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ARAKELIAN v. NATIONAL WESTERN LIFE INS. CO.

October 4, 1990

ROBERT ARAKELIAN, et al., Plaintiffs,
v.
NATIONAL WESTERN LIFE INSURANCE CO., et al., Defendants



The opinion of the court was delivered by: HARRIS

 This matter is before the Court on defendant United Masonry, Inc., of Virginia's (United Masonry) motion for summary judgment. Upon consideration of that motion, plaintiffs' opposition, United Masonry's reply, and the entire record herein, the Court grants the motion in part and denies it in part.

 Background

 The background of this longstanding case has been addressed in the Court's prior opinions. See Arakelian v. National Western Life Insurance Co., 724 F. Supp. 1033 (D.D.C. 1989); Arakelian v. National Western Life Insurance Co., 126 F.R.D. 1 (D.D.C. 1989); Arakelian v. National Western Life Insurance Co., 680 F. Supp. 400 (D.D.C. 1987). However, little has been said to date about defendant United Masonry. United Masonry employed five of the named plaintiffs. *fn1" United Masonry enrolled them in its newly-adopted pension plan, which had been developed by National Western Life Insurance Company (National Western), and deducted from their pay amounts otherwise required to be paid to them in wages under the Davis-Bacon Act. Those deductions were sent to National Western on behalf of the individuals working for United Masonry. United Masonry adopted the National Western Life Insurance Company's Builders, Contractors, and Employees Retirement Trust and Pension Plan (Plan) on April 15, 1983, after receiving information about the Plan from Jacob Weiss. *fn2" See United Masonry's Motion for Summary Judgment, Exhibit 7. The Plan was characterized as a way to lower costs while helping employees. In the information provided to United Masonry were examples which showed how an employer could pay $ 7.50 towards the plan; pay the employee $ 9.00, and save $ 2.34 per Davis-Bacon employee, per hour. *fn3" United Masonry paid exorbitant amounts into National Western's Plan, using the suggested calculation which subtracted the going wage from the Davis-Bacon required wage. This "leveling out" formula allowed United Masonry to equalize take home pay for its employees on Davis-Bacon and non-prevailing wage jobs. United Masonry paid into the Plan from June 1983 until March 18, 1984. During that time United Masonry claims that it believed it was acting in compliance with the Plan and the applicable laws. This is in spite of a meeting called by Maria Ortiz, an official of the United States Housing and Urban Development Agency (HUD), in August 1983 to discuss complaints received by HUD about United Masonry's contributions and HUD's concerns about the contributions. *fn4" On August 20, 1984, United Masonry received a letter from Ortiz which stated that HUD had investigated the pension plan payments made by United Masonry between the dates of June 4, 1983, and January 14, 1984. Those investigations revealed that United Masonry was contributing over 50% of the employees' weekly gross earnings to the Plan. Again United Masonry contacted National Western. At first National Western claimed that its leveling-out plan was completely legitimate; however, on October 10, 1984, National Western sent United Masonry a letter saying that the Department of Labor (DoL) had changed its interpretation of the level of acceptable contributions and now employers were not to contribute in excess of 25% of the employees' hourly basic cash wage. *fn5" On October 24, 1984, HUD informed United Masonry that it had to refund the excess contributions and set forth the exact manner in which the refunding process was to be accomplished. *fn6" On February 12, 1985, United Masonry submitted its calculations as to the excess contributions to HUD. On April 24, 1985, HUD verified and approved the calculations and gave United Masonry the exact procedures for restitution. On May 17, 1985, United Masonry sent the appropriate checks to all employees except those who already had requested their funds from National Western. *fn7" United Masonry also paid the applicable taxes on the excesses. No taxes were paid on the excesses already repaid, via National Western, to the employees. See United Masonry's Motion for Summary Judgment, Exhibit 27.

 Discussion

 Plaintiffs argue that United Masonry is liable on several grounds. First, plaintiffs argue that United Masonry knowingly aided and abetted National Western and its trustees in a number of fiduciary breaches, and, as a result, financially benefitted. Second, plaintiffs argue that United Masonry is an ERISA fiduciary since it "exercised discretionary and other authority . . . for certain purposes, and breached various fiduciary duties." See Plaintiffs' opposition at 5. Specifically, plaintiffs claim that United Masonry breached its fiduciary duties under ERISA by (1) adopting the Plan; (2) failing to monitor the performance of National Western and the Trustees in administering the Plan; (3) remaining in the Plan when it plainly violated ERISA; (4) setting contribution levels above the 25% limitation; (5) failing to pay taxes on the refunded money and failing to pay interest on the payments; and (6) making late contribution payments to the Plan.

 Defendant United Masonry argues, among other things, that it did not aid and abet in any fiduciary breaches, that it is not a fiduciary under the terms of ERISA, and that plaintiffs cannot allege such claims as they were not alleged in the complaint.

 Aiding and Abetting

 While there is no statutory cause of action under ERISA against non-fiduciaries for aiding and abetting a fiduciary in ERISA breaches, non-fiduciaries have been found liable for ERISA violations. See Whitfield v. Lindemann, 853 F.2d 1298 (5th Cir. 1988), cert. denied, Klepak v. Dole, 490 U.S. 1089, 109 S. Ct. 2428, 104 L. Ed. 2d 986 (1989); Brock v. Hendershott, 840 F.2d 339, 342 (6th Cir. 1988); Lowen v. Tower Asset Management, Inc., 829 F.2d 1209, 1220-21 (2d Cir. 1987); Fink v. National Savings & Trust Co., 249 U.S. App. D.C. 33, 772 F.2d 951, 958 (D.C. Cir. 1985); Thornton v. Evans, 692 F.2d 1064 (7th Cir. 1982); Pension Fund-Mid Jersey Trucking Industry-Local 701 v. Omni Funding Group, 731 F. Supp. 161 (D.N.J. 1990); Foltz v. U.S. News & World Report, Inc., 627 F. Supp. 1143, 1168 (D.D.C. 1986); Donovan v. UMIC, Inc., 580 F. Supp. 1455 (S.D.N.Y. 1984); Donovan v. Bryans, 566 F. Supp. 1258 (E.D. Pa. 1983); Donovan v. Daugherty, 550 F. Supp. 390 (S.D. Ala. 1982); Freund v. Marshall & Ilsley Bank, 485 F. Supp. 629 (W.D. Wis. 1979). In order to find a non-fiduciary liable for aiding and abetting, it must be shown that it gave knowing and substantial aid in the breach. Some circuits also have required a showing that the non-fiduciary derived direct financial benefit from the harm. See, e.g., Thornton v. Evans, 692 F.2d 1064; Fremont McGraw-Edison Co., 606 F.2d 752, 759 (7th Cir. 1979), cert. denied, 445 U.S. 951, 100 S. Ct. 1599, 63 L. Ed. 2d 786 (1980); Donovan v. Daugherty, 550 F. Supp. at 410, 411.

 Plaintiffs argue that regardless of the complexity of the ERISA laws, United Masonry should have known that its payments were in excess of the acceptable payments. Plaintiffs contend that United Masonry knew or should have known that it was acting in violation of ERISA by contributing in excess of 25% of its employees' wages to the Plan.

 It is clear to the Court that National Western led United Masonry to believe that its actions were lawful. First, National Western, in conjunction with Benefits, Inc., told plaintiffs that the leveling calculations were lawful. *fn8" The only notation of a 25% limit is noted in one line in the Plan which states that contributions are not to exceed 25% of a participant's annual wages. National Western minimized this point. For example, National Western provided United Masonry with a DoL letter which stated in part:

 
Although it is true that there is no maximum amount which can be credited for "bona fide" fringe benefits, the amount must represent the actual costs or contribution rate required to provide benefits for the employee in question.

 See United Masonry's Motion, Exhibit 8, at 87.

 Second, National Western gave the leveling formula to United Masonry. National Western's benefit "administration kit" and sales material, as discussed above, set forth examples in which more than 25% of the employee's wage was contributed to the Plan. Furthermore, in the "administration kit" given to United Masonry, via Benefits, Inc., National Western stated that an employer could determine how much to pay ...


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