Selected docket entries for case 10-5480 Generated: 12/23/2010 16:43:28 Filed Document Description Page Docket Text 04/28/2010 Case Opening Letter 4 Bankruptcy Case Docketed. Notice filed by Appellant John C. McLemore. Transcript needed: n. 04/28/2010 The case manager for this case is: Diane Schnur 05/04/2010 appearance form 7 APPEARANCE filed for Appellant John C. McLemore and Debtor 1 Point Solutions, LLC by Phillip G. Young, Jr.. Certificate of Service: 05/04/2010. 05/04/2010 APPEARANCE filed for Appellant John C. McLemore and Debtor 1 Point Solutions, LLC by Robert M. Garfinkle. Certificate of Service: 05/04/2010. (Attorney instructed to refile using the correct login information)--[Edited 05/07/2010 by DS] 05/05/2010 civil appeal statement of parties and issues 8 CIVIL APPEAL STATEMENT OF PARTIES AND ISSUES filed by Attorney Mr. Robert Martin Garfinkle for Appellant John C. McLemore. Certificate of Service:05/05/2010. 05/05/2010 transcript order 9 TRANSCRIPT ORDER FORM filed by Mr. Robert Martin Garfinkle for John C. McLemore; No hearings held in District Court. Certificate of Service: 05/05/2010. 05/06/2010 appearance form 11 APPEARANCE filed for Appellee Regions Bank by John R. Wingo. Certificate of Service: 05/06/2010. 05/06/2010 APPEARANCE filed for Appellee Regions Bank by Matthew C. Blickensderfer. Certificate of Service: 05/06/2010. (Attorney instructed to refile using the correct login information)--[Edited 05/07/2010 by DS] 05/06/2010 corporate disclosure 12 CORPORATE DISCLOSURE STATEMENT filed by Attorney Mr. John Rex Wingo for Appellee Regions Bank Certificate of Service: 05/06/2010. 05/07/2010 appearance form 13 APPEARANCE filed for Appellee Regions Bank by Matthew C. Blickensderfer. Certificate of Service: 05/07/2010. 05/07/2010 motion 14 MOTION filed by Mr. Robert Martin Garfinkle for John C. McLemore to consolidate cases 10-5941. Certificate of Service: 05/07/2010. 05/07/2010 appearance form 16 APPEARANCE filed for Appellant John C. McLemore by Robert M. Garfinkle. Certificate of Service: 05/07/2010. 05/21/2010 ORDER filed to consolidate for briefing and submission cases 10-5480, 10-5491. [10-5480, 10-5491] Clerk Order-Consolidate Briefing and Sub 17 Cover Letter 19 06/16/2010 Briefing Letter 21 BRIEFING LETTER SENT setting briefing schedule: appellant brief due 07/26/2010;. appellee brief due 08/30/2010. [10-5480, 10-5491] 1
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Transcript
Selected docket entries for case 10−5480
Generated: 12/23/2010 16:43:28
Filed Document Description Page Docket Text
04/28/2010 Case Opening Letter 4 Bankruptcy Case Docketed. Notice filed by Appellant JohnC. McLemore. Transcript needed: n.
04/28/2010 The case manager for this case is: Diane Schnur
05/04/2010 appearance form 7 APPEARANCE filed for Appellant John C. McLemore andDebtor 1 Point Solutions, LLC by Phillip G. Young, Jr..Certificate of Service: 05/04/2010.
05/04/2010 APPEARANCE filed for Appellant John C. McLemore andDebtor 1 Point Solutions, LLC by Robert M. Garfinkle.Certificate of Service: 05/04/2010. (Attorney instructed torefile using the correct login information)−−[Edited05/07/2010 by DS]
05/05/2010 civil appeal statement of partiesand issues
8 CIVIL APPEAL STATEMENT OF PARTIES ANDISSUES filed by Attorney Mr. Robert Martin Garfinkle forAppellant John C. McLemore. Certificate ofService:05/05/2010.
05/05/2010 transcript order 9 TRANSCRIPT ORDER FORM filed by Mr. Robert MartinGarfinkle for John C. McLemore; No hearings held inDistrict Court. Certificate of Service: 05/05/2010.
05/06/2010 appearance form 11 APPEARANCE filed for Appellee Regions Bank by JohnR. Wingo. Certificate of Service: 05/06/2010.
05/06/2010 APPEARANCE filed for Appellee Regions Bank byMatthew C. Blickensderfer. Certificate of Service:05/06/2010. (Attorney instructed to refile using the correctlogin information)−−[Edited 05/07/2010 by DS]
05/06/2010 corporate disclosure 12 CORPORATE DISCLOSURE STATEMENT filed byAttorney Mr. John Rex Wingo for Appellee Regions BankCertificate of Service: 05/06/2010.
05/07/2010 appearance form 13 APPEARANCE filed for Appellee Regions Bank byMatthew C. Blickensderfer. Certificate of Service:05/07/2010.
05/07/2010 motion 14 MOTION filed by Mr. Robert Martin Garfinkle for John C.McLemore to consolidate cases 10−5941. Certificate ofService: 05/07/2010.
05/07/2010 appearance form 16 APPEARANCE filed for Appellant John C. McLemore byRobert M. Garfinkle. Certificate of Service: 05/07/2010.
05/21/2010 ORDER filed to consolidate for briefing and submissioncases 10−5480, 10−5491. [10−5480, 10−5491] Clerk Order−Consolidate Briefing
and Sub17
Cover Letter 19
06/16/2010 Briefing Letter 21 BRIEFING LETTER SENT setting briefing schedule:appellant brief due 07/26/2010;. appellee brief due08/30/2010. [10−5480, 10−5491]
07/26/2010 appellant brief 23 APPELLANT BRIEF filed by Mr. Robert Martin Garfinklefor John C. McLemore. Certificate of Service:07/26/2010.Argument Request: requested.
08/05/2010 corporate disclosure 63 CORPORATE DISCLOSURE STATEMENT filed byAttorney Mr. Robert Martin Garfinkle for Appellant JohnC. McLemore Certificate of Service: 08/05/2010.
08/23/2010 motion 65 MOTION filed by Mr. Matthew C. Blickensderfer forRegions Bank in 10−5480, 10−5491 to extend time to filebrief. Certificate of Service: 08/23/2010. [10−5480,10−5491]
08/23/2010 Reset Briefing Schedule Letter 68 LETTER SENT granting motion to extend time to file brief[4236530−2] filed by Mr. Matthew C. Blickensderfer forRegions Bank in 10−5480, resetting briefing schedule:appellee brief now due 09/20/2010. [10−5480, 10−5491]
09/14/2010 motion 70 MOTION filed by Mr. Matthew C. Blickensderfer forRegions Bank in 10−5480, 10−5491 to extend time to filebrief. Certificate of Service: 09/14/2010. [10−5480,10−5491]
09/14/2010 Reset Briefing Schedule Letter 73 LETTER SENT granting motion to extend time to file brief[4248207−2] filed by Mr. Matthew C. Blickensderfer forRegions Bank, resetting briefing schedule: appellee briefnow due 10/04/2010. [10−5480, 10−5491]
09/30/2010 motion 75 MOTION filed by Mr. Matthew C. Blickensderfer forRegions Bank in 10−5480, 10−5491 to extend time to filebrief. Certificate of Service: 09/30/2010. [10−5480,10−5491]
10/04/2010 appellee brief 79 APPELLEE BRIEF filed by Mr. Matthew C.Blickensderfer for Regions Bank in 10−5480, 10−5491.Certificate of Service:10/04/2010. Argument Request:waived. [10−5480, 10−5491]
10/12/2010 Cover Letter 120 LETTER SENT granting motion to extend time to file brief[4257784−2] filed by Mr. Matthew C. Blickensderfer forRegions Bank. [10−5480, 10−5491]
10/13/2010 motion 121 MOTION filed by Mr. Robert Martin Garfinkle for John C.McLemore to extend time to file brief. Certificate ofService: 10/13/2010.
10/14/2010 Cover Letter 124 LETTER SENT granting motion to extend time to filereply brief [4265000−2] filed by Mr. Robert MartinGarfinkle for John C. McLemore. Appellant's reply brief isnow due by 11/12/2010. [10−5480, 10−5491]
11/12/2010 REPLY filed by Mr. Robert Martin Garfinkle for John C.McLemore regarding brief of Appellee. Certificate ofService: 11/12/2010. [10−5480, 10−5491] (Counselinstructed to refile as reply brief.)−−[Edited 11/15/2010 byDS]
11/16/2010 reply brief 125 REPLY BRIEF filed by Attorney Mr. Robert MartinGarfinkle for Appellant John C. McLemore. Certificate ofService:11/16/2010.
11/19/2010 appearance form 149 APPEARANCE filed for Amicus Curiae DOL by LeonardH. Gerson. Certificate of Service: 11/19/2010.
11/19/2010 motion to file amicus brief 150 MOTION to file AMICUS BRIEF filed by Leonard HGerson for Hida L. Solis, Secretary of the U.S. Departmentof Labor. Certificate of Service: 11/19/2010.
11/19/2010 amicus curiae brief 155 AMICUS BRIEF filed by Mr. Leonard Howard Gerson forDOL. Certificate of Service:11/19/2010.
11/22/2010 Cover Letter 184 LETTER SENT granting motion to file amicus brief out oftime. [4287469−2].
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Leonard Green Clerk
100 EAST FIFTH STREET, ROOM 540 POTTER STEWART U.S. COURTHOUSE
CINCINNATI, OHIO 45202-3988 Tel. (513) 564-7000
www.ca6.uscourts.gov
Filed: April 28, 2010 Mr. Robert Martin Garfinkle Garfinkle, McLemore & Walker 2000 Richard Jones Road Suite 250 Nashville, TN 37215 Mr. John Rex Wingo Frost Brown Todd 424 Church Street Suite 1600 Nashville, TN 37219
Re: Case No. 10-5480, In re: 1 Point Solutions, LLC, et al v. Regions Bank Originating Case No. : 08-00021
Dear Counsel,
This appeal has been docketed as case number 10-5480 with the caption that is enclosed on a separate page. The appellate case number and caption must appear on all filings submitted to the Court.
Before preparing any documents to be filed, counsel are strongly encouraged to read the Sixth Circuit Rules at www.ca6.uscourts.gov. If you have not established a PACER account and registered with this court as an ECF filer, you should do so immediately. Your password for district court filings will not work in the appellate ECF system.
The following forms should be downloaded from the web site and filed with the Clerk's office by May 12, 2010.
Appellant:
Appearance of Counsel Civil Appeal Statement of Parties & Issues Disclosure of Corporate Affiliations (if applicable) Application for Admission to 6th Circuit Bar (if applicable)
Appearance of Counsel Disclosure of Corporate Affiliations (if applicable) Application for Admission to 6th Circuit Bar (if applicable)
More specific instructions are printed on each form. If appellant's initial forms are not timely filed, the appeal will be dismissed for want of prosecution. If you have questions after reviewing the forms and the rules, please contact the Clerk's office for assistance.
Sincerely yours,
s/Diane Schnur Case Manager Direct Dial No. 513-564-7037 Fax No. 513-564-7094
In re: 1 POINT SOLUTIONS, LLC, Debtor ------------------------------ JOHN C. MCLEMORE, Trustee, Appellant EFS, INC. v. REGIONS BANK, as Successor in Interest by Merger to AmSouth Bank, Appellee
UNITED STATES COURT OF APPEALSFOR THE SIXTH CIRCUIT
Appearance of Counsel
Sixth CircuitCase No.: Case Manager:
Case Name: vs.
Client’s or Clients’ Name(s): (List all clients on this form, do not file a separate appearance form for each client.)
AppellantAppellee
PetitionerRespondent
Amicus CuriaeIntervenor
Criminal Justice Act (Appointed)
Lead counsel must be designated if a party is represented by more than one attorney or law
firm. Check if you are lead counsel.
Name: Admitted: (Sixth Circuit admission date only)
Signature:
Firm Name:
Business Address:
Suite: City/State/Zip:
Telephone Number: (Area Code) Fax:
Primary E-mail Address:
Additional E-mail Address:
CERTIFICATE OF SERVICE
I certify that on _____________________________________ the foregoing document was served on all parties ortheir counsel of record through the CM/ECF system if they are registered users or, if they are not, by placing a trueand correct copy in the United States mail, postage prepaid, to their address of record.
READ INSTRUCTIONS ON THE NEXT PAGETRANSCRIPT ORDER
List on this form all transcript you are ordering from one court reporter. Use a separate form for each reporter and docket each form separately in the Sixth Circuit ECF database.
District Court District Court Docket Number
Short Case Title
Date Notice of Appeal Filed by Clerk of District Court COA#
PART 1 (TO BE COMPLETED BY PARTY ORDERING TRANSCRIPT, THE FORM MUST BE SIGNED WHETHER OR NOT TRANSCRIPT IS ORDERED).
