ERISA-Sixth Circuit Rules That A Company’s Owner And Coordinator, Two Individuals, Are Not Fiduciaries Under ERISA, And Therefore Are Not Liable For Unpaid Plan Contributions

In Sheet Metal Local 98 Pension Fund v. Airtab, Inc., No. 09-3121 (6th Cir. 2012) (Unpublished Opinion), the Sheet Metal Workers Local 98 Pension Fund and Sheet Metal Workers Local 98 Welfare Fund (the “Funds”), and their trustees (collectively the “Plaintiffs”), had filed suit against several defendants, including AirTab, Inc. (“Air Tab”), Tina Hairston-Ileogben, the owner and president of AirTab, and Pius Ileogben, a “coordinator” at AirTab. The Plaintiffs alleged that the defendants failed to make contributions to the Funds, as required by the applicable collective bargaining agreement between AirTab and the union (the “CBA”). In particular, the Plaintiffs asserted several causes of action against Ileogben and Hairston-Ileogben (“the Individual Defendants”), including breach of fiduciary duty and breach of trust. The district court granted summary judgment to the Individual Defendants on Plaintiffs’ claims of breach of fiduciary duty and breach of trust, concluding that the unpaid contributions did not constitute plan assets and that the Individual Defendants were not fiduciaries under ERISA.

One question for the Sixth Circuit Court of Appeals (the “Court”): was the district court correct in granting summary judgment on the breach of fiduciary duty/breach of trust issues?

In analyzing the case, the Court noted that, under ERISA, a person is a fiduciary with respect to a plan to the extent that he or she: (1) exercises any discretionary authority or discretionary control respecting management of such plan, (2) exercises any authority or control respecting management or disposition of its assets or (3) has any discretionary authority or discretionary responsibility in the administration of such plan.

As to this case, the Court said, first, that the Individual Defendants are not defined as fiduciaries in any documents; on the contrary, it is the trustees that have control over the Funds’ assets according to the CBA and other contractual documents. In addition, at least one other circuit (meaning the Eleventh Circuit) has held that a person should not be attributed fiduciary status under ERISA and held accountable for performance of the strict responsibilities required of him in that role, if he is not clearly aware of his status as a fiduciary. Here, nothing indicates that the Individual Defendants were ever made aware of their potential status as fiduciaries. The Court said, next, that the Individual Defendants’ alleged refusal to pay the funds as required under the CBA does not rise to the level of exercising discretionary control or authority such that fiduciary status attaches under ERISA. As such, the Court concluded that the Individual Defendants were not fiduciaries of the Funds under ERISA, so that the allegation of breach of fiduciary duty or trust must fail. It did not need to reach the plan asset issue, since, even if the unpaid contributions were plan assets, the Individual Defendants-who were not fiduciaries under ERISA-would not be responsible for them . The Court therefore affirmed the district court’s summary judgment on the breach of fiduciary duty/breach of trust issues.

Posted in:
Updated:

Comments are closed.