Opinion ID: 521022
Heading Depth: 3
Heading Rank: 1

Heading: Liability for Entire Cost of Prohibited Transaction2

Text: 10 Fujikawa does not appeal the district court's holding that the outer island representative system violated the prohibited transaction provisions of ERISA. 3 He contends, however, that the district court erred in holding him personally liable for the entire cost of the prohibited transaction, i.e., the outer island representative system, while simultaneously recognizing that at least some portion of the transaction benefited the Funds. 11 Liability for breaching fiduciary responsibility is judicially assessed pursuant to section 409(a) of ERISA, which provides in pertinent part: 12 Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary. 13 29 U.S.C. Sec. 1109(a). Neither section 409(a) nor any other section of ERISA discloses the methods which are to be used in measuring the losses for which breaching fiduciaries are to be held liable. Indeed, ERISA does not define 'loss' as that term is used in section 409. Donovan v. Bierwirth, 754 F.2d 1049, 1052 (2d Cir.1985). 14 Fujikawa argues that because some non-neglible portion of the work performed by the outer island representatives benefited the Funds, that portion should not be considered a loss[ ] to the [Funds] resulting from ... such breach. Thus, he requests that this court vacate the monetary judgment, and remand the matter for further proceedings to determine the proportion of the cost of the outer island representative system which was in fact a loss to the Funds. We reject this argument. 15 In determining the amount that a breaching fiduciary must restore to the Funds as a result of a prohibited transaction, the court should resolve doubts in favor of the plaintiffs. Leigh v. Engle, 727 F.2d 113, 138-39 (7th Cir.1984). This course [would] avoid the ... unfair result[ ] of ... depriving the plaintiffs of any recovery simply because the defendants have made it difficult to disentangle the prohibited transaction. Id. at 139. See also Bierwirth, 754 F.2d at 1056 (This is nothing more than application of the principle that, once a breach of trust is established, uncertainties in fixing damages will be resolved against the wrongdoer). We adopt this principle in this case and place squarely on the breaching fiduciary the burden of demonstrating what portion of the activities of the outer island representatives benefited the Funds. This is a burden Fujikawa failed to meet. 16 As the district court noted, the outer island representatives have not maintained records to determine what expenses are used for the benefit of the Union. The record also indicates that the outer island representatives did not keep adequate records of their time and that the Ad Office did not audit or verify those records that were kept. Under these circumstances, we conclude that the defendants did not present sufficient evidence to allow the district court to apportion the payments made. 4 The district court was therefore correct in assessing against Fujikawa the entire cost of the prohibited transaction, less reimbursements made by the Union.