December 19, 2011
--- A federal court found the owner of a business, as trustee to its retirement plan, may be held liable for a breach of fiduciary duty related to a denial of benefits. ---
The U.S. District Court for the Western District of New York ruled Harry Stockwell, Jr.’s awareness of the alleged breach is sufficient to preserve Dawn Smith’s fiduciary duty claim against him.
The Stockwell Construction Co., Inc. Profit Sharing Plan states Stockwell, Jr., as trustee, had the duty to invest plan assets, so he is clearly a plan fiduciary. The fact Stockwell, Jr. did not have discretion over the payment of the benefits of Smith’s deceased ex-husband’s account does not shield him from liability, the court said.
Stockwell, Jr. was aware of the company’s decision not to pay benefits to Smith as correspondence was exchanged between him and the company. which requested information concerning the denial of benefits. This would have put Stockwell, Jr. on notice that Smith’s claim was being denied, and this knowledge, in turn, may establish a breach.
However, the court found that to the extent Smith brings suit against any defendants in a capacity other than that of administrator or trustee, including in a corporate or individual capacity, those claims must be dismissed.