A. Complete one of the following:
No Hearings
Transcript is unnecessary for appeal purposes
Transcript is already on the file in District Court Clerk’s Office
This is to order a transcript of the following proceedings: (specify exact dates of proceedings)
JUDGE MAGISTRATE HEARING DATE(S) COURT REPORTER
Pre-trial proceedings
Testimony (specify witnesses)
Other (specify)
TRANSCRIPT OF THE FOLLOWING PROCEEDINGS WILL BE PROVIDED ONLY IF SPECIALLY AUTHORIZED. SEE ITEM 13 CJA FORM 24
Voir Dire Opening statement of plaintiff Opening statement of defendant
Jury Instructions Closing argument of plaintiff Closing argument of defendant
FAILURE TO SPECIFY IN ADEQUATE DETAIL THOSE PROCEEDINGS TO BE TRANSCRIBED, OR FAILURE TO MAKE PROMPT SATISFACTORY FINANCIAL ARRANGEMENTSFOR TRANSCRIPT, ARE GROUNDS FOR DISMISSAL OF THE APPEAL.
B. This is to certify that satisfactory financial arrangements have been completed with the court reporter for payment of the cost of the transcript.
This method of payment will be:
Criminal Justice Act (Attach copy of CJA Form 24)
Private Funds
Date:
Signature Print Name Counsel for
Address Telephone
ALLOWANCE BY THE COURT OF LEAVE TO PROCEED IN FORMA PAUPERIS IN A CIVIL APPEAL
DOES NOT ENTITLE THE LITIGANT TO HAVE TRANSCRIPT AT GOVERNMENT EXPENSE.
PART II. COURT REPORTER ACKNOWLEDGMENT (To be completed by the Court Reporter and forwarded to the Court of Appeals within 10 days after receipt).
Date transcript order received
Estimated completion date; if not within 45 days of the date financialarrangements made, motion for extension to be made to Court of Appeals
Estimated number of pages
Arrangements for payment were made onArrangements for payment have not been made pursuant to FRAP (10(b))
Date Signature of Court Reporter Telephone
PART III. NOTIFICATION THAT TRANSCRIPT HAS BEEN FILED IN THE DISTRICT COURT (To be completed by Court Reporter on date of filing transcript in District Courtand notification must be forwarded to Court of Appeals on the same date).
This is to certify that the transcript has been completed and filed with the District Court today.
YOU HAVE TEN DAYS AFTER FILING YOUR NOTICE OF APPEAL TO COMPLETE THIS FORM BY DOING THEFOLLOWING:
1. Complete Part 1. Sign the form whether or not transcript is ordered. If ordering transcript list on theform all transcript being ordered from one court reporter.
2. Contact each court reporter involved in reporting the proceedings to make arrangements for payment. A separate transcript order form must be prepared for each court reporter and then docketseparately in the Sixth Circuit ECF database.
3. Send four (4) copies to each court reporter.
4. Attorney’s must electronically file with the Clerk’s office. Pro Se litigants are to mail the form.
Clerk’s Office Mailing Address
United States Court of Appeals540 Potter Stewart U.S. Courthouse100 East Fifth StreetCincinnati, Ohio 45202
5. Send a copy to appellee(s). Make additional photocopies if necessary.
6. Retain a copy for your files.
SHOULD SATISFACTORY ARRANGEMENTS FOR TRANSCRIPT PRODUCTION, INCLUDING NECESSARYFINANCIAL ARRANGEMENTS, NOT BE MADE WITHIN TEN (10) DAYS AFTER FILING YOUR NOTICE OF APPEAL,YOUR APPEAL CAN BE DISMISSED.
If you have further questions, contact the Clerk's Office, U.S. Court of Appeals for the Sixth Circuit:513-564-7000.
UNITED STATES COURT OF APPEALSFOR THE SIXTH CIRCUIT
Appearance of Counsel
Sixth CircuitCase No.: Case Manager:
Case Name: vs.
Client’s or Clients’ Name(s): (List all clients on this form, do not file a separate appearance form for each client.)
AppellantAppellee
PetitionerRespondent
Amicus CuriaeIntervenor
Criminal Justice Act (Appointed)
Lead counsel must be designated if a party is represented by more than one attorney or law
firm. Check if you are lead counsel.
Name: Admitted: (Sixth Circuit admission date only)
Signature:
Firm Name:
Business Address:
Suite: City/State/Zip:
Telephone Number: (Area Code) Fax:
Primary E-mail Address:
Additional E-mail Address:
CERTIFICATE OF SERVICE
I certify that on _____________________________________ the foregoing document was served on all parties ortheir counsel of record through the CM/ECF system if they are registered users or, if they are not, by placing a trueand correct copy in the United States mail, postage prepaid, to their address of record.
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
In re: 1POINT SOLUTIONS, LLC, Debtor. ----------------------------- JOHN C. McLEMORE, TRUSTEE, Appellant, v. Case No. 10-5480 REGIONS BANK, as Successor in Interest by Merger to AmSouth Bank, Appellee.
APPELLANT’S MOTION TO CONSOLIDATE THIS APPEAL WITH APPEAL NUMBER 10-5941
Appellant John C. McLemore, Trustee, respectfully moves the Court, pursuant to Federal
Rule of Appellate Procedure 3(b)(2), to consolidate this appeal with appeal number 10-5491.
These two cases were consolidated in the District Court below because they raise virtually
identical claims and issues as to the same defendant, Regions Bank. Also, the issues on appeal
are the same in each case and concern the same rulings by the trial court.
Appellant submits that it would be most efficient for the Court and the parties if the two
An identical motion is being filed by Appellants in case number 10-5491.
Respectfully submitted,
GARFINKLE, McLEMORE & YOUNG, PLLC /s/ Robert M. Garfinkle Robert M. Garfinkle Tn. Bar No. 5354 2000 Richard Jones Rd., Ste. 250 Nashville, TN 37125-8249 (615) 383-9495 (phone) (615) 292-9848 (fax) [email protected] Attorney for the Appellant
CERTIFICATE OF SERVICE
I certify that this document has been filed on May 7, 2010, with the Court’s ECF system and will be forwarded to : John R. Wingo Matthew C. Blickensderfer Frost Brown Todd LLC Frost Brown Todd LLC 424 Church Street, Suite 1600 2200 PNC Center, 201 East Fifth Street Nashville, TN 37219 Cincinnati, OH 45202 Attorneys for Regions Bank /s/ Robert M. Garfinkle Robert M. Garfinkle
UNITED STATES COURT OF APPEALSFOR THE SIXTH CIRCUIT
Appearance of Counsel
Sixth CircuitCase No.: Case Manager:
Case Name: vs.
Client’s or Clients’ Name(s): (List all clients on this form, do not file a separate appearance form for each client.)
AppellantAppellee
PetitionerRespondent
Amicus CuriaeIntervenor
Criminal Justice Act (Appointed)
Lead counsel must be designated if a party is represented by more than one attorney or law
firm. Check if you are lead counsel.
Name: Admitted: (Sixth Circuit admission date only)
Signature:
Firm Name:
Business Address:
Suite: City/State/Zip:
Telephone Number: (Area Code) Fax:
Primary E-mail Address:
Additional E-mail Address:
CERTIFICATE OF SERVICE
I certify that on _____________________________________ the foregoing document was served on all parties ortheir counsel of record through the CM/ECF system if they are registered users or, if they are not, by placing a trueand correct copy in the United States mail, postage prepaid, to their address of record.
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
ORDER
In re: 1 POINT SOLUTIONS, LLC, Debtor ------------------------------ JOHN C. MCLEMORE, Trustee, Appellant EFS, INC. v. REGIONS BANK, as Successor in Interest by Merger to AmSouth Bank, Appellee
The court having determined that consolidation of the above causes for purposes of briefing
and submission is appropriate,
It is ORDERED that the causes be and they hereby are consolidated for the purposes stated
above. Each appellant shall file a separate brief and the appellee shall file one consolidated brief.
ENTERED PURSUANT TO RULE 45(a), RULES OF THE SIXTH CIRCUIT Leonard Green, Clerk
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Leonard Green Clerk
100 EAST FIFTH STREET, ROOM 540 POTTER STEWART U.S. COURTHOUSE
CINCINNATI, OHIO 45202-3988 Tel. (513) 564-7000
www.ca6.uscourts.gov
Filed: May 21, 2010
Mr. Matthew C. Blickensderfer Frost Brown Todd 201 E. Fifth Street Suite 2200 PNC Center Cincinnati, OH 45202 Mr. H. Naill Falls Jr. Falls & Veach 1143 Sewanee Road Nashville, TN 37220 Mr. Robert Martin Garfinkle Garfinkle, McLemore & Walker 2000 Richard Jones Road Suite 250 Nashville, TN 37215 Mr. John Rex Wingo Frost Brown Todd 424 Church Street Suite 1600 Nashville, TN 37219 Mr. Phillip Gary Young Jr. Garfinkle, McLemore & Young 22 Public Square Suite 12 Columbia, TN 38401
Re: Case No. 10-5480 /10-5491 , In re: 1 Point Solutions, LLC, et al v. Regions Bank Originating Case No. : 08-00021
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Leonard Green Clerk
100 EAST FIFTH STREET, ROOM 540 POTTER STEWART U.S. COURTHOUSE
CINCINNATI, OHIO 45202-3988 Tel. (513) 564-7000
www.ca6.uscourts.gov
Filed: June 16, 2010 Mr. Matthew C. Blickensderfer Frost Brown Todd 201 E. Fifth Street Suite 2200 PNC Center Cincinnati, OH 45202 Mr. H. Naill Falls Jr. Falls & Veach 1143 Sewanee Road Nashville, TN 37220 Mr. Robert Martin Garfinkle Garfinkle, McLemore & Walker 2000 Richard Jones Road Suite 250 Nashville, TN 37215 Mr. John Rex Wingo Frost Brown Todd 424 Church Street Suite 1600 Nashville, TN 37219 Mr. Phillip Gary Young Jr. Garfinkle, McLemore & Young 22 Public Square Suite 12 Columbia, TN 38401
Re: Case No. 10-5480 /10-5491 , In re: 1 Point Solutions, LLC, et al v. Regions Bank Originating Case No. : 08-00021
The briefing schedule for this case is listed below. The briefs must be filed electronically with the Clerk's office no later than these dates. If the appellant's principal brief is filed late, the case is at risk of being dismissed for want of prosecution.
The Court has ceased its use of the electronic Record on Appeal (ROA). In lieu of the ROA, the Court will access directly the electronic record in the district court. To assist the Court, counsel must include in an addendum in the principal brief, a designation of relevant district court documents, identifying each document by record entry number and a succinct description.
If any relevant documents are not available electronically, the parties must file an electronic appendix with the briefs. To determine if this appeal requires an appendix and how to prepare it, counsel are strongly encouraged to read the latest version of the Sixth Circuit Rules at www.ca6.uscourts.gov, in particular Rules 28 and 30.
Appellant's Principal Brief Appendix (if required by 6th Cir. R. 30(a))
Filed electronically by July 26, 2010
Appellee's Principal Brief Appendix (if required by 6th Cir. R. 30(a)) and (c)(2))
Filed electronically by August 30, 2010
Appellant's Reply Brief (Optional Brief) Filed electronically 17 days after
the appellee's brief. See Fed. R. App. P. 26(c)
A party desiring oral argument must include a statement in the brief setting forth the reason(s) why oral argument should be heard. See 6th Cir. R. 34(a). If the docket entry for your brief indicates that you have requested oral argument but the statement itself is missing, you will be directed to file a corrected brief.
In scheduling appeals for oral argument, the court will do what it can to avoid any dates which counsel have called to its attention as presenting a conflict. If you have any such dates, you should address a letter to the Clerk advising of the conflicted dates.
Sincerely yours,
s/Diane Schnur Case Manager Direct Dial No. 513-564-7037 Fax No. 513-564-7094
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
In re: 1POINT SOLUTIONS, LLC, Debtor, --------------------------------------------- JOHN C. McLEMORE, TRUSTEE, Plaintiff - Appellant, vs. REGIONS BANK, as Successor in Interest by Merger to AmSouth Bank,
Defendant - Appellee.
On Appeal From The United States District Court For The Middle District of Tennessee Nashville Division
BRIEF OF APPELLANT Robert M. Garfinkle, Tn. Bar No. 5354 Phillip G. Young, Jr., Tn. Bar No. 21087 Garfinkle, McLemore & Young, PLLC 2000 Richard Jones Road, Suite 250 Nashville, Tennessee 37215 (615) 383-9495
UNITED STATES COURT OF APPEALSFOR THE SIXTH CIRCUIT
Disclosure of Corporate Affiliationsand Financial Interest
Sixth CircuitCase Number: Case Name:
Name of counsel:
Pursuant to 6th Cir. R. 26.1, Name of Party
makes the following disclosure:
1. Is said party a subsidiary or affiliate of a publicly owned corporation? If Yes, list below theidentity of the parent corporation or affiliate and the relationship between it and the namedparty:
2. Is there a publicly owned corporation, not a party to the appeal, that has a financial interestin the outcome? If yes, list the identity of such corporation and the nature of the financialinterest:
CERTIFICATE OF SERVICE
I certify that on _____________________________________ the foregoing document was served on allparties or their counsel of record through the CM/ECF system if they are registered users or, if they are not,by placing a true and correct copy in the United States mail, postage prepaid, to their address of record.
s/
This statement is filed twice: when the appeal is initially opened and later, in the principal briefs, immediately preceding the table of contents. See 6th Cir. R. 26.1 on page 2 of this form.
