Opinion ID: 532526
Heading Depth: 2
Heading Rank: 2

Heading: Personal Liability of Grace

Text: 19 The District Court ruled that H. David Grace was personally liable to the Fund for any losses resulting from a breach of fiduciary duty on his part. On appeal, Grace argues that our decision in Lowen v. Tower Asset Management, 829 F.2d 1209 (2d Cir.1987), held that personal liability under section 1109 can be imposed only where the individual has used the corporate form as a shield from ERISA liability. In essence, Grace argues that the District Court was wrong to find him personally liable absent circumstances sufficient to warrant piercing GCI's corporate veil. 20 However, this case is unlike Lowen and other decisions dealing with the liability of non -fiduciaries under section 1109, see Thornton v. Evans, 692 F.2d 1064, 1077-78 (7th Cir.1982); cf. Leddy v. Standard Drywall, Inc., 875 F.2d 383 (2d Cir.1989) (officer of employer can be personally liable even if he did not meet statutory definition of employer). The District Court found that Grace exercised complete discretion over the disposition of the Fund assets, 664 F.Supp. at 112, and hence was a fiduciary within the meaning of 29 U.S.C. Sec. 1002(21)(A) (1982). In light of the language of the Agreement (H. David Grace shall personally supervise and manage the Account) and Grace's own admission that he personally exercised discretion over how the Fund's portfolio was invested, we agree that there is no factual dispute as to Grace's fiduciary status. 21 Grace, however, characterizes the District Court's approach as imposing strict liability on any individual who exercises control or discretion over the assets of an ERISA plan, even when the individual acts through a corporate entity. This is not so. Absent circumstances that warrant disregarding the corporate form under the standards set forth in Lowen, individuals are not necessarily liable for any and all of the corporation's fiduciary breaches. First, they are liable as fiduciaries under section 1109 only if they personally breach a fiduciary duty. Second, they are ordinarily not liable for breaches occurring with respect to assets of the plan over which they do not exercise discretionary authority. See 29 C.F.R. Sec. 2510.3-21 (1988). Third, such an individual fiduciary faces personal liability for the acts of a co-fiduciary corporation only in certain specific instances. See 29 U.S.C. Sec. 1105. 22 Grace should hardly be surprised that by personally exercising control over the Fund's account he assumed the risk of personal liability. See Yeseta v. Baima, 837 F.2d 380, 386 (9th Cir.1988). ERISA specifies that a fiduciary who breaches a duty to the plan shall be personally liable to make good to such plan any losses to the plan resulting from each such breach. 29 U.S.C. Sec. 1109(a) (emphasis added). Moreover, the Department of Labor's interpretive bulletins concerning ERISA anticipate and permit the efforts of corporate plan fiduciaries to indemnify employees who perform fiduciary services. 29 C.F.R. Sec. 2509.75-4 (1988). The department's regulations also interpret section 1002's definition of fiduciary as extending to corporate officers, directors, and partners when they personally render investment advice through their affiliated corporation. 29 C.F.R. Sec. 2510.3-21 (1988). We need not consider the issue of personal liability where non-managerial employees merely render advice or appear to exercise discretionary authority though their decisions must be approved by corporate officers; Grace not only managed the account personally but was also president and chief executive officer of GCI. Under these circumstances, he should have fully anticipated his exposure to personal liability as a fiduciary when he disregarded the 50% ceiling.