Source: http://openjurist.org/153/f3d/134
Timestamp: 2013-12-13 18:08:09
Document Index: 387667305

Matched Legal Cases: ['§ 1001', '§ 514', '§ 1144', '§ 514', '§ 502', '§ 1132', '§ 406', '§ 1106', '§ 502', '§ 502', '§ 406', '§ 1106', '§ 502']

153 F3d 134 22 Employee Benefits Cas 1545 Pens Plan Guide P 23944w | OpenJurist
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153 F3d 134 22 Employee Benefits Cas 1545 Pens Plan Guide P 23944w 153 F.3d 134
22 Employee Benefits Cas. 1545,Pens. Plan Guide (CCH) P 23944W
Marc E. LeBLANC, Administrator of the Sheet Metal Workers'National Pension Fund; Sheet Metal Workers' NationalPension Fund; John Harrington, in his capacity as aparticipant in the Sheet Metal Workers' National PensionFund, 15 Garden Drive, Lynbrook, NY 11563; Arthur Moore, inhis capacity as Trustee of the Sheet Metal Workers' NationalPension Fund; Alan J. Chermak, in his capacity as NationalPension Fund Trustee; Matthew B. Hernandez, Jr., in hiscapacity as National Pension Fund Trustee; Clinton O.Gowan, Jr., in his capacity as National Pension FundTrustee; Ronald Palmerick, in his capacity as NationalPension Fund Trustee; Bruce Stockwell, in his capacity asNational Pension Fund Trustee, Plaintiffs-Appellants,v.Lawrence A. CAHILL; Kenneth M. Cahill; James W. Beck;Charles E. Underbrink; Larken, Incorporated;Larken Properties, Incorporated,Defendants-Appellees,andEdward Williams; Oakleigh J. Thorne; Thorne Consultants,Incorporated; Rick Mandrell; Edward J. Carlough; GordonJones; Cavet Snyder; June M. Carlough, in her capacity asthe Administratrix of the Estate of Edward J. Carlough;Judith L. Boyce Jones, in her capacity as representative ofthe estate of Gordon Jones, Defendants.Secretary of Labor, Amicus Curiae.Mark E. LeBLANC, Administrator of the Sheet Metal Workers'National Pension Fund; Sheet Metal Workers' NationalPension Fund; John Harrington, in his capacity as aparticipant in the Sheet Metal Workers' National PensionFund, 15 Garden Drive, Lynbrook, NY 11563, Plaintiffs-Appellants,andArthur Moore, in his capacity as Trustee of the Sheet MetalWorkers' National Pension Fund; Alan J. Chermak, in hiscapacity as National Pension Fund Trustee; Matthew B.Hernandez, Jr., in his capacity as National Pension FundTrustee; Clinton O. Gowan, Jr., in his capacity as NationalPension Fund Trustee; Ronald Palmerick, in his capacity asNational Pension Fund Trustee; Bruce Stockwell, in hiscapacity as National Pension Fund Trustee, Plaintiffs,v.Lawrence A. CAHILL; Kenneth M. Cahill; James W. Beck;Charles E. Underbrink; Larken, Incorporated;Larken Properties, Incorporated,Defendants-Appellees,Popham, Haik, Schnobrich & Kaufman, Limited, (as to Larkendefendants proposed fees and costs), Intervenor-Appellee,andOakleigh J. Thorne, Thorne Consultants, Incorporated; RickMandrell; Gordon Jones; Cavet Snyder; June M. Carlough,in her capacity as the Administratrix of the estate ofEdward J. Carlough, Defendants.Secretary of Labor, Amicus Curiae.
Nos. 96-2046, 96-2848.
Argued May 6, 1998.Decided Aug. 11, 1998.
ARGUED: John O'Brien Clarke, Jr., Highsaw, Mahoney & Clarke, P.C., Washington, D.C., for Appellants. Elizabeth Hopkins, United States Department of Labor, Washington, D.C., for Amicus Curiae. Mark Fox Evens, Reid & Priest, L.L.P., Washington, D.C.; Thomas William Pahl, Kelly & Berens, P.A., Minneapolis, Minnesota, for Appellees. ON BRIEF: L. Pat Wynns, Melissa B. Kirgis, Highsaw, Mahoney & Clarke, P.C., Washington, D.C., for Appellants. J. Davitt McAteer, Acting Solicitor of Labor, Allen H. Feldman, Associate Solicitor for Special Appellate and Supreme Court Litigation, United States Department of Labor, Washington, D.C., for Amicus Curiae. Christopher Connolly, Brendan M. Donnell, Jr., Reid & Priest, L.L.P., Washington, D.C.; Timothy D. Kelly, Kelly & Berens, P.A., Minneapolis, Minnesota; Craig C. Reilly, Richards, McGettigan, Reilly & West, P.C., Alexandria, Virginia, for Appellees.