John C. McLemore, Trustee v. Regions Bank,as Successor in Interest by Merger to AmSouth Bank
lcornwell
Text Box
Garfinkle, McLemore & Young, PLLC 2000 Richard Jones Road, Suite 250 Nashville, Tennessee 37215
6CA-18/08 Page 2 of 2
6th Cir. R. 26.1DISCLOSURE OF CORPORATE AFFILIATIONS
AND FINANCIAL INTEREST
(a) Parties Required to Make Disclosure. With the exception of the United Statesgovernment or agencies thereof or a state government or agencies or political subdivisions thereof,all parties and amici curiae to a civil or bankruptcy case, agency review proceeding, or originalproceedings, and all corporate defendants in a criminal case shall file a corporate affiliate/financialinterest disclosure statement. A negative report is required except in the case of individual criminaldefendants.
(b) Financial Interest to Be Disclosed.
(1) Whenever a corporation that is a party to an appeal, or which appears as amicuscuriae, is a subsidiary or affiliate of any publicly owned corporation not named in the appeal, counselfor the corporation that is a party or amicus shall advise the clerk in the manner provided bysubdivision (c) of this rule of the identity of the parent corporation or affiliate and the relationshipbetween it and the corporation that is a party or amicus to the appeal. A corporation shall beconsidered an affiliate of a publicly owned corporation for purposes of this rule if it controls, iscontrolled by, or is under common control with a publicly owned corporation.
(2) Whenever, by reason of insurance, a franchise agreement, or indemnity agreement,a publicly owned corporation or its affiliate, not a party to the appeal, nor an amicus, has a substantialfinancial interest in the outcome of litigation, counsel for the party or amicus whose interest is alignedwith that of the publicly owned corporation or its affiliate shall advise the clerk in the manner providedby subdivision (c) of this rule of the identity of the publicly owned corporation and the nature of its orits affiliate's substantial financial interest in the outcome of the litigation.
(c) Form and Time of Disclosure. The disclosure statement shall be made on a formprovided by the clerk and filed with the brief of a party or amicus or upon filing a motion, response,petition, or answer in this Court, whichever first occurs.
TABLE OF CONTENTS Table of Authorities ......................................................................................... i Statement in Support of Oral Argument ........................................................ iii Jurisdictional Statement .................................................................................. 1 Statement of Issues.......................................................................................... 2 Statement of the Case...................................................................................... 2 Statement of Facts ........................................................................................... 4 Summary of Argument.................................................................................. 14 Argument....................................................................................................... 17 I. Standard of review on appeal. ........................................................... 17 II. The District Court erred in finding that Regions/AmSouth was not an ERISA fiduciary...................................................................... 17 A. Whether Regions/AmSouth was an ERISA fiduciary is a fact-intensive inquiry that should not have been decided by the District Court on a motion to dismiss. ................................... 18 B. The Trustee pled sufficient facts in his complaint to establish that Regions/AmSouth was an ERISA fiduciary. ........................ 21 III. The District Court erred in finding that the Trustee’s state law claims against Regions/AmSouth are preempted by ERISA............. 28 Conclusion .................................................................................................... 30 Certificate of Compliance ............................................................................. 31 Certificate of Service .................................................................................... 32 Designation of Relevant District Court Documents ...................... Appendix 1
Federal Rules of Appellate Procedure FRAP Rule 28(i) ........................................................................................... 30
Federal Rules of Civil Procedure Fed. R. Civ. P. 12(b)(6)................................................................................. 17 Fed. R. Civ. P. 12(c)...................................................................................... 17
duties. The Complaint also alleged a number of state law claims, including
negligence, recklessness and aiding and abetting fraud.
On February 11, 2008, the reference was withdrawn from the Bankruptcy
Court, which transferred the case to the United States District Court for the Middle
District of Tennessee (Case No. 08-00021). R.E. 7. The Defendants to the suit,
including Regions/AmSouth, filed motions to dismiss all claims against them.
R.E. 18, Att. 8.1
On September 9, 2008, the District Court granted in part
Regions/AmSouth’s Motion to Dismiss. R.E. 34. In the September 9, 2008,
Order, the District Court dismissed the Trustee’s ERISA claims against
Regions/AmSouth, finding that Regions/AmSouth was not a fiduciary under
ERISA. The Court also found that certain state law claims were not pre-empted by
ERISA and could proceed.
Subsequent to the dismissal of the ERISA claims, the Trustee filed an
Amended Complaint (on July 24, 2009, R.E. 80) and a Second Amended
Complaint (on November 18, 2009, R.E. 99). Because the ERISA claims had been
dismissed by the District Court, those complaints did not allege ERISA causes of
1 District Court Case No. 08-1003, EFS, Inc., et al. v. Regions Bank, was consolidated with this action in the District Court. R.E. 17. That case, Case No. 10-5491, has likewise been consolidated with this appeal before the Court.
AmSouth Bank. ¶ 2. Regions Bank and AmSouth Bank are throughout referred to
as “Regions/AmSouth.”
Stokes was the sole owner of 1Point. ¶ 7. 1Point was formed2 in 2000 to
act as a third party administrator (“TPA”) for employee plans established under
federal statutes to provide tax-advantaged benefits to employees. ¶ 8. 1Point
began its operations working for 401(k) plans. ¶ 12. If the 1Point customer had an
established plan, it was instructed to liquidate the securities held by the plan and
send the proceeds to an account in the name of 1Point at Mid Atlantic Capital
Corporation (“MACC”). ¶ 13. Generally, 401(k) plan customers of 1Point were
instructed to send checks for their periodic 401(k) contributions to 1Point, which
deposited them in accounts at Regions/AmSouth in the name of 1Point, usually an
account named 1Point 401-K. Id. Stokes also caused the transfer of customers’
money at MACC to an account or accounts at Regions/AmSouth. Id. At the close
of operations, 1Point was TPA for 52 401(k) plans (the “Depleted 401(k) Plans”).
¶ 14. There was not enough money to pay the amount owed the Depleted 401(k)
Plans. Id.
1Point also acted as TPA for FSAs (flexible spending accounts), HSAs
(health spending accounts), HRAs (Health Reimbursement Arrangements), and
2 The company was initially called 1Point Administrative Services, LLC, upon its formation on September 18, 2000. Its name was formally changed to 1Point Solutions, LLC, on September 25, 2002.
of whether Regions/AmSouth was an ERISA fiduciary on a motion to dismiss.
Such an inquiry is very fact-intensive and should be reserved until after discovery
has been conducted. Second, even if the District Court properly considered the
matter on a motion to dismiss, the District Court erred in finding that the
Complaint lacked sufficient factual allegations to sustain a claim that
Regions/AmSouth was an ERISA fiduciary. The District Court’s finding ignored
the numerous factual allegations made in the Complaint, contradicted well-
established law of this Circuit, and violated the Congressional intent of ERISA.
A. Whether Regions/AmSouth was an ERISA fiduciary is a fact-intensive inquiry that should not have been decided by the District Court on a motion to dismiss.
The District Court found, on a motion to dismiss, that the Trustee had not
alleged sufficient facts to establish that Regions/AmSouth was a fiduciary under
ERISA. In so holding, the District Court acknowledged that the question of
whether a party is an ERISA fiduciary is “generally a mixed question of law and
fact,” but found that the “the facts relevant to the question of whether the
defendants are fiduciaries under ERISA are not in dispute, and thus the question
may be resolved as a matter of law.” R.E. 33, Memorandum p. 16. The Trustee
respectfully submits that this finding was in error.
Many courts within this circuit have noted the difficulty of considering the
issue of ERISA fiduciary status on a motion to dismiss. One of the most succinct
Fiduciary status is "a fact-intensive inquiry, making the resolution of that issue inappropriate for a motion to dismiss." In re AEP Litig., 327 F. Supp. 2d 812, 827 (S.D. Ohio 2004) (citation omitted); see also Rankin v. Rots, 278 F. Supp. 2d 853, 879 (E.D. Mich. 2003) ("[T]he manner in which each defendant . . . operated is for now something of a black box. To expect a plaintiff to be able to turn on the light and point to particular individuals who exercised decision making authority is simply too much to require at this stage of the case."); In re Elec. Data Sys. Corp. ERISA Litig., 305 F. Supp. 2d 658, 665 (E.D. Tex. 2004) ("It is typically premature to determine a defendant's fiduciary status at a motion to dismiss stage of the proceedings."). Indeed Stokes, 1Point and Regions/AmSouth operated in something of a
“black box” with regard to the disposition of the assets of the Victim Plans. Before
filing the original complaint, the Trustee had enough information to allege that
Regions/AmSouth knew that the funds it held belonged to the Victim Plans (R.E.
18, Att. 16, Complaint ¶¶ 72-75, 82; pp. 14-15); that Regions/AmSouth allowed
Stokes to transfer the plan funds among 401(k) and healthcare plan accounts,
including substantial funds to his personal Regions/AmSouth account (R.E. 18,
Att. 16, Complaint ¶¶ 75, 77-79, 82, 85-86; pp. 14-16); that Regions/AmSouth paid
itself over $500,000 in fees and analysis charges (R.E. 18, Att. 16, Complaint ¶¶
80, 95; pp. 15, 17); and that Regions/AmSouth exercised authority or control over
the management or disposition of the trust funds in its custody. (R.E. 18, Att. 16,
Complaint ¶ 83, p. 16).
After the District Court had dismissed the ERISA claims against
Regions/AmSouth, the parties conducted some initial discovery. Through this
discovery, the Trustee also learned that Regions/AmSouth instructed Stokes and
1Point to open their bank accounts in such a way as to allow Regions/AmSouth to
make an end-run around the “Know Your Customer” banking regulations. Stokes
would ultimately take advantage of the freedom that this banking account
framework provided to defraud the Victim Plans. Regions/AmSouth’s
involvement is described in Paragraph 44 of the Second Amended Complaint:
1Point intended from the outset to set up for each client its own account at Regions/AmSouth. Regions/AmSouth said that this could not be done because the “know your customer” rules described in ¶¶ 28 and 29 above required the bank physically to meet and to collect proper identification from the customer. Rather than comply with applicable law, Regions/AmSouth insisted that accounts be opened in the name “1Point Solution, “Customer Name,” under 1Point’s tax ID number. 44.1. 1Point established at least 58 accounts at Regions/AmSouth. As directed by Regions/AmSouth, accounts bore the name of both 1Point and the customer, for example, 1Point FSA Metro Government Account. 44.2. Regions/AmSouth told 1Point that the bank could make access to the new accounts available to each respective “Customer Name” through its internet banking system. 44.3. With the accounts set up as directed by Regions/AmSouth, Stokes was able to transfer money among and out of any of the accounts.
Regions/AmSouth retained over $500,000 for itself in fees and analysis charges,3
as alleged in Paragraphs 80 and 95 of the Complaint. Further, the Trustee has
alleged that Regions/AmSouth had extensive knowledge that plan funds were
being misused and converted, including knowledge that over $400,000 was
transferred to Barry Stokes’ individual bank account at Regions/AmSouth. These
facts, combined with the other facts alleged by the Trustee, are more than sufficient
to establish a claim that Regions/AmSouth was a fiduciary under ERISA.
The Trustee has met the stringent pleading requirements of Iqbal and
Twombly. The Supreme Court, in Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
127 S.Ct. 1955 (2007), explained that a complaint need not plead “detailed factual
allegations,” but the allegations “must be enough to raise a right to relief above the
speculative level.” Id. at 1964-65. The Court noted that “a formulaic recitation of
the elements of a cause of action will not do.” Id. In this case, the Trustee has not
relied on formulaic statements of elements of applicable law. The Complaint lays
out a quite detailed factual and legal foundation for the assertion that
Regions/AmSouth knew that it was holding funds of employee benefit plans, that it
3 The Trustee asserts that the fees and analysis charges withheld by Regions/AmSouth go beyond the simple “administrative fees” withheld by PHP in the Briscoe case. The full nature of the fees withheld by Regions/AmSouth is, at least, a factual issue that should have been determined by the District Court prior to dismissal.
was enabling 1Point and Stokes to misuse that money, and that it was exercising
authority and/or control over those funds.
Finally, the District Court’s grant of Regions/AmSouth’s motion to dismiss
was not only legally flawed, but decisions such as this also serve to frustrate the
very purpose of ERISA. This Court explained in part the Congressional intent of
ERISA in Tullis v. UMB Bank, N.A., 515 F.3d 673, 679 (6th Cir. 2008):
Congress created a ‘broad remedial’ scheme when it enacted ERISA in response to the economic collapse of the Studebaker-Packard Corporation, an event that left many terminated employees without their promised pensions. Consequently, while ERISA may have reflected Congress's attempt to define available remedies, the overarching goal of the statute was to ensure that such relief was available in cases of fiduciary breaches.
The Ninth Circuit Court of Appeals has noted that ERISA’s primary purpose is
“assuring that people who have practical control over an ERISA plan's money have
fiduciary responsibility to the plan's beneficiaries.” IT Corp. v. General Am. Life
Ins. Co., 107 F.3d 1415, 1421 (9th Cir. 1997).
