Labor Department Wins $4.7 Million in ERISA Lawsuit

Trenton, NJAn ERISA lawsuit filed in 2005 by the Department of Labor has resulted in a $4.7 million judgment against the fiduciaries of the Professional Industrial Trade Workers Union (PITWU) Health & Welfare Fund. The ERISA plan complaint alleged that the fiduciaries violated their duties by compensating themselves for their services through employer contributions.

The lawsuit was initially filed in 2005 and originally resulted in a district court ruling in favor of the fiduciaries. In 2012, however, the US Court of Appeals for the Third Circuit found in favor of the Department of Labor and remanded the lawsuit to district court. The district court found that payments to administrators were assets of the fund and should not have been remitted to the administrators.

According to court documents, the district court found that the defendants breached their fiduciary duties, including by allowing more than 60 percent of the fund’s assets to go toward paying commissions and fees. One former trustee for the fund was found to have breached fiduciary duty because she did not investigate suspicious activities involving the fund.

The court found that although the former trustee resigned, that did not absolve her of her duties. According to the lawsuit, the trustee, Cynthia Holloway, resigned for several reasons, “including the lack of financial accountability for contributions to the Fund and resulting lack of funding to pay claims. She described the ‘vulnerability of the Fund due to actions taken by membership that has created insolvency of the Fund.’”

Court documents note that cease and desist orders from multiple states were sent to the Professional Industrial Trade Workers Union and other entities associated with the multiple employer welfare arrangement (MEWA). Despite her concerns, however, Holloway did not demand an audit of the funds.

The Secretary of Labor also alleged that James Doyle was a plan fiduciary because he, as head of PCMG (Privileged Care Marketing Group), had control over plan assets. Therefore, according to the Secretary, Doyle was subject to fiduciary duties.

The court found that both Doyle and Holloway were plan fiduciaries and therefore bound by fiduciary duties including prudence and loyalty. As a result, Holloway was made jointly liable for restoring $4.7 million to the fund and Doyle was made jointly liable for restoring $3.9 million to the fund.