In this appeal, we decide three issues of first impression in our circuit under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461. The first issue is whether ERISA § 514(a), 29 U.S.C. § 1144(a), which provides that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan ...," preempts a state common law cause of action for fraud, pressed by a pension plan subject to ERISA, against a third party who is neither a fiduciary nor a party in interest with respect to the plan, but who allegedly fraudulently induced the pension plan to enter into a risky investment deal. We hold that ERISA § 514(a) does not preempt such a cause of action. The second issue is whether ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), which provides, in pertinent part, that "[a] civil action may be brought--... (3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of [ERISA] or the terms of the plan, or (B) to obtain other equitable relief (i) to redress such violations or (ii) to enforce any provisions of [ERISA] or the terms of the plan ...," provides a cause of action for appropriate equitable relief against a nonfiduciary, nonparty in interest, whose interests are adverse to the interests of a pension plan subject to ERISA, and who knowingly participated in a transaction prohibited by ERISA § 406(b)(2), 29 U.S.C. § 1106(b)(2). On this issue, we hold that ERISA § 502(a)(3) provides such a cause of action. The third issue is closely related to the second and asks whether ERISA § 502(a)(3) provides a cause of action for appropriate equitable relief against a nonfiduciary, nonparty in interest who knowingly gave a plan fiduciary consideration in connection with a transaction involving assets of the plan--a transaction prohibited by ERISA § 406(b)(3), 29 U.S.C. § 1106(b)(3). On this issue, we hold that ERISA § 502(a)(3) provides such a cause of action.
In late July 1989, James Beck approached Edward Williams about investing in the LHLP package that had been offered to the over 100 other potential investors. Beck also mentioned the possibility of the Pension Fund further investing in between ten and twenty hotels currently owned by insurance companies that needed asbestos abatement work. In a memorandum dated August 4, 1989, Edward Williams brought both investment possibilities to Chairman Carlough's attention and added that his "initial thought" was to "find[ ] a way to joint venture the hotels with their existing owners, get Cahill in the hotels as the operator/manager, have Beck help structure the transaction, and [our union] will do all the abatement and renovation work." (J.A. 1680). Edward Williams knew that Chairman Carlough wanted the union to perform asbestos abatement work and wanted the Pension Fund to invest in companies that performed such work. On August 10, 1989, Chairman Carlough replied by letter to Edward Williams' memorandum of August 4, 1989, stating that the first proposal did not excite him but that the second one, the one involving asbestos removal, "looks like something we ought to assiduously pursue." (J.A. 1357).
When the LHLP investment proposal was presented to the Former Trustees on December 12, 1989, Former Trustee Richard Dominico questioned the prudence of investing in hotels, especially these twenty-one hotels because of their age and locations. As a result of Former Trustee Dominico's opposition, the Former Trustees directed Pension Fund General Counsel Raymond Sweeney "to retain a firm with experience in the hospitality industry for the purpose of reviewing the underlying assumptions upon which the proposed transaction is based and providing the [Former] Trustees with a written report regarding the reasonableness of those assumptions." (J.A. 1535). Raymond Sweeney in turn hired Arthur Andersen & Co., Inc., specifically its consulting arm in the field of hospitality (Arthur Andersen), to perform the review and forwarded to Arthur Andersen the Thorne Report, the AAA appraisals, historical information from Larken, Inc. and LPI, and internal memoranda from Larken, Inc.
Following its review of a package of LHLP investment materials provided by the due diligence team, on December 20, 1989, Arthur Andersen participated in a telephone conference with some of the due diligence team members. During that conversation, Arthur Andersen opined that the LHLP investment proposal was so risky the Pension Fund would be wasting its money by spending any additional time reviewing the package. Arthur Andersen explained that the twenty-one hotels were "not investment-grade properties--they [we]re old [h]otels with short remaining economic lives and high risks." (J.A. 598). Moreover, Arthur Andersen stated that "[t]here is little likelihood that the value of these [h]otels will increase over the next five years, and a high likelihood that the values will decline in the future." Id. Finally, Arthur Andersen emphasized that the appraisals were deficient in that they did not contain any rationale for their projections of growth in hotel demand, their projections of improvement in the twenty-one hotels' share of the market, or their projections of net operating income.
[AAA's] income projections for 1990 and 1991 were realistic, and ... the occupancy projections for the 1992 and beyond time period, (which are generally capped in 1993 or 1994) were reasonable. However, we found the projected increases in average daily rates beyond 1992, which continue to increase at 3% to 6%, to be optimistic. (Note: We do accept [AAA's] projections as a possible scenario, but feel a more conservative projection is warranted to bracket the range of expected returns and to serve as the basis to invest.) These average daily rate increases are the primary source of operating income increa