Regions/AmSouth had practical control over the funds of the Victim Plans.
As detailed in the Complaint and further explained in the Second Amended
Complaint, Regions/AmSouth assisted Barry Stokes and 1Point in defrauding
numerous ERISA plans. Regions/AmSouth knew that the funds belonged to plans
and knew (or should have known) that they were being misappropriated, yet it did
nothing to prevent the damage caused to the plans’ beneficiaries.
negligence claims against Regions/AmSouth were not preempted by ERISA and
could proceed. Id. at p. 35. Subsequently, the Trustee amended his complaint to
add state law causes of action for violation of the Tennessee Consumer Protection
Act and unjust enrichment, in addition to his negligence claim. R.E. 99, Second
Amended Complaint.
In its March 18, 2010, memorandum, the District Court reversed field from
its first decision and found that each of the Trustee’s state law claims, including his
original claim against Regions/AmSouth for negligence, was preempted by
ERISA. R.E. 135, Memorandum.4 The Trustee recognizes that ERISA preemption
is a complicated area of the law that deserves careful examination; however, he
respectfully submits that the District Court should not have reconsidered and
altered its original holding.
The Trustee hereby adopts and incorporates the arguments asserted in the
brief contemporaneously filed in the consolidated case, Case No. 10-5491, by
Plaintiffs EFS, Inc., et al. as its argument regarding ERISA preemption of the
4 It is interesting to note that the District Court reviewed its original finding sua sponte, since Regions/AmSouth acknowledged in its Response to Plaintiffs’ Motion to File Surreply, R.E. 128 p. 2, “Regions has not argued, and did not intend to argue, that the alleged negligence claim itself is preempted by ERISA.” The District Court did not review its finding regarding Region/AmSouth’s status as an ERISA fiduciary, notwithstanding the additional allegations in the Second Amended Complaint. R.E. 99, ¶ 44, 13-14.
Trustee’s state law claims, as permitted by Rule 28(i) of the Federal Rules of
Appellate Procedure.
CONCLUSION
The District Court’s decisions in this case have effectively stripped ERISA
plans of any remedy they might have, under state law or federal law, against a
banking institution that negligently, or in bad faith, mishandles plan funds.
Wherefore, the Trustee respectfully requests that this Court (1) reverse the
District Court’s order granting Regions/AmSouth’s motion for dismissal of the
Trustee’s ERISA claims; (2) reverse the District Court’s order granting
Regions/AmSouth’s motion for judgment on the pleadings with regard to the
Trustee’s state law claims; and (3) remand this matter to the District Court for
further proceedings.
Respectfully submitted, /s/ Robert M. Garfinkle Robert M. Garfinkle, Tn. Bar No. 5354 Phillip G. Young, Jr., Tn. Bar No. 21087 Garfinkle, McLemore & Young, PLLC 2000 Richard Jones Road, Suite 250 Nashville, Tennessee 37215 Phone: (615) 383-9495 Fax: (615) 292-9848 E-mail: [email protected][email protected] Attorneys for John C. McLemore, Trustee, Plaintiff - Appellant
CERTIFICATE OF COMPLIANCE REQUIRED BY FED. R. APP. P 32(a)(7)(C)
Plaintiffs’ counsel certifies that this brief contains 637 lines and 6,746
words.
/s/ Robert M. Garfinkle Robert M. Garfinkle, Tn. Bar No. 5354 Phillip G. Young, Jr., Tn. Bar No. 21087 Garfinkle, McLemore & Young, PLLC 2000 Richard Jones Road, Suite 250 Nashville, Tennessee 37215 Phone: (615) 383-9495 Fax: (615) 292-9848 E-mail: [email protected][email protected] Attorneys for John C. McLemore, Trustee, Plaintiff - Appellant
I certify that the foregoing document has filed with the court’s ECF system and will be forwarded this 26th day of July, 2010, to: John R. Wingo Frost Brown Todd LLC 424 Church Street, Suite 1600 Nashville, TN 37219 and Matthew C. Blickensderfer Frost Brown Todd LLC 2200 PNC Center, 201 East Fifth Street Cincinnati, OH 45202 Attorneys for Regions Bank, Defendant – Appellee
H. Naill Falls, Jr. John B. Veach, III Falls & Veach 1143 Sewanee Road Nashville, Tennessee 37220 Attorney for EFS, Inc., el al., Plaintiffs – Appellants in Case No. 10-5491 in the United States Court of Appeals For the Sixth Circuit
/s/ Robert M. Garfinkle Robert M. Garfinkle, Tn. Bar No. 5354 Phillip G. Young, Jr., Tn. Bar No. 21087 Garfinkle, McLemore & Young, PLLC 2000 Richard Jones Road, Suite 250 Nashville, Tennessee 37215 Phone: (615) 383-9495 Fax: (615) 292-9848 E-mail: [email protected][email protected] Attorneys for John C. McLemore, Trustee, Plaintiff - Appellant
Pursuant to Sixth Circuit Rule 30(b), the Trustee designates the following District Court documents as relevant:
Date filed in District Court
Record Number
Description of Record Entry
02/11/2008 7 Order
03/05/2008 12 Defendants’ Joint Motion to Set Deadline for Trustee to Respond to Motions to Dismiss and for Leave to File Replies
03/14/2008 17 Order
04/04/2008 18 United States Bankruptcy Court Docket Sheet
18, Att. 8 Defendant Regions Bank’s Motion to Dismiss
18, Att. 16 Complaint
09/09/2008 33 Memorandum
09/09/2008 34 Order
07/24/2009 80 Amended Complaint of Plaintiff John C. McLemore, Trustee
11/18/2009 99 Second Amended Complaint of Plaintiff John C. McLemore, Trustee
12/04/2009 106 Regions Bank’s Motion for Judgment on the Pleadings as to All Claims Asserted in Trustee’s Second Amended Complaint Filed in Case No. 3:08-cv-21
UNITED STATES COURT OF APPEALSFOR THE SIXTH CIRCUIT
Disclosure of Corporate Affiliationsand Financial Interest
Sixth CircuitCase Number: Case Name:
Name of counsel:
Pursuant to 6th Cir. R. 26.1, Name of Party
makes the following disclosure:
1. Is said party a subsidiary or affiliate of a publicly owned corporation? If Yes, list below theidentity of the parent corporation or affiliate and the relationship between it and the namedparty:
2. Is there a publicly owned corporation, not a party to the appeal, that has a financial interestin the outcome? If yes, list the identity of such corporation and the nature of the financialinterest:
CERTIFICATE OF SERVICE
I certify that on _____________________________________ the foregoing document was served on allparties or their counsel of record through the CM/ECF system if they are registered users or, if they are not,by placing a true and correct copy in the United States mail, postage prepaid, to their address of record.
s/
This statement is filed twice: when the appeal is initially opened and later, in the principal briefs, immediately preceding the table of contents. See 6th Cir. R. 26.1 on page 2 of this form.
John C. McLemore, Trustee v. Regions Bank, as Successor in Interest by Merger to AmSouth Bank
lcornwell
Text Box
Garfinkle, McLemore & Young, PLLC 2000 Richard Jones Road, Suite 250 Nashville, Tennessee 37215
6CA-18/08 Page 2 of 2
6th Cir. R. 26.1DISCLOSURE OF CORPORATE AFFILIATIONS
AND FINANCIAL INTEREST
(a) Parties Required to Make Disclosure. With the exception of the United Statesgovernment or agencies thereof or a state government or agencies or political subdivisions thereof,all parties and amici curiae to a civil or bankruptcy case, agency review proceeding, or originalproceedings, and all corporate defendants in a criminal case shall file a corporate affiliate/financialinterest disclosure statement. A negative report is required except in the case of individual criminaldefendants.
(b) Financial Interest to Be Disclosed.
(1) Whenever a corporation that is a party to an appeal, or which appears as amicuscuriae, is a subsidiary or affiliate of any publicly owned corporation not named in the appeal, counselfor the corporation that is a party or amicus shall advise the clerk in the manner provided bysubdivision (c) of this rule of the identity of the parent corporation or affiliate and the relationshipbetween it and the corporation that is a party or amicus to the appeal. A corporation shall beconsidered an affiliate of a publicly owned corporation for purposes of this rule if it controls, iscontrolled by, or is under common control with a publicly owned corporation.
(2) Whenever, by reason of insurance, a franchise agreement, or indemnity agreement,a publicly owned corporation or its affiliate, not a party to the appeal, nor an amicus, has a substantialfinancial interest in the outcome of litigation, counsel for the party or amicus whose interest is alignedwith that of the publicly owned corporation or its affiliate shall advise the clerk in the manner providedby subdivision (c) of this rule of the identity of the publicly owned corporation and the nature of its orits affiliate's substantial financial interest in the outcome of the litigation.
(c) Form and Time of Disclosure. The disclosure statement shall be made on a formprovided by the clerk and filed with the brief of a party or amicus or upon filing a motion, response,petition, or answer in this Court, whichever first occurs.
requested because the undersigned appellate counsel (1) has a brief due in the Ohio
Supreme Court on the same day as Regions Bank’s brief is currently due in these
appeals, and (2) is new to this case and needs additional time to analyze the issues.
Regions Bank’s brief is currently due on August 30, 2010. With the
requested extension, Regions Bank’s brief would be due on September 20, 2010.
Respectfully submitted,
/s/ Matthew C. BlickensderferMatthew C. BlickensderferFROST BROWN TODD LLC2200 PNC Center201 East Fifth StreetCincinnati, Ohio 45202(513) 651-6162(513) 651-6981 (facsimile)
John R. WingoFROST BROWN TODD LLC424 Church Street, Suite 1600Nashville, Tennessee 37219(615)251-5582(615) 251-5551 (facsimile)[email protected]
I hereby certify that on this 23rd day of August, 2010, I electronically filedAppellee Regions Bank’s Motion for Extension of Time for Filing Its Brief withthe Clerk of the Court using the CM/ECF system, which will send notification ofsuch filing to all registered counsel of record.
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Leonard Green Clerk
100 EAST FIFTH STREET, ROOM 540 POTTER STEWART U.S. COURTHOUSE
CINCINNATI, OHIO 45202-3988 Tel. (513) 564-7000
www.ca6.uscourts.gov
Filed: August 23, 2010 Mr. Matthew C. Blickensderfer Frost Brown Todd 201 E. Fifth Street Suite 2200 PNC Center Cincinnati, OH 45202 Mr. H. Naill Falls Jr. Falls & Veach 1143 Sewanee Road Nashville, TN 37220 Mr. Robert Martin Garfinkle Garfinkle, McLemore & Walker 2000 Richard Jones Road Suite 250 Nashville, TN 37215 Mr. John Rex Wingo Frost Brown Todd 424 Church Street Suite 1600 Nashville, TN 37219 Mr. Phillip Gary Young Jr. Garfinkle, McLemore & Young 22 Public Square Suite 12 Columbia, TN 38401
Re: Case No. 10-5480 /10-5491 , In re: 1 Point Solutions, LLC, et al v. Regions Bank Originating Case No. : 08-00021
Dear Counsel,
Appellee’s motion for an extension of time to file a brief has been GRANTED.
The briefing schedule for this case has been reset and the briefs listed below must be filed electronically with the Clerk's office no later than these dates. Counsel are strongly encouraged to read the latest version of the Sixth Circuit Rules at www.ca6.uscourts.gov, in particular Rules 28 and 30.
Appellee's Brief Appendix (if required by 6th Cir. R. 30(a)) and (c)(2))
Filed electronically by September 20, 2010
Appellant's Reply Brief (Optional Brief) Filed electronically 17 days after
the appellee's brief. See Fed. R. App. P. 26(c)
A party desiring oral argument must include a statement in the brief setting forth the reason(s) why oral argument should be heard. See 6th Cir. R. 34(a). If the docket entry for your brief indicates that you have requested oral argument but the statement itself is missing, you will be directed to file a corrected brief.
In scheduling appeals for oral argument, the court will do what it can to avoid any dates which counsel have called to its attention as presenting a conflict. If you have any such dates, you should address a letter to the Clerk advising of the conflicted dates.
Sincerely yours,
s/Diane Schnur Case Manager Direct Dial No. 513-564-7037 Fax No. 513-564-7094
extension is requested because of the undersigned appellate counsel’s other
professional obligations, including multiple briefs due in this Court within the next
week (Cases 10-3784 and 10-5117/5118/5119). Appellate counsel also is new to
this case and requests additional time to analyze the issues.
Regions Bank’s brief is currently due on September 20, 2010. With the
requested extension, Regions Bank’s brief would be due on October 4, 2010.
Respectfully submitted,
/s/ Matthew C. BlickensderferMatthew C. BlickensderferFROST BROWN TODD LLC2200 PNC Center201 East Fifth StreetCincinnati, Ohio 45202(513) 651-6162(513) 651-6981 (facsimile)
John R. WingoFROST BROWN TODD LLC424 Church Street, Suite 1600Nashville, Tennessee 37219(615)251-5582(615) 251-5551 (facsimile)[email protected]
I hereby certify that on this 14th day of September, 2010, I electronicallyfiled Appellee Regions Bank’s Motion for Extension of Time for Filing Its Briefwith the Clerk of the Court using the CM/ECF system, which will send notificationof such filing to all registered counsel of record.
