Opinion
CIVIL ACTION 02-8442.
May 12, 2004
ORDER
AND NOW, this 12th day of May, 2004, upon consideration of Third Party Defendants Alvin Gutman and James Gutman's Motion for Summary Judgment (Document No. 56), and Third Party Plaintiff First Union's response thereto (Document No. 62), it is hereby ORDERED that Third Party Defendants' Motion is DENIED.
Third Party Defendants, Alvin and James Gutman ("the Gutmans"), contend that they are entitled to entry of judgment in their favor as a matter of law on all of the claims brought against them in Third Party Plaintiff First Union's Third Party Complaint. First Union brought a Third Party Complaint against the Gutmans seeking contribution and/or indemnification in the event that First Union is found liable in the underlying ERISA action. We find that genuine issues of material fact preclude entry of summary judgment on First Union's claim for contribution or indemnification.
While there is disagreement among the Circuit and District Courts, this Court has previously found that the right to contribution among co-fiduciaries exists under ERISA.Site-Blauvelt Engineers, Inc. v. First Union Corp., 153 F. Supp.2d 707 (E.D.Pa. 2001). Courts reaching the same conclusion have grounded their decision, in part, on the principle in trust law that defaulting fiduciaries may seek contribution from one another. See Chemung Canal Trust Co. v. Sovran Bank/Maryland, 939 F.2d 12, 17 (2d Cir. 1991). The Restatement (Second) of Trusts § 258 reads in pertinent part: "(1) Except as stated in Subsection (2)[dealing with bad faith], where two trustees are liable to the beneficiary for a breach of trust, each of them is entitled to contribution from 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. . . ." Restatement (Second) of Trusts § 258(1959).
First Union alleges that Alvin and James Gutman, as officers of Pressman-Gutman Co., Inc. and agents of the Profit Sharing Plan, breached fiduciary duties owed to the plan participants and beneficiaries, thereby contributing to the losses allegedly sustained by the Plan. Specifically, First Union contends that the Gutmans were aware of, authorized, and/or participated in the investment management and/or activities of the Plan. First Union further contends that Alvin Gutman directed specific investment activity, thereby assuming a de facto responsibility as co-trustee with First Union of the Plan assets. Therefore, according to First Union, to the extent that any investment philosophy, goal, or strategy implemented by First Union and/or Forefront was imprudent, the Gutmans breached their fiduciary duties by their participation in or authorization of those philosophies, goals, or objectives. Likewise, First Union contends that to the extent any purchase or sale of an investment made by First Union and/or Forefront was imprudent, the Gutmans breached their fiduciary duties by their participation in and/or authorization of those investments, and in the case of Alvin, his specific direction to purchase or sell a particular investment.
The two arguments advanced by the Gutmans are: 1) that First Union is substantially more at fault than they are and thus contribution should not be permitted in this case; and 2) that the Gutmans were not fiduciaries with respect to investment decisions.
Pressman-Gutman Co., Inc. is a named fiduciary of the Plan, who acted at all relevant times by and through Alvin and James Gutman in their capacities as officers and directors. Plf.'s Complaint ¶ s 2-3. It is true that the trust and plan documents give the trustees, or an appointed investment manager, sole responsibility for management of the assets. See Document No. 56, Exs. 1,2. However, to the extent that the Gutmans may have used their positions to cause First Union and/or Forefront to relinquish their independent discretion with respect to management of the assets and exercised actual control over the assets, the Gutmans may be liable as fiduciaries for investment decisions. See Sommers Drug Stores Co. Employee Profit Sharing Trust v. Corrigan Enterprises, Inc., 793 F.2d 1456, 1459-60 (5th Cir. 1986). We find that First Union has established triable issues with respect to the Gutmans actual control over plan assets and investment decisions. Genuine issues of material fact still exist on this record, most importantly, identification of the alleged inappropriate stock. In addition, the Gutmans, as agents of the Employer, had the responsibility to appoint and remove the trustee and to periodically review the performance of any fiduciary. To the extent that the Gutmans were aware of, approved, or authorized investment goals or objectives that were imprudent, they may be found to have breached fiduciary duties of the Employer under the plan. We believe that it would be premature for us to decide at this juncture whether one fiduciary is substantially more at fault than the other. We therefore DENY Third Party Defendants' Motion for Summary Judgment as to these claims.
First Union also contends that the Gutmans breached their fiduciary duties to the Plan by the actions they took during the conversion of the Plan to a self-directed investment format. We do not believe that this claim is the proper subject of a third party complaint. First Union's allegations with respect to this claim fail to establish that the Gutmans may be liable to First Union for the specific claims brought against it in the Amended Complaint, as distinguished from the Gutman's responsibility for the plan's losses in general. To the extent that First Union can show that the Gutmans' actions during the conversion of the Plan contributed in whole or in part to the Plan's losses, that would be a proper defense to Plaintiff's allegation that First Union and Forefront's breaches caused those losses.