Opinion ID: 2803977
Heading Depth: 2
Heading Rank: 2

Heading: Federal District Court Proceedings

Text: The MAF alleged the following counts in its federal district court complaint: (1) breach of fiduciary duty in 5 ____ FOR PUBLICATION IN WEST’S HAWAII REPORTS AND PACIFIC REPORTER ____ violation of 29 U.S.C. § 1104(a)(1)(A);2 (2) breach of fiduciary duty by co-fiduciary pursuant to 29 U.S.C. § 1105;3 and (3) engaging in prohibited transactions in violation of 29 U.S.C. § 1106(a)(1)(D).4 2 29 U.S.C. § 1104(a)(1)(A) (2012) provides: (a) Prudent man standard of care (1) Subject to sections 1103(c) and (d), 1342, and 1344 of this title, a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and— (A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan[.] 3 29 U.S.C. § 1105(a) (2012) states in relevant part: [A] fiduciary with respect to a plan shall be liable for a breach of fiduciary responsibility of another fiduciary with respect to the same plan in the following circumstances: (1) if he participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other fiduciary, knowing such act or omission is a breach; (2) if, by his failure to comply with section 1104(a)(1) of this title in the administration of his specific responsibilities which give rise to his status as a fiduciary, he has enabled such other fiduciary to commit a breach; or (3) if he has knowledge of a breach by such other fiduciary, unless he makes reasonable efforts under the circumstances to remedy the breach. 4 29 U.S.C. § 1106(a)(1)(D) (2012) states in relevant part: A fiduciary with respect to a plan shall not cause the plan to engage in a transaction, if he knows or should know that such transaction constitutes a direct or indirect-- . . . (D) transfer to, or use by or for the benefit of a party in interest, of any assets of the plan . . . . 6 ____ FOR PUBLICATION IN WEST’S HAWAII REPORTS AND PACIFIC REPORTER ____ After a three-day bench trial, the federal district court entered its “Findings of Fact and Conclusions of Law.” The federal district court first concluded that the MAF is an employee benefit plan governed by ERISA pursuant to 29 U.S.C. § 1002(1),5 and that it had jurisdiction pursuant to 28 U.S.C. § 1331, which grants the district courts of the United States original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States. DeCosta, 2008 WL 1815716, at -7. Second, focusing on Rodrigues’ activities rather than his title as UPW’s State Director, the court found that the evidence was “sufficient to establish by far more than a preponderance of the evidence that [Rodrigues] exercised discretionary authority and control over the management of the [MAF’s] assets” in making the loans to Best Rescue. Id. at . 5 Pursuant to 29 U.S.C. § 1002(1) (2012): The terms “employee welfare benefit plan” and “welfare plan” mean any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services, or (B) any benefit described in section 186(c) of this title (other than pensions on retirement or death, and insurance to provide such pensions). 7 ____ FOR PUBLICATION IN WEST’S HAWAII REPORTS AND PACIFIC REPORTER ____ The court additionally concluded that pursuant to 29 U.S.C. § 1104, plaintiffs had demonstrated by a preponderance of the evidence that Rodrigues “clearly breached his fiduciary duties” with respect to five of the six loans made to Best Rescue. Id. at . Specifically, the federal district court concluded that a prudent fiduciary would have done more before authorizing and recommending further investments with Best Rescue after Rodrigues’ first loan to the company. Id. at . The court also concluded that the actions of the MAF Board in relation to the failed investments did not make Rodrigues any less liable for his own actions. Id. The court held that Rodrigues was liable under ERISA for making imprudent investments and that he was liable for five of the six failed loans, which totaled $850,000. Id. at . The Ninth Circuit Court of Appeals subsequently affirmed the federal district court’s judgment. De Costa, 334 F. App’x at 810.