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Leonard Green Clerk
100 EAST FIFTH STREET, ROOM 540 POTTER STEWART U.S. COURTHOUSE
CINCINNATI, OHIO 45202-3988 Tel. (513) 564-7000
www.ca6.uscourts.gov
Filed: September 14, 2010 Mr. Matthew C. Blickensderfer Frost Brown Todd 201 E. Fifth Street Suite 2200 PNC Center Cincinnati, OH 45202 Mr. H. Naill Falls Jr. Falls & Veach 1143 Sewanee Road Nashville, TN 37220 Mr. Robert Martin Garfinkle Garfinkle, McLemore & Walker 2000 Richard Jones Road Suite 250 Nashville, TN 37215 Mr. John Rex Wingo Frost Brown Todd 424 Church Street Suite 1600 Nashville, TN 37219 Mr. Phillip Gary Young Jr. Garfinkle, McLemore & Young 22 Public Square Suite 12 Columbia, TN 38401
Re: Case No. 10-5480 /10-5491 , In re: 1 Point Solutions, LLC, et al v. Regions Bank Originating Case No. : 08-00021
Dear Counsel,
Appellee’s motion for an extension of time to file a brief has been GRANTED.
The briefing schedule for this case has been reset and the briefs listed below must be filed electronically with the Clerk's office no later than these dates. Counsel are strongly encouraged to read the latest version of the Sixth Circuit Rules at www.ca6.uscourts.gov, in particular Rules 28 and 30.
Appellee's Brief Appendix (if required by 6th Cir. R. 30(a)) and (c)(2))
Filed electronically by October 4, 2010
Appellant's Reply Brief (Optional Brief) Filed electronically 17 days after
the appellee's brief. See Fed. R. App. P. 26(c)
A party desiring oral argument must include a statement in the brief setting forth the reason(s) why oral argument should be heard. See 6th Cir. R. 34(a). If the docket entry for your brief indicates that you have requested oral argument but the statement itself is missing, you will be directed to file a corrected brief.
In scheduling appeals for oral argument, the court will do what it can to avoid any dates which counsel have called to its attention as presenting a conflict. If you have any such dates, you should address a letter to the Clerk advising of the conflicted dates.
Sincerely yours,
s/Diane Schnur Case Manager Direct Dial No. 513-564-7037 Fax No. 513-564-7094
extension is requested because of the undersigned appellate counsel’s other
professional obligations, including briefs due in two other cases in this Court in the
next four business days. Appellate counsel has needed extra time to analyze the
issues in these consolidated appeals, and now requests this short additional
extension to permit the client to have sufficient time to review the draft brief. No
further extension will be requested.
Regions Bank’s brief is currently due on October 4, 2010. With the
requested extension, Regions Bank’s brief would be due on October 11, 2010.
Respectfully submitted,
/s/ Matthew C. BlickensderferMatthew C. BlickensderferFROST BROWN TODD LLC2200 PNC Center201 East Fifth StreetCincinnati, Ohio 45202(513) 651-6162(513) 651-6981 (facsimile)
John R. WingoFROST BROWN TODD LLC424 Church Street, Suite 1600Nashville, Tennessee 37219(615)251-5582(615) 251-5551 (facsimile)[email protected]
I hereby certify that on this 30th day of September, 2010, I electronicallyfiled Appellee Regions Bank’s Motion for Extension of Time for Filing Its Briefwith the Clerk of the Court using the CM/ECF system, which will send notificationof such filing to all registered counsel of record.
United States Court of AppealsFOR THE SIXTH CIRCUIT
IN RE: 1 POINT SOLUTIONS, LLC,
Debtor.
_______________________________
JOHN C. MCLEMORE, TRUSTEE,
Appellant.
EFS, INC.,
Appellant,
V.
REGIONS BANK,
Appellee.
On Appeal from the U.S. District Courtfor the Middle District of Tennessee
BRIEF FOR APPELLEE REGIONS BANK
John R. WingoFROST BROWN TODD LLC424 Church Street, Suite 1600Nashville, Tennessee 37219(615)251-5582(615) 251-5551 (facsimile)[email protected]
Matthew C. BlickensderferFROST BROWN TODD LLC2200 PNC Center201 East Fifth StreetCincinnati, Ohio 45202(513) 651-6162(513) 651-6981 (facsimile)[email protected]
The trustee’s ERISA claims fail as a matter of law becauseRegions Bank was not an ERISA fiduciary ....................................................7
The trustee lacks standing to pursue claims for the recoveryof plan funds ..................................................................................................13
The trustee’s claims are barred by the doctrines of in pari delictoand unclean hands..........................................................................................16
The plaintiffs’ state law claims are preempted to thelimited extent that they are not barred by state law.......................................18
ERISA preempts state claims, like those asserted by theplaintiffs, that seek an alternative remedy for themishandling of ERISA plan assets ...........................................................18
The plaintiffs have waived any challenge to the districtcourt’s ruling that their negligence and TennesseeConsumer Protection Act claims were barred by theTennessee Uniform Fiduciaries Act .........................................................20
The plaintiffs’ negligence claims are barred by Tennessee’sUniform Fiduciaries Act...........................................................................21
The plaintiffs’ Tennessee Consumer Protection Actclaims are barred by Tennessee’s Uniform Fiduciaries Act ....................27
The plaintiffs’ unjust enrichment claim is preempted byERISA because it is an attempt to recover ERISA plan assets ................29
Aetna Health, Inc. v. Davila, 542 U.S. 200 (2004)................................18, 19, 20, 30
American Fed’n of Unions Local 102 v. Equitable Life Assurance Soc’y,841 F.2d 658 (5th Cir. 1988) .............................................................................15
Arizona State Carpenters Pension Trust Fund v. Citibank, 125 F.3d 715(9th Cir. 1997) ...................................................................................................10
Assocs. in Adolescent Psychiatry v. Home Life Insurance Company,941 F.2d 561, (7th Cir. 1991) ............................................................................10
Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299 (1985)....................16
Beddall v. State Street Bank & Trust Co., 137 F.3d 12 (1st Cir. 1998)...................10
Brandt v. Grounds, 687 F.2d 895 (7th Cir. 1982) ...................................................10
Briscoe v. Fine, 444 F.3d 478 (6th Cir. 2006) ..................................................passim
C-Wood Lumber Co., Inc. v. Wayne County Bank, 233 S.W.3d 263(Tenn. Ct. App. 2007)........................................................................................22
Marks v. Newcourt Credit Group, Inc., 342 F.3d 444 (6th Cir. 2003)..............19, 24
Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987) .........................................1
Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995) ..................................................15
Official Committee of Unsecured Creditors of PSA, Inc. v. Edwards,437 F.3d 1145 (11th Cir. 2006).........................................................................17
O’Toole v. Arlington Trust, 681 F.2d 94 (1st Cir. 1982).........................................10
Pagan v. Fruchey, 492 F.3d 766, 769 n.1 (6th Cir. 2007) (en banc) ......................21
Penny/Ohlmann/Nieman, Inc. v. Miami Valley Pension Corp.,399 F.3d 692 (6th Cir. 2005) ...........................................................19, 20, 25, 28
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987) .................................................30
St. Marys Foundry, Inc. v. Employers Ins. of Wausau, 332 F.3d 989(6th Cir. 2003). ..................................................................................................12
duty imposed by ERISA is a fiduciary.” Briscoe v. Fine, 444 F.3d 478, 486 (6th
Cir. 2006).
The trustee asserted both types of ERISA claims against Regions Bank. He
attempted to recover bank fees charged by Regions Bank on the theory that
Regions Bank was not an ERISA fiduciary and that the recovery of these fees was
an equitable form of relief. R. 1, Complaint ¶¶ 169-73 (Case No. 3:07-ap-00283).
The district court disagreed that the remedy sought was equitable in nature and
dismissed the claim. R. 33, Memorandum Opinion (Case No. 3:08-cv-00021).
That ruling has not been appealed.
The trustee also alleged claims under provisions of ERISA applicable to
fiduciaries. Proving fiduciary status was the only way the trustee could obtain
“personal liability” – i.e., money damages – against the bank under ERISA. 29
U.S.C. § 1132(a)(2); Briscoe, 444 F.3d at 486. Because the trustee did not allege
any facts to establish that Regions Bank was an ERISA fiduciary, the district court
correctly dismissed these ERISA claims.
ERISA provides a three-part definition of a fiduciary:
[A] person is a fiduciary with respect to a plan to the extent (i) heexercises any discretionary authority or discretionary controlrespecting management of such plan or exercises any authority orcontrol respecting management or disposition of its assets, (ii) herenders investment advice for a fee or other compensation, direct orindirect, with respect to any moneys or other property of such plan, orhas any authority or responsibility to do so, or (iii) he has any
The trustee’s claim to fiduciary status rests on his supposed control over
certain plan funds that were recovered in accounts at Regions Bank. Nowhere
does the trustee allege which plans own these funds, and thus there is no allegation
that the trustee is a fiduciary for any particular plan. Furthermore, if he is an
ERISA fiduciary, it is only to the extent of the limited funds recovered in accounts
at Regions Bank.3 The trustee is not an ERISA fiduciary with respect to the funds
stolen by 1Point and Stokes, because neither he nor 1Point is the current plan
3 It is doubtful that the trustee is an ERISA fiduciary at all. The funds on which hebases his claim of fiduciary status have been deposited with the district court, andthe trustee has no ability to take any action with respect to these funds without acourt order.
conflicts with the clear congressional intent to make the ERISA remedy exclusive
and is therefore pre-empted.” Davila, 542 U.S. at 209. The focus is on the remedy
sought by the plaintiff and its relation to the employee benefit plan. Ramsey v.
Formica Corp., 398 F.3d 421, 424 (6th Cir. 2005); Marks v. Newcourt Credit
Group, Inc., 342 F.3d 444, 453 (6th Cir. 2003). This Court has further refined the
ERISA preemption analysis by defining several categories of state law that are
clearly preempted:
ERISA preempts state laws that (1) mandate employee benefitstructures or their administration; (2) provide alternative enforcementmechanisms; or (3) bind employers or plan administrators toparticular choices or preclude uniform administrative practice, therebyfunctioning as a regulation of an ERISA plan itself.
Penny/Ohlmann/Nieman, Inc. v. Miami Valley Pension Corp. (“PONI”), 399 F.3d
692, 698 (6th Cir. 2005) (quotation and citation omitted).
Under these standards, the plaintiffs’ state law claims were necessarily
preempted. The plaintiffs challenge the dismissal of only three of the various state
law claims they alleged: negligence, violation of the Tennessee Consumer
Protection Act, and unjust enrichment. No matter what label is attached or how
they are characterized, these state law claims seek to impose monetary liability for
the alleged mishandling of ERISA plan funds (or the failure to stop the
Because Regions Bank is not an ERISA fiduciary, however, it cannot be
liable for money damages under ERISA. See Briscoe v. Fine, 444 F.3d 478, 486
(6th Cir. 2006). The state law claims are a back-door effort to impose monetary
liability that is precluded by ERISA. Those claims therefore provide an
“alternative enforcement mechanism” to ERISA’s remedial scheme and are
preempted. PONI, 399 F.3d at 698. State law claims cannot “supplement” the
exclusive remedies provided by ERISA. Davila, 542 U.S. at 209.
The state law claims were properly dismissed for other reasons as well, as
discussed in the next sections.
B. The plaintiffs have waived any challenge to the district court’sruling that their negligence and Tennessee Consumer ProtectionAct claims were barred by the Tennessee Uniform FiduciariesAct.
The district court held that two of the state law claims on appeal –
negligence and the Tennessee Consumer Protection Act – were barred, or at least
sharply limited, by Tennessee’s Uniform Fiduciaries Act, which immunizes banks
from liability for the conduct of their customers who are fiduciaries. R. 135,
Memorandum Opinion, pp. 7-10 (Case No. 3:08-cv-00021). And, the district court
held, any claim that survived the Uniform Fiduciaries Act would be preempted by
ERISA. Id. at 15-18.
Neither the trustee nor the EFS plaintiffs so much as mention the Uniform
Fiduciaries Act in their briefs, let alone analyze the statute or challenge the district
court’s application of the statute. Instead, they simply pretend as if the district
court held that every garden-variety negligence or Consumer Protection Act claim
would be preempted by ERISA. Indeed, they argue that the district court
“reversed” its earlier ruling that the negligence claim was not preempted. All of
this is divorced from the reality of what the district court actually held.
Because the plaintiffs have not challenged the district court’s ruling on the
scope and application of the Uniform Fiduciaries Act, they have waived any
argument against that ruling. See Pagan v. Fruchey, 492 F.3d 766, 769 n.1 (6th
Cir. 2007) (en banc). As a result, the only thing that the plaintiffs may challenge
with respect to their negligence and Consumer Protection Act claims is the district
court’s holding that ERISA preempts any state law claim that requires proof of
Regions Bank’s actual knowledge of, or bad faith with respect to, 1Point’s and
Stokes’ wrongdoing.
C. The plaintiffs’ negligence claims are barred by Tennessee’sUniform Fiduciaries Act.
While the plaintiffs have waived any argument to the contrary, Tennessee’s
Uniform Fiduciaries Act eliminates bank liability based on the acts of a bank
customer who is a fiduciary:
(c)(1) Knowledge on the part of the bank or savings institution of theexistence of a fiduciary relationship or the terms of the relationshipshall not impose any duty or liability on the bank or savings institutionfor any action of the fiduciary.
(2) A bank or savings institution has no duty … to limit transactions in[an account established for a fiduciary] … unless, in its discretion, itcontracts in writing with the fiduciary to establish or limit transactionswith respect to such an account . . . .
Tenn. Code Ann. § 35-2-111(c)(1) and (2) (emphasis added). This statute “was
designed to facilitate banking transactions by relieving depository banks of the
responsibility of assuring that an authorized fiduciary used entrusted funds for
proper purposes.” C-Wood Lumber Co., Inc. v. Wayne County Bank, 233 S.W.3d
263, 273-74 (Tenn. Ct. App. 2007). The statute “places the burden on the principal
to employ honest fiduciaries.” Id.
The Uniform Fiduciaries Act barred the plaintiffs’ negligence claim as a
matter of law. That claim alleged that Regions Bank knew or should have known
that 1Point and Stokes were fiduciaries of the plans, that Regions Bank should
have known the fiduciaries were converting plan assets, and that the plaintiffs were
damaged by Regions Bank’s failure to act to stop the conversion. This is precisely
the type of claim the Uniform Fiduciaries Act prohibits. The Act provides that
Regions Bank’s alleged knowledge of the fiduciary status of 1Point and Stokes
cannot create any liability based on the fiduciaries’ actions. Tenn. Code Ann.
§ 35-2-111(c)(1). The Act further provides that Regions Bank had no duty to limit
transactions in the 1Point accounts notwithstanding any knowledge of 1Point’s
fiduciary status with respect to those accounts. Tenn. Code Ann. § 35-2-
111(c)(2).4 The negligence claim simply could not survive the Uniform
Fiduciaries Act.
The district court agreed that the Uniform Fiduciaries Act barred a
negligence claim like the one asserted by the plaintiffs. It held, however, that
allegations of a bank’s bad faith with respect to the fiduciary’s wrongdoing could
state a claim not barred by the Act. R. 135, Memorandum Opinion, p. 10 (Case
No. 3:08-cv-00021). The district court generously found that the complaints
sufficiently alleged Regions Bank’s bad faith with respect to 1Point and Stokes’s
theft of plan assets. Id. at 14.
In so holding, the district court simply misinterpreted the Uniform
Fiduciaries Act. That statute could not be any clearer that a bank has no liability
for any action by a fiduciary customer even if the bank knows of the fiduciary
status or the requirements of the fiduciary relationship. Tenn. Code Ann. § 35-2-
111(c)(1). And the statute could not be any clearer that a bank has no duty,
regardless of what knowledge it has, to limit transactions in the fiduciary’s
account. Tenn. Code Ann. § 35-2-111(c)(2). Thus, there is no “bad faith”
exception to the Uniform Fiduciaries Act’s prohibition on bank liability.
4 The Act provides that a bank may have a duty to limit transaction in a fiduciary’saccount if the bank has contracted so to limit transactions. Tenn. Code Ann. § 35-2-111(c)(2). There is no allegation of any such agreement here.
Ultimately, however, the district court dismissed this bad faith claim
anyway. It held that any bad faith claim was inescapably premised on 1Point’s and
Stokes’s fiduciary duties under ERISA and Regions Bank’s purported knowledge
of those duties and the violation of them.5 Therefore the district court held that the
bad faith claim was preempted. R. 135, Memorandum Opinion, pp. 14-20 (Case
No. 3:08-cv-00021).
Assuming for purposes of argument that a bad faith claim would not be
barred by the Uniform Fiduciaries Act, this preemption ruling was entirely correct.
The harm on which the bad faith claim was based was the theft of plan assets. The
claim depended on (1) the existence of ERISA fiduciaries (1Point and Stokes), (2)
Regions Bank’s knowledge of their fiduciary duties under ERISA, (3) Regions
Bank’s knowledge that the fiduciaries were violating their ERISA duties, and (4)
Regions Bank’s alleged duty to stop the fiduciaries’ violation of their ERISA
duties. The claim necessarily required an analysis of ERISA duties. And it was
fundamentally an effort to impose liability for the handling of ERISA plan assets.
The bad faith claim therefore “relates to” an ERISA plan. Shaw, 463 U.S. at
96-97. The remedy sought is the recovery of plan assets. See Ramsey, 398 F.3d at
424; Marks, 342 F.3d at 453. And that remedy is an “alternative enforcement
5 The district court held that this was not the case with respect to the non-ERISAplans. R. 135, Memorandum Opinion, p. 20 (Case No. 3:08-cv-00021). Only the
1Point and Stokes.6 R. 135, Memorandum Opinion, p. 21 (Case No. 3:08-cv-
00021). No plaintiff has challenged this ruling in these appeals.
Second, the district court held that any claim that met the Uniform
Fiduciaries Act’s bad faith standard would be preempted by ERISA. Id. Any such
claim was necessarily premised on 1Point’s and Stokes’s fiduciary duties under
ERISA and Regions Bank’s purported knowledge of those duties and the violation
of them. Such a claim therefore was preempted.
To the extent the Consumer Protection Act was viable at all (and it was not),
the district court correctly held it was preempted. The claim was premised on the
theft of plan assets, and the remedy sought was the recovery of those assets. Proof
of the claim required proof that 1Point and Stokes were ERISA fiduciaries, that
Regions Bank knew of that status, that Regions Bank knew they were breaching
their fiduciary duties under ERISA, and that Regions Bank had a duty to stop the
breach of those ERISA duties. At bottom, the Consumer Protection Act claim was
an attempt to impose liability for the loss of ERISA plan assets. It was, in other
words, an “alternative enforcement mechanism” to the civil remedies provided by
ERISA and plainly preempted. PONI, 399 F.3d at 698.
6 As explained above, even this was an overly generous – and erroneous –interpretation of the Uniform Fiduciaries Act, which eliminates bank liabilityregardless of what the bank knows about the fiduciary’s obligations and conduct.
/s/ Matthew C. BlickensderferJohn R. WingoFROST BROWN TODD LLC424 Church Street, Suite 1600Nashville, Tennessee 37219(615)251-5582(615) 251-5551 (facsimile)[email protected]
Matthew C. BlickensderferFROST BROWN TODD LLC2200 PNC Center201 East Fifth StreetCincinnati, Ohio 45202(513) 651-6162(513) 651-6981 (facsimile)[email protected]
CASE NUMBER 10-5480 (CONSOLIDATED WITH CASE NO. 10-5491)
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
In re: 1POINT SOLUTIONS, LLC, Debtor, --------------------------------------------- JOHN C. McLEMORE, TRUSTEE, Plaintiff - Appellant, vs. REGIONS BANK, as Successor in Interest by Merger to AmSouth Bank,
Defendant - Appellee.
On Appeal From The United States District Court For The Middle District of Tennessee Nashville Division
APPELLANT JOHN C. McLEMORE, TRUSTEE’S MOTION FOR EXTENSION OF TIME FOR FILING HIS REPLY BRIEF
Appellant John C. McLemore, Trustee, respectfully requests a three-week
extension of the deadline for filing his reply brief in this appeal.
The Appellee’s brief raised cross-appeal issues that were not addressed in
Appellant’s brief because the District Court had ruled in favor of the Appellant on
those issues. Appellant requests the additional time in order to address those issues
in the reply brief along with the issues initially briefed.
The Appellant’s reply brief is currently due on October 21, 2010. With the
requested extension, the Appellant’s reply brief would be due on November 11,
2010. Appellant respectfully submits, with authorization of counsel of the
consolidated Appellant, that the reply brief in the consolidated case (No. 10-5491)
should also have the same extended deadline.
Respectfully submitted,
/s/ Robert M. Garfinkle Robert M. Garfinkle, Tn. Bar No. 5354 Phillip G. Young, Jr., Tn. Bar No. 21087 Garfinkle, McLemore & Young, PLLC 2000 Richard Jones Road, Suite 250 Nashville, Tennessee 37215 Phone: (615) 383-9495 Fax: (615) 292-9848 E-mail: [email protected][email protected] Attorneys for John C. McLemore, Trustee, Plaintiff - Appellant
I certify that this 13th day of October, 2010, I electronically filed Appellant John C. McLemore, Trustee’s Motion for Extension of Time for Filing his Reply Brief with the Clerk of the Court using the CM/CEF system, which will send notification of such filing to all registered counsel of record.
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
In re: 1POINT SOLUTIONS, LLC, Debtor, --------------------------------------------- JOHN C. McLEMORE, TRUSTEE, Plaintiff - Appellant, vs. REGIONS BANK, as Successor in Interest by Merger to AmSouth Bank,
Defendant - Appellee.
On Appeal From The United States District Court For The Middle District of Tennessee Nashville Division
REPLY BRIEF OF APPELLANT JOHN C. McLEMORE, TRUSTEE
Robert M. Garfinkle, Tn. Bar No. 5354 Phillip G. Young, Jr., Tn. Bar No. 21087 Garfinkle, McLemore & Young, PLLC 2000 Richard Jones Road, Suite 250 Nashville, Tennessee 37215 (615) 383-9495
TABLE OF CONTENTS Table of Contents ............................................................................................. i Table of Authorities ........................................................................................ ii Statement in Support of Oral Argument ......................................................... 1 Introduction..................................................................................................... 2 Argument......................................................................................................... 3 I. The Trustee is the proper party to pursue the recovery of the plan funds sought in this suit. ............................................................. 3 A. The Trustee has standing to pursue these claims as an ERISA fiduciary for the Victim Plans. ..................................... 4 B. The Trustee’s claims are not barred by the equitable doctrines of in pari delicto or unclean hands. ................................ 9 II. Regions/AmSouth was an ERISA fiduciary for the Victim Plans. ................................................................................................. 11 III. The Trustee’s State Law Claims are not preempted, barred or waived, and should proceed. ............................................................. 14 A. The Trustee’s State Law Claims are not barred by the UFA, nor has the Trustee waived any right to assert the State Law Claims. ........................................................................ 15 B. The Trustee’s State Law Claims against Regions/AmSouth are not preempted by ERISA. ...................................................... 16 Conclusion .................................................................................................... 17 Certificate of Compliance ............................................................................. 19 Certificate of Service .................................................................................... 20
Fed. R. App. P. 28(i) ............................................................................. 16, 17 Fed. R. App. P. 32(a)(7)(C) .......................................................................... 19
State Statutes Uniform Fiduciaries Act, Tenn. Code Ann. § 35-2-101, et seq ............................................ 14, 15, 16 Tenn. Code Ann. § 35-2-111, (c) .................................................................. 16 Tennessee Consumer Protection Act, Tenn. Code Ann. §47-18-101, et. seq ................................................. 14, 15
Based upon the allegations contained in the Complaints, the District Court
properly concluded that the Trustee, as an ERISA fiduciary, has standing to pursue
these recovery claims against Regions/AmSouth and that he is not barred from a
recovery by the doctrines of in pari delicto or unclean hands. The Trustee
respectfully submits that these legal findings are correct and that this Court should
not reverse the District Court on those issues.
A. The Trustee has standing to pursue these claims as an ERISA
fiduciary for the Victim Plans.
Regions/AmSouth contends that the Trustee lacks standing to pursue the
claims at issue in this matter. With this argument, Regions/AmSouth argument
2 On September 9, 2008, the District Court granted in part Regions/AmSouth’s Motion to Dismiss. R.E. 34. In the September 9, 2008, Order, the District Court held that the Trustee has standing as an ERISA fiduciary and is not barred from recovery by in pari delicto or unclean hands. The District Court, however, dismissed the Trustee’s ERISA claims against Region/AmSouth, finding that Regions/AmSouth was not a fiduciary under ERISA. The Court also found in that Order that certain state law claims were not preempted by ERISA and could proceed. Subsequent to the dismissal of the ERISA claims, the Trustee filed an Amended Complaint (on July 24, 2009, R.E. 80) and a Second Amended Complaint (on November 18, 2009, R.E. 99). In this Reply Brief, the Trustee will cite to the record entry for any specific factual allegation; for more general statements regarding facts that are contained throughout the three Complaints, the Trustee will cite more generally to the “Complaints.”
The Trustee has exercised control over management and disposition of the assets
of the Victim Plans; therefore, he is an ERISA fiduciary and has all authority
inherent with that responsibility.
In addition to this legal fallacy, Regions/AmSouth’s conclusion that the
Trustee must be a “limited” ERISA fiduciary is based entirely upon misstatements
of the record. Regions/AmSouth contends that the Trustee’s Complaint fails to
allege which plans own these funds, or that the Trustee is a fiduciary for any
particular plan. Regions/AmSouth Brief, p. 15. To the contrary, the Trustee
alleges:
Paragraph 4.2, Second Amended Complaint, R.E. 99: “The Trustee has taken possession of assets of 1Point, including cash in banks and real and personal property. Most of the assets were either directly property of plans subject to ERISA, or were purchased for the benefit of Stokes or 1Point with assets of plans subject to ERISA. The Trustee currently exercises discretionary control over assets of plans subject to ERISA. Therefore, the Trustee is functionally a fiduciary within the meaning of ERISA.” Paragraph 4.3, Second Amended Complaint, R.E. 99: “Pursuant to documents executed by the parties, or by the plan documents, or by agreement, or otherwise, 1Point and/or Stokes acted as fiduciaries for plans subject to ERISA. The Trustee is a fiduciary for each of the plans, or is the successor fiduciary to the position of 1Point and/or Stokes as fiduciary for each of the plans.” Paragraph 170, Complaint, R.E. 18, Att. 16: “Stokes and 1Point were fiduciaries within the meaning of ERISA with respect to the Victim Plans. The Plaintiff is a fiduciary with respect to each of the Plans, and is the successor fiduciary to Stokes and/or 1Point as fiduciary with respect to each of the Plans.”
These facts, taken as true, are more than sufficient to establish the Trustee’s role as
ERISA fiduciary over all of the Victim Plans, whose funds were held at
Regions/AmSouth.
In Footnote 3, Regions/AmSouth then makes a confounding statement: “It
is doubtful that the trustee is an ERISA fiduciary at all. The funds on which he
bases his claim of fiduciary status have been deposited with the district court, and
the trustee has no ability to take any action with respect to these funds without
court order.” This is simply untrue; no funds have been deposited with the District
Court.3 The Trustee maintains possession and control over all funds of the
Debtor’s estate as well as all plan funds not previously distributed to the Victim
Plans.4 As such, the Trustee continues his exercise of authority and/or control
respecting management and/or disposition of Victim Plan assets, including those at
issue in this case.
The Complaints filed by the Trustee in this matter contain concrete
allegations that are legally sufficient to establish his standing to initiate this suit as
an ERISA fiduciary on behalf of the Victim Plans. Accordingly, this Court should
not affirm a dismissal of the Trustee’s actions for lack of standing.
3 Regions/AmSouth’s reliance upon such faulty statements of fact highlights the prematurity of the District Court’s decision on the Motions to Dismiss. As stated in the Trustee’s Brief this matter should be remanded for further factual discovery. 4 The Trustee reconciled Victim Plans’ accounts and has already made 184 distributions totaling $248,523.37 of traceable funds to Victim Plans.
B. The Trustee’s claims are not barred by the equitable doctrines of
in pari delicto or unclean hands.
Next, Regions/AmSouth argues that this Court should reverse the finding of
the District Court and find that the Trustee’s claims against Regions/AmSouth are
barred by the equitable doctrines of in pari delicto and/or unclean hands. 5
Regions/AmSouth’s argument in this regard rests entirely upon the success of its
prior contention; that is, that the Trustee should not be an ERISA fiduciary for the
Victim Plans. Because the Trustee is an ERISA fiduciary, the Court likewise
should reject this argument.
The Trustee readily admits that the Complaints allege that 1Point and Stokes
stole money from the Victim Plans. The Trustee further concedes that some cases,
such as those cited by Regions/AmSouth in its brief, have found that bankruptcy
trustees may be barred from asserting certain causes of action because of the
wrongdoing of the debtor, into whose shoes the trustee steps. As noted by the
District Court, however, those cases are inapplicable in the ERISA context.
Regions/AmSouth has not cited any case whereby an ERISA fiduciary, as opposed
to a bankruptcy trustee, has been barred from asserting a cause of action based
upon in pari delicto or unclean hands. 5 In its brief, Regions/AmSouth seems to use the doctrines of in pari delicto and unclean hands interchangeably. The District Court noted in a footnote that its rejection of the in pari delicto doctrine applied equally to the doctrine of unclean hands.
The District Court thoroughly and properly analyzed the application of these
doctrines in its September 9, 2008 Memorandum:
Underlying the doctrine of in pari delicto is the principle that “courts should not lend their good offices to mediating disputes among wrongdoers” and that “denying judicial relief to an admitted wrongdoer is an effective means of deterring illegality.” Bateman Eichler, 472 U.S. at 306. This principle is not implicated, however, by the ERISA claims brought by the Trustee, because those claims are brought on behalf of the affected ERISA plans, who are victims of wrongdoing rather than participants therein. Moreover, any recovery on those claims would not benefit the Trustee or the bankruptcy estate, but rather the affected plans themselves. The case of Donovan v. Schmoutey, 592 F. Supp. 1361 (D. Nev. 1984), is instructive. There, the court rejected the defendants’ in pari delicto defense to the plaintiffs’ ERISA claims, finding that the plaintiff had not participated in the transactions alleged to violate ERISA and that application of the defense would harm the plan participants and beneficiaries. Id. at 1403. Although the analogy to this case may be imperfect, as the plaintiff in Donovan was not a bankruptcy trustee but rather the Secretary of Labor, who brought claims on the behalf of ERISA plan participants and beneficiaries, at the very least Donovan supports the conclusion that in pari delicto does not apply in an ERISA case where, as here, the claims at issue exist between the victims of the wrongdoing and one of the wrongdoers, rather than between two wrongdoers, and where application of the defense would negatively impact the plan participants and beneficiaries – the very parties whom ERISA was enacted to protect.
R.E. 33, p. 14. Because the Trustee is an ERISA fiduciary for the Victim Plans,
the doctrines of unclean hands and/or in pari delicto do not bar him from asserting
The St. Marys Foundry court discusses the appellate courts’ discretion in
determining whether to rule on an “issue not decided below.” Here, the question
of whether the fees retained by Regions/AmSouth constitutes an exercise of
authority or control is not an “issue not decided below.” The factual allegations
were clearly raised by the Trustee in the Complaint, although the District Court
chose not to focus on that particular allegation in reaching its decision. At any
rate, the concern expressed by the St. Marys Foundry court is not present here;
namely, that permitting an appellate court to review an “issue not decided below”
allows an appellant to make an end-run around the standard of review.6 In this
case, where the Court must review the District Court’s dismissal of these actions
de novo, such concern is not implicated.
In more substantive response to the allegation that Regions/AmSouth
exercised authority or control over Victim Plan assets by retaining for itself over
$500,000 in fees and charges, Regions/AmSouth attempts to distinguish this
Court’s holding in Briscoe v. Fine, 444 F.3d 478 (6th Cir. 2006), limiting that
decision as one based strictly upon the bank’s authority to write checks on ERISA
plan accounts. This interpretation of Briscoe ignores the importance of this
6 The St. Marys Foundry opinion quotes Estate of Thomas P. Quirk v. Comm’r, 928 F.2d 751, 756-57 (6th Cir. 1991), in part: “By thus obliterating any application of a standard of review, which may be more stringent than a de novo consideration of the issue, the parties could affect their chances of victory merely by calculating at which level to better pursue their theory.”
/s/ Robert M. Garfinkle Robert M. Garfinkle, Tn. Bar No. 5354 Phillip G. Young, Jr., Tn. Bar No. 21087 Garfinkle, McLemore & Young, PLLC 2000 Richard Jones Road, Suite 250 Nashville, Tennessee 37215 Phone: (615) 383-9495 Fax: (615) 292-9848 E-mail: [email protected][email protected] Attorneys for John C. McLemore, Trustee, Plaintiff - Appellant
CERTIFICATE OF COMPLIANCE REQUIRED BY FED. R. APP. P 32(a)(7)(C)
Plaintiffs’ counsel certifies that this brief contains 369 lines and 3,925
words.
/s/ Robert M. Garfinkle Robert M. Garfinkle, Tn. Bar No. 5354 Phillip G. Young, Jr., Tn. Bar No. 21087 Garfinkle, McLemore & Young, PLLC 2000 Richard Jones Road, Suite 250 Nashville, Tennessee 37215 Phone: (615) 383-9495 Fax: (615) 292-9848 E-mail: [email protected][email protected] Attorneys for John C. McLemore, Trustee, Plaintiff - Appellant
I certify that the foregoing document has filed with the court’s ECF system and will be forwarded this 12th day of November, 2010, to: John R. Wingo Frost Brown Todd LLC 424 Church Street, Suite 1600 Nashville, TN 37219 and Matthew C. Blickensderfer Frost Brown Todd LLC 2200 PNC Center, 201 East Fifth Street Cincinnati, OH 45202 Attorneys for Regions Bank, Defendant – Appellee
H. Naill Falls, Jr. John B. Veach, III Falls & Veach 1143 Sewanee Road Nashville, Tennessee 37220 Attorney for EFS, Inc., el al., Plaintiffs – Appellants in Case No. 10-5491 in the United States Court of Appeals For the Sixth Circuit
/s/ Robert M. Garfinkle Robert M. Garfinkle, Tn. Bar No. 5354 Phillip G. Young, Jr., Tn. Bar No. 21087 Garfinkle, McLemore & Young, PLLC 2000 Richard Jones Road, Suite 250 Nashville, Tennessee 37215 Phone: (615) 383-9495 Fax: (615) 292-9848 E-mail: [email protected][email protected] Attorneys for John C. McLemore, Trustee, Plaintiff - Appellant
UNITED STATES COURT OF APPEALSFOR THE SIXTH CIRCUIT
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UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
In re: 1POINT SOLUTION, LLC
Debtor,
JOHN C. MCLEMORE, TRUSTEE,
Plaintiff-Appellant,
vs.
REGIONS BANK, as Successor in Interest by Merger to AmSouth Bank
Defendant-Appellee.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF TENNESSEE NASHVILLE
DIVISION
MOTION OF THE SECRETARY OF LABOR, HILDA L. SOLIS, FOR LEAVE TO FILE A BRIEF OUT OF TIME AS AMICUS CURIAE IN
SUPPORT OF APPELLANT
M. PATRICIA SMITH NATHANIEL I. SPILLER Solicitor of Labor Counsel for Appellate and Special Litigation TIMOTHY D. HAUSER Associate Solicitor for Plan LEONARD H. GERSON Benefits Security Division Trial Attorney U.S. Department of Labor Plan Benefits Security Division 200 Constitution Avenue, N.W. Room N-4611 Washington, D.C. 20210 Tel. (202) 693-5615 Fax. (202) 693-5610
5. McLemore has consented to the filing of the brief. Regions is
withholding consent to the filing of an amicus brief by the Secretary pending
its review of the Secretary's brief.
WHEREFORE, the Secretary moves for leave to file an amicus brief
on these two issues on November 19, 2010.
Respectfully submitted,
M. PATRICIA SMITH Solicitor of Labor
TIMOTHY D. HAUSER Associate Solicitor for Plan Benefits Security Division
NATHANIEL I. SPILLER Counsel for Appellate and Special Litigation s/ Leonard H. Gerson LEONARD H. GERSON Trial Attorney U.S. Department of Labor 200 Constitution Avenue, N.W. Room N-4611 Washington, D.C. 20210 Tel. (202) 693-5615 Fax. (202) 693-5610
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
In re: 1POINT SOLUTION, LLC Debtor,
JOHN C. MCLEMORE, TRUSTEE, Plaintiff-Appellant,
vs.
REGIONS BANK, as Successor in
Interest by Merger to AmSouth Bank Defendant-Appellee.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF TENNESSEE NASHVILLE
DIVISION
BRIEF OF THE SECRETARY OF LABOR, HILDA L. SOLIS, AS AMICUS CURIAE SUPPORTING APPELLANTS
M. PATRICIA SMITH NATHANIEL I. SPILLER Solicitor of Labor Counsel for Appeallate and Special Litigation TIMOTHY D. HAUSER Associate Solicitor for Plan LEONARD H. GERSON Benefits Security Division Trial Attorney U.S. Department of Labor Plan Benefits Security Division 200 Constitution Avenue, N.W. Room N-4611 Washington, D.C. 20210 (202) 693-5615(p), (202) 693-5610(f)
TABLE OF CONTENTS TABLE OF AUTHORITIES.......................................................................... ii STATEMENT OF THE ISSUES ................................................................... 1 INTERST OF THE SECRETARY OF LABOR............................................ 1 STATEMENT OF THE CASE ...................................................................... 2 SUMMARY OF THE ARGUMENT ............................................................. 5 ARGUMENT.................................................................................................. 9
I. The Bankruptcy Trustee, McLemore, Who Also Is An ERISA Fiduciary, Has Standing To Bring An ERISA Action On Behalf Of Plan Participants Against A Former Fiduciary Of An Employee Benefit Plan....................................................... ....... 9
II. The Defense of In Pari Delicto Cannot Be Asserted Against An
Innocent ERISA Fiduciary Seeking To Remedy A Fiduciary Breach Caused By The Defendant Fiduciary..................... ..... 18
belongs to the affected ERISA plans or that was purchased on behalf of
those plans using the plans’ own funds." Id. at 12. The court then held that
McLemore's status as an ERISA fiduciary gave him a separate basis for
standing to bring his ERISA action, apart from his status as chapter 11
trustee. Because ERISA "enables any fiduciary of an ERISA plan to pursue
relief under the statute on behalf of the plan for which it is a fiduciary, see
29 U.S.C. § 1132(a)," the district court concluded that "the fact that he
[McLemore] serves simultaneously as a bankruptcy trustee does not defeat
his standing as an ERISA fiduciary to bring an ERISA claim." Id. at 9, 13.
The district court also accepted the Secretary's view that the in pari
delicto defense, which is an unclean hands doctrine that could otherwise
constitute an equitable bar to a suit by a bankruptcy trustee stepping into the
shoes of a wrongdoing debtor, was not a bar to the ERISA action. Id. at 14-
15. Rather than benefiting the wrongdoers (1Point and Stokes), the district
court emphasized that:
[I]n pari delicto does not apply in an ERISA case where, as here, the claims at issue exist between the victims of the wrongdoing and one of the wrongdoers, rather than between two wrongdoers, and where the application of the defense would negatively impact the plan participants and beneficiaries – the very parties whom ERISA was enacted to protect.
In McLemore I, the district court also dismissed a non-fiduciary
ERISA claim against Regions on the grounds that the funds the chapter 11
trustee sought were not identifiable, and state law aiding and abetting claims
against Regions and MACC on the grounds that they were preempted by
ERISA. Id. at 27, 32-35. The district court ruled, however, that the state
law negligence claims against Regions and MACC could go forward.2 Id. at
35. In a subsequent decision issued March 18, 2010 ("McLemore II"),
however, the district court dismissed the remaining state law claims against
Regions on preemption grounds. 3 R.E. 135.
SUMMARY OF THE ARGUMENT
1. Suits by fiduciaries to remedy violations of ERISA are one of
the primary ways Congress has chosen to protect employee benefit plans.
Under ERISA, any fiduciary has the right, and in many situations the duty,
to seek to recover losses to the plan caused by another fiduciary's breach.
In seeking dismissal of appellant McLemore's ERISA fiduciary breach claim
against it, however, Regions essentially argues that McLemore lacks
2 MACC is no longer in the case, after entering a settlement following McLemore I with the chapter 11 trustee and various ERISA plans that had been clients of 1Point. 3 The Secretary did not address the other issues decided in McLemore I and McLemore II in her district court amicus brief, nor is she doing so here.
I. THE BANKRUPTCY TRUSTEE, MCLEMORE, WHO ALSO IS AN ERISA FIDUCIARY, HAS STANDING TO BRING AN ERISA ACTION ON BEHALF OF PLAN PARTICIPANTS AGAINST A FORMER FIDUCIARY OF AN EMPLOYEE BENEFIT PLAN A central mechanism for enforcing ERISA is the granting of standing
to a fiduciary in 29 U.S.C. § 1132 to bring suit against entities who have
violated ERISA. See also 29 U.S.C. § 1105 (co-fiduciary liability). In this
case, Stokes literally stole millions of dollars in assets belonging to
numerous plans that had entrusted the assets to the debtors, who
administered the plans. Asserting standing as an ERISA fiduciary,
McLemore, the chapter 11 trustee, brought an ERISA suit (in the form of an
adversary proceeding in the bankruptcy court, which was referred back to
the district court) to recover losses to the plans caused by wrongful actions
the debtors committed allegedly in concert with Regions.
The threshold question is whether McLemore became an ERISA
fiduciary when assuming his duties as bankruptcy trustee. ERISA defines
"fiduciary" functionally to include anyone who "exercises any authority or
control respecting . . . disposition of [a plan’s] assets." 29 U.S.C. §
1002(21)(A)(1). As bankruptcy trustee, McLemore legally stepped into the
shoes of the debtors who, prior to bankruptcy, functioned as fiduciaries
(albeit breaching ones) respecting the various plans' assets that had been
entrusted to them in their capacity as third-party administrator. By assuming
control over the bankruptcy estate, McLemore also gained control over plan
assets. The district court held that, "regardless of how the Trustee came to
have control over the plans' assets, the fact is that he now does exercise
control over plan assets and, therefore, he is a fiduciary under the express
terms of the statute." McLemore I, at 12.
That holding is exactly right. ERISA 3(21)(A), 29 U.S.C. §
1002(21)(A), provides that "any authority or control" respecting the
"management or disposition of" plan assets is enough to confer fiduciary
status on a person with respect to those assets. Here, the debtors controlled
plan assets in their capacity as third party administrators. By assuming
control over the bankruptcy estate, McLemore also gained control over the
disposition of the plan assets. McLemore has possession of the assets and is
responsible for their management and disposition.4 Consequently, he is an
ERISA fiduciary.
ERISA was deliberately written to be as expansive as possible in this
regard to ensure that all plan assets are impressed with a trust and subject to
4 Although not explicitly addressed below, the fact that plan assets are commingled does not alter their status as plan assets. FAB 2006-1, available at www.dol.gov/ebsa (intermediaries who receive distributions in securities settlements for plan customers are fiduciaries with respect to those commingled assets).
suit as a plan fiduciary.5 Instead, ERISA simply states that an action for
fiduciary breach may be brought "by the Secretary, or by a participant,
beneficiary or fiduciary…" without in any way limiting or qualifying the
right of plan fiduciaries to bring suit. 29 U.S.C. § 1132(a)(2), (3). Under a
plain reading of the statute, as a fiduciary McLemore has standing to bring
suit. The significance of the "to the extent" limitation on McLemore's
fiduciary status is only that he cannot be held liable as a defendant for plan
activities and responsibilities that are unrelated to his authority over plan
assets – the sole basis for his status as a plan fiduciary. Accordingly, the
cases cited by the defendants merely stand for the proposition that the scope
of a fiduciary defendant's liability is circumscribed by the scope of his
fiduciary actions. See Briscoe v. Fine, 444 F.3d 478 (6th Cir. 2006) (issue
of whether defendant officers and directors were functional fiduciaries);
American Fed'n of Unions Local 102 v. Equitable Life Assurance Soc'y, 841
F.2d 658 (5th Cir. 1988) (issue of whether defendant administrator of health
and welfare fund was a functional fiduciary). The cases neither challenge
5 29 U.S.C. § 1002(21)(A) provides that persons are fiduciaries only "to the extent" that they have the requisite authority or engage in the requisite activities. Thus, assuming McLemore is a fiduciary solely by virtue of his authority over plan assets, he is a plan fiduciary only to the extent that he "exercises any authority or control respecting management or disposition of [the plans'] assets." 29 U.S.C. § 1002(21)(A)(i).
The district court in McLemore I aptly distinguished Cannon:
What the defendants ignore, however, is the role that ERISA plays in this case. None of the cases on which the defendants rely, most notably Cannon, are directly analogous to this case, as none of them involved the duties and responsibilities imposed by the federal ERISA statute, as is the case here.
McLemore I, at 8-9. Cannon addressed only the standing of a bankruptcy
trustee to bring an adversary action under the Bankruptcy Code. Here,
however, McLemore does not bring suit as a bankruptcy trustee seeking to
recover assets for the debtors, but rather as an ERISA fiduciary seeking to
recover assets for the plans to which he owes fiduciary duties under ERISA.
His obligations and authority as an ERISA plan fiduciary are independent of
his obligations as a trustee for the bankruptcy estate. In short, McLemore, as
a fiduciary under ERISA, has standing to bring this action pursuant to
ERISA, seeking remedies unique to ERISA (i.e., the recovery of losses to
the plans that were caused by Regions' alleged fiduciary breaches).
Finally, Congress, in a somewhat different context has recognized that
a bankruptcy trustee can play a dual role as both a representative of the
bankruptcy estate and a representative of an ERISA plan. In 2005, Congress
amended the Bankruptcy Code to make clear that a bankruptcy trustee also
had to fulfill the duties of an ERISA plan administrator, if those duties were
performed by a debtor prior to the bankruptcy. 11 U.S.C. § 704(a)(11).
Thus, in In re Trans-Industries, Inc., 419 B.R. 21 (E.D. Mich. 2009), the
opinion explicitly states that it was undisputed that § 704(a)(11) of the
Bankruptcy Code gave the chapter 7 trustee standing to bring an adversary
proceeding for breach of fiduciary duty, even though any recovery would go
to the plan rather than to the bankruptcy estate. Even if this provision is not
directly applicable to this case (because the debtor's own plan is not at issue
and McLemore is not the plan administrator of the various plans whose
assets he controls), the provision reflects Congress's clear understanding that
a bankruptcy trustee may have fiduciary status under ERISA at the same
time that he is trustee to a debtor's estate under the Bankruptcy Code.
II. THE DEFENSE OF IN PARI DELICTO CANNOT BE ASSERTED AGAINST AN INNOCENT ERISA FIDUCIARY SEEKING TO REMEDY A FIDUCIARY BREACH CAUSED BY THE DEFENDANT FIDUCIARY.
The use of the in pari delicto defense as a means of barring a
bankruptcy trustee from bringing an action under ERISA against an entity
involved in a fiduciary's embezzlement would unreasonably limit an
important means of enforcing ERISA. The in pari delicto doctrine bars "a
plaintiff [from] seeking damages or equitable relief [where the plaintiff] is
himself involved in some of the same sort of wrongdoing." Perma Life
Mufflers v. International Parts Corp., 392 U.S. 134, 138 (1968). The
doctrine "derives from the Latin, in pari delicto potior est condition
defendentis: 'In a case of equal or mutual fault . . . the position of the
[defending] party . . . is the better one.' The defense is grounded on two
premises: first, that courts should not lend their good offices to mediating
disputes among wrongdoers, and second, that denying judicial relief to an
admitted wrongdoer is an effective means of deterring illegality." Bateman
Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299, 306 (1985). Neither of
these purposes would be furthered by the application of the in pari delicto
doctrine in this action.
First, McLemore, who is the chapter 11 trustee by appointment of the
bankruptcy court was not the wrongdoer. Under ERISA a fiduciary is not
liable for the breaches of its predecessor. 29 U.S.C. § 1109(b). Instead,
where prudent, a fiduciary is obligated to take action to remedy a
predecessor's prior breach, an obligation which McLemore is fulfilling by
bringing this action. See 29 U.S.C. §§ 1104(a)(1) and 1105(a)(3).
Second, McLemore is not bringing the suit to further his own interests
or even the interests of the bankruptcy estate. Instead he is suing Regions to
vindicate the interests of the victims of the wrongdoers, the ERISA plans.6
6 In the two cases relied upon by Regions (br. at 17), In re Dublin Securities et al, 133 F.3d 377 (6th Cir. 1997), and Official Comm. of Unsecured Creditors of PSA, Inc. v. Edwards, 437 F.3d 1145 (11th Cir. 2006), the plaintiff bankruptcy trustees brought suit for the benefit of the bankruptcy estates, rather than as fiduciaries for an ERISA plan.
This principle [the in pari delicto defense] is not implicated, however, by the ERISA claims brought by the Trustee, because those claims are brought on behalf of the affected ERISA plans, who are victims of wrongdoing rather than participants therein. Moreover, any recovery on those claims would not benefit the Trustee or the bankruptcy estate, but rather the affected plans themselves.
McLemore I at 14. In Donovan v. Schmoutey, 592 F. Supp. 1361 (D. Nev.
1984), the court ruled that the in pari delicto defense did not bar a suit
against pension trustees for breach of their fiduciary duties under ERISA by
making imprudent loans, failing to diversify the pension fund's investments
and engaging in prohibited transactions. Id. at 1368. The court explained:
“[A]n in pari delicto defense is inappropriate where, as here, its application
would harm the persons - participants and beneficiaries -protected by the law
claimed to have been violated.” Id. at 1403. As in Schmoutey, if the in pari
delicto defense were accepted in this proceeding, it would be the innocent
victims of Regions' alleged fiduciary violations who would be further
victimized and Regions would be inappropriately shielded from liability.
Third, the Supreme Court has warned against a broad application of
the in pari delicto defense, where it would bar private suits that enforce
public policy. Thus, in Bateman, it refused an attempt by the defendants to
bar a Rule 10-b insider information suit by investor "tippees," because the
if the in pari delicto defense were interpreted to apply to suits brought by
successor, and entirely innocent, fiduciaries, such as McLemore, an
important remedy provided by Congress would be undermined.
Accordingly, the in pari delicto defense is not a bar to the action brought by
McLemore against Regions.
CONCLUSION
For the reasons stated above, the order of the district court with
respect to the issue of fiduciary standing and the applicability of the defense
of in pari delicto should be affirmed.
Respectfully submitted, M. PATRICIA SMITH Solicitor of Labor TIMOTHY D. HAUSER Associate Solicitor for Plan Benefits Security Division NATHANIEL I. SPILLER Counsel for Appellate and Special Litigation s/ Leonard H. Gerson LEONARD H. GERSON Trial Attorney U.S. Department of Labor 200 Constitution Avenue, N.W. Room N-4611 Washington, D.C. 20210 Tel. (202) 693-5615 NOVEMBER, 2010 Fax. (202) 693-5610
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Leonard Green Clerk
100 EAST FIFTH STREET, ROOM 540 POTTER STEWART U.S. COURTHOUSE
CINCINNATI, OHIO 45202-3988 Tel. (513) 564-7000
www.ca6.uscourts.gov
Filed: November 22, 2010
Mr. Matthew C. Blickensderfer Frost Brown Todd 201 E. Fifth Street Suite 2200 PNC Center Cincinnati, OH 45202 Mr. Robert Martin Garfinkle Garfinkle, McLemore & Walