Opinion ID: 411806
Heading Depth: 1
Heading Rank: 2

Heading: The Cost of the Arbitration Proceeding

Text: 15 The court upon remand held that none of the defendants were liable for the cost of arbitration. Beck and Phagan were not liable because they did not breach a fiduciary duty in deadlocking the board. Bowen was not liable because even though he participated in the discussion of the motion, if not the voting, only two votes were required to deadlock the board. Plaintiffs challenge this ruling, arguing that all three defendants should be liable for the cost of arbitration. 16 Beck and Phagan's liability for these costs was remanded because in its original order the court applied the wrong standard, stating that Beck and Phagan had not acted in bad faith in deadlocking the board. 624 F.2d at 1260. The court clarified its original conclusion, applying the fiduciary standard mandated by ERISA, which embraces a duty of loyalty to the trust beneficiaries, 29 U.S.C.A. Secs. 1104(a)(1)(A), 1106(b)(2), as well as a duty of care, 29 U.S.C.A. Sec. 1104(a)(1)(B). Applying that standard, the court found that Beck and Phagan had not breached their fiduciary duty by voting against filing the suit. Plaintiffs' primary challenge to this finding is that Beck and Phagan did not conduct an independent investigation of the allegations of misconduct. However, the court discussed that issue before arriving at its conclusion, stating that Beck and Phagan justifiably relied on the advice of their own attorney, Mr. Wolf. Under general trust principles and under ERISA, a trustee may rely on information provided by other persons. See 29 C.F.R. Sec. 2509.75-8 (fiduciary may rely on information provided by other persons who perform purely ministerial functions for the plan). 17 The court found that Bowen was not liable for the cost of arbitration because, even though he participated in the discussion leading up to the vote, that participation did not cause the deadlock which required arbitration. Plaintiffs' contention that Bowen is nevertheless liable under 29 U.S.C.A. Sec. 1109(a) ignores the court's holding below. Section 1109(a) provides that a fiduciary who breaches his duties shall be personally liable to make good to such plan any losses to the plan resulting from each such breach. (emphasis added). The court specifically stated: Bowen's participation, although a breach of his fiduciary duty, did not cause the loss to the Fund. R. 1343. 18 For the reasons stated above, we hold that the award of attorneys' fees was properly granted, and costs of arbitration were properly denied. The decision of the district court is AFFIRMED.