 (1985). The Supreme Court has recognized that a central purpose of ERISA is to ensure that "if a worker has been promised a defined pension benefit upon retirement-and if he has fulfilled whatever conditions are required to obtain a vested benefit-he actually will receive it." Nachman Corp. v. Pension Ben. Guar. Corp., 446 U.S. 359, 375, 100 S.Ct. 1723, 64 L.Ed.2d 354 (1980). It is thus through this lens that the Court must determine whether the Plan's express language is sufficient to absolve Ascensus of any duty as a fiduciary concerning whether contributions were properly made to the plan.

In so doing the Court is instructed by the Sixth Circuit's opinion in Best v. Cyrus, 310 F.3d 932 (6th Cir. 2002). There, the court of appeals, relying on the precedent discussed above, held that the fiduciary duties of a trustee, whose express duties were limited by the defined contribution plan to administration of investments, were in fact not limited to those described in the plan document and that ERISA imposed a specific duty on that trustee to secure contributions and repayments which it would under the plan documents be responsible for administrating. Id. at 935–936. The Court finds the circuit court's reasoning persuasive, and holds that it similarly applies in this instance where Ascensus was under an express duty to administer funds once received and thus under the principles of ERISA had a further duty to ensure that those contributions were being made. See also Solis v. Plan Ben. Servs., Inc., 620 F.Supp.2d 131, 141 (D. Mass. 2009) (joining "courts which have found that Section 403 imposes not only a right, but also a duty, on trustees to monitor and collect employer contributions to ERISA funds").

B. Breach of fiduciary duty

As the Court has determined that Ascensus has as a matter of law a fiduciary duty in regard to the Plan contributions, it next determines whether summary judgment is appropriate on the issue of breach.

(i) Plan assets

The Court first determines that, contrary to Ascensus' arguments, the unpaid Plan contributions are plan assets and fall within the scope of Ascensus' duties as trustee. Plan assets include those "amounts a participant has withheld from his wages by an employer...