United States: MMWR Attorneys Win On Summary Judgement In ERISA Case

Originally appeared in Benefits & Compensation Bulletin, Volume IX, No. 1

Two MMWR attorneys, Jeanne Bakker and Ed Ellis, have won on summary judgement in an ERISA-based action brought by the U.S. Department of Labor ("DOL") against three retirement plan trustees and against Radnor Capital Management, Inc. and Pierce Archer. MMWR represents Radnor Capital Management and Pierce Archer. Judge Lancaster of the Western District of Pennsylvania rendered his opinion on February 14, 2001.

In 1993, the three plan trustees decided to merge the employer’s profit sharing plan ("PSP") into its employee stock ownership plan ("ESOP") and to use the PSP’s liquid assets to pay off the ESOP’s initial stock acquisition loan. When the employer subsequently went bankrupt and the ESOP was unable to pay benefits because it held nothing but worthless stock, the DOL alleged that the trustees had breached their ERISA fiduciary duties and engaged in prohibited transactions.

Radnor Capital served as the investment manager of the PSP, and Radnor Capital and Mr. Archer facilitated the transfer of PSP assets to the ESOP. They sold securities in the PSP investment account to create the liquidity needed to pay off the ESOP loan and then transmitted the wire instructions for the transfer. The DOL alleged that Radnor Capital’s and Archer’s role in connection with the transfer of PSP assets created co-fiduciary liability under ERISA.

Judge Lancaster ruled that Radnor Capital’s fiduciary status under ERISA was limited to its role as investment advisor. Neither Radnor Capital nor Archer, he said, functioned as ERISA fiduciaries when they performed ministerial services that were incident to Radnor Capital’s investment advisor services. Since Radnor Capital’s limited fiduciary role as an investment advisor had no causal relationship to the alleged loss to the PSP, the court ruled that Radnor Capital and Archer could not have co-fiduciary liability under ERISA.