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DONAHEY v. CHILDS EQUIP. CO.

October 1, 1992

EDWARD DONAHEY, Plaintiff,
v.
CHILDS EQUIPMENT CO., INC., a Pennsylvania corporation; CHILDS EQUIPMENT CO., INC. PROFIT SHARING PLAN AND TRUST, a Pennsylvania pension plan; MONTY LILLEY, Trustee for the Childs Equipment Co., Inc. Profit Sharing Plan and Trust; and PATRICIA LILLEY, Co-Trustee for the Childs Equipment Co., Inc. Profit Sharing Plan and Trust, Defendants.


Bloch


The opinion of the court was delivered by: ALAN N. BLOCH

MEMORANDUM OPINION

BLOCH, District J.

 This action involves the claim of plaintiff Edward Donahey that Childs Equipment Co., Inc. Profit Sharing Plan and Trust (the Plan) failed to pay him benefits due and owing to him according to its terms. Additionally, plaintiff has alleged that the trustees, Monty and Patricia Lilley have breached their fiduciary duty to him, causing the failure to pay benefits.

 Defendant Monty Lilley's activities, the reason for the instant action, are abhorrent. The stipulation of facts contained within the plea agreement reached between the United States and Monty Lilley establishes that Monty Lilley virtually wiped out the Plan's funds by converting assets to his own personal use. Monty Lilley used the funds in the Plan to purchase the Company from its prior owner; to pay back rent owned by defendant Monty Lilley's real estate company; to pay back rent on his personal residence; to pay corporate debts of the Company; to make a deposit on the purchase of his personal residence; to pay the balance of the closing costs on his personal residence; and to purchase a $ 10,000 Harley Davidson motorcycle. From the Plan's assets in excess of $ 3 million, defendant embezzled and willfully appropriated all except approximately $ 3,000.

 The people harmed by Lilley's conduct are, of course, the Plan's beneficiaries. Plaintiff is one such beneficiary and is seeking a judgment against defendant Monty Lilley for the amount of money plaintiff had fully vested in the Plan, that is $ 85,731. *fn1" The question before the Court is whether plaintiff is entitled to a judgment against defendant Monty Lilley for that amount. The answer is no.

 Before turning to a discussion of this question, certain undisputed facts should be stated. The Plan is a retirement plan governed by the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq. The Plan was adopted by the Company effective January 28, 1965, as amended on August 14, 1985. Plaintiff Edward Donahey was and continues to be a participant in the Plan. Plaintiff's account balance as of December 31, 1989, was $ 85,731, and was fully vested and not subject to forfeiture.

 There is no doubt that plaintiff has the statutory authority to sue "in a representative capacity on behalf of the Plan as a whole." Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134, 142 n. 9 (1985); 29 U.S.C. § 1132(a)(2). Nonetheless, § 1132(a)(2) specifically incorporates § 1109 which allows liability for breach of fiduciary duty to accrue only to the Plan itself, not the participants suing in their individual capacities. 29 U.S.C. § 1109; Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1162 n. 7 (3d Cir. 1990); McMahon v. McDowell, 794 F.2d 100, 109 (3d Cir.), cert. denied, 479 U.S. 971 (1986).

 Although it is clear that plaintiff is not entitled to recover directly from a fiduciary under § 1132(a)(2) and § 1109, see Hozier, 908 F.2d at 1162 n. 9, plaintiff is asserting that "other civil enforcement vehicles are readily available under ERISA" which allow such direct recovery. (Plaintiff's response at 2). Specifically, plaintiff alleges that § 1132(a)(1)(B) and § 1132(a)(3) are remedial provisions that justify a direct recovery from the trustee. *fn2"

 This Court first examines the § 1132(a)(1)(B) claim. Section 1132(a)(1)(B) provides that a civil action may be brought "to recover benefits due to [the plaintiff] under the terms of his Plan, to enforce his rights under the terms of the Plan, or to clarify his rights to future benefits under the terms of the Plan." Claims made under this section are "personal in nature and seek to declare the plaintiff beneficiary's rights under the Plan. . . ." McMahon, 794 F.2d at 109 (quoting Livolsi v. R.A.M. Construction Co., 728 F.2d 600 (3d Cir. 1984)); Gruber v. Hubbard Bert Karle Weber, Inc., 675 F. Supp. 281, 283 (W.D. Pa. 1987). In this suit, there is no dispute as to plaintiff's rights under the Plan or the amount of money plaintiff is entitled to. The present case transcends the individual claim and concerns the broader questions of the fundamental administration of the Plan. Gruber, 675 F. Supp. at 283. See generally Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101 (1989) (§ 1132(a)(1)(B) action for denial of benefits based on Plan interpretation by trustee); Hozier, 908 F.2d at 1162-63 (§ 1132(a)(1)(B) action for interpretation of terms of defendants' severance plan). As stated by plaintiff in his brief in support of his motion for summary judgment, "the only issue remaining for this Court to decide is whether the reduction to less than $ 10,000 of a pension fund which only a few years ago held more than $ 3 million was the result of a breach of fiduciary duty by the defendant, Monty Lilley." (Plaintiff's brief in support at P 2).

 The Third Circuit, in McMahon, supra, held that a claim for damages for breach of fiduciary duty, although styled as a § 1132(a)(1)(B) claim, can only be brought pursuant to § 1132(a)(2), and any damages recovered do "not go to any individual Plan participant or beneficiary, but inures to the benefit of the Plan as a whole." McMahon, 794 F.2d at 109. See also Hozier, 908 F.2d at 1162. As such, this Court finds that § 1132(a)(1)(B) does not justify plaintiff's direct recovery of damages from the defendant trustee.

 The second statutory provision alleged by plaintiff to justify direct recovery is § 1132(a)(3), which states that a civil action may be brought:

 
by a participant, beneficiary, or fiduciary . . . to obtain other appropriate equitable relief to redress such violations or to enforce any provisions of this subchapter or the terms of the Plan.

 29 U.S.C. § 1132(a)(3). Actions brought under this section are "more broad-based, drawing the Court's remedial focus to structural, systematic violations of the ERISA scheme." Livolsi, 728 F.2d at 602 (comparing § 1132(a)(3) claims with § 1132(a)(1)(B) claims). Just as the instant claim is not "personal in nature," neither is it "broad-based" in nature. In Livolsi, the Court found a § 1132(a)(3) claim because the plaintiffs were not beneficiaries of the Plan and plaintiffs ...


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