Вы находитесь на странице: 1из 2

102. Donovan v.

Bierwirth - ida chua Topic: Fiduciary Duties of Officials Facts: Defendants, trustees of corporate pension plan, appealed the order of the District Court for the Eastern District of New York, which granted a temporary injunction against their buying, selling, or exercising any rights with respect to the plans corporate securities, and which appointed a receiver with respect to securities it held. Plaintiff Secretary of Labor filed the suit due to the failure of a tender offer of stock made by defendants. The Secretary of Labor brought suit under ERISA, 29 U.S.C.S. 1132(e)(1) against defendants, trustees of corporate pension plan, alleging breach of fiduciary duties arising from the unsuccessful tender offer of the stock of a corporation for the outstanding common stock and convertible securities of the corporation of defendants. The district court preliminarily enjoined defendants from buying, selling, or exercising any rights with respect to its securities, and directed the appointment of a receiver to serve as an investment manager for the securities owned by the plan. Defendants appealed arguing that they did not violate their fiduciary duties by following a course of action with respect to the plan, which benefited the corporation as well as the beneficiaries. The court affirmed the order of the district court, finding that defendants failed to observe the high standard of duty placed upon them, that they should have acquired legal advice, and that they should have investigated whether anything could have been done to protect the fund in the event of an acquisition of its corporation by another company. Issue: Whether the appointment of an Investment Manager to act as receiver pendente lite. They insist that the Investment Manager is in fact a partial trustee; that, under 7.01 of the Plan and 2(c) and 10 of the Trust Agreement, new trustees can be appointed only by the Grumman board; and that the proposal for the appointment by the non-management directors of three of their number as interim trustees filled whatever need there was to replace the existing trustees. Held: Although ERISA does not provide specifically for the appointment of a receiver in an action by the Secretary under 1132(a)(5), such power is conferred by the provision authorizing him to seek "other appropriate equitable relief." See Marshall v. Snyder, 572 F.2d 894, 901 (2 Cir. 1978). The contention that in exercising this power a court is constrained by the provisions of a plan does not require comment. See Restatement of Trusts 2d 199d, Comment d (1959). Still the appointment of a receiver is a harsh remedy, [**45] not to be imposed without a showing of necessity. Ratio: The order of the district court was affirmed because defendants, trustees of corporate pension plan, failed to measure up to the high standards imposed by statute when as fiduciaries they failed to seek expert advise with regard to the tender offer of corporate stock.

One appropriate remedy in cases of breach of fiduciary duty is the restoration of the trust beneficiaries to the position they would have occupied but for the breach of trust. The measure of loss applicable under ERISA section 409 requires a comparison of what the Plan actually earned on the investment with what the Plan would have earned had the funds been available for other Plan purposes. If the latter amount is greater than the former, the loss is the difference between the two; if the former is greater, no loss was sustained. A fiduciary must discharge his duties solely in the interest of the plans participants and beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable expenses of administration. ERISA Section 404(a)(1)(A). This rule is based on the common law trust duty of undivided loyalty. In the seminal case, Donovan v. Bierwirth, 680 F.2d 263, 271 (2d Cir. 1982), the Second Circuit interpreted this duty to require that a fiduciarys decision be made with an eye single to the interests of [plan] participants and beneficiaries. A fiduciarys use of its control over plan assets to extract concessions from a plan violates the exclusive purpose rule. A fiduciary may not engage in balancing of interests as ERISA requires undivided loyalty to the plan participants. A fiduciary does not violate this duty of loyalty if his actions incidentally benefit the fiduciary or another party so long as the actions are taken solely with the interests of the participants and beneficiaries in mind

Вам также может понравиться