Opinion ID: 493993
Heading Depth: 2
Heading Rank: 2

Heading: osborne's duty as president of powhatan

Text: 16 The president of a closely held corporation makes business decisions based upon his duty as president to the corporation. As president of Powhatan, Osborne made decisions with respect to the handling of corporate funds. Included in such decisions is the president's decision regarding the payment of the corporation's operating and business expenses based upon the funds available. The district court held that when Osborne made the decision to pay the employees' salaries and other business expenses of Powhatan he violated his fiduciary duty under ERISA to maintain the plan. We think the district court erred in this conclusion. 17 ERISA recognizes that a person may be a fiduciary for some purposes and not others.... The key language in the statutory definition is that a person is a fiduciary [of the plan] 'to the extent' he or she exercises control or authority over the plan. Leigh, 727 F.2d at 133. One assumes fiduciary status only when and to the extent that they function in their capacity as health plan fiduciaries, not when they conduct business that is not regulated by ERISA. Amato, 773 F.2d at 1416-17. Under the circumstances of this case, Osborne's decision to pay the business expenses of Powhatan, in an attempt to keep the corporation from financial collapse, was a business decision Osborne made in his capacity as president of the corporation. It is not unusual in a closely held corporation for the president and majority stockholder to control the corporation's operations. McKissick v. Auto-Owners Insurance Co., 429 So.2d 1030, 1033 (Ala.1983). However, [a] corporation is a distinct and separate entity from the individuals who compose it as stockholders or who manage it as directors or officers. Read News Agency, Inc. v. Moman, 383 So.2d 840, 843 (Ala.Civ.App.), writ denied sub nom, 383 So.2d 847 (Ala.1980). Thus, this decision by Osborne to pay bills other than the insurance premiums was not made in his capacity as fiduciary of the health plan, it was made as the president of the corporation. Indeed, until monies were paid by the corporation to the plan there were no assets in the plan under the provisions of ERISA. This distinction in the role of president of the corporation as opposed to the role as fiduciary of the plan does not diminish in any way the obligation of the fiduciary to keep the beneficiaries (employees) advised as to the status of the plan, insurance coverage, etc. as discussed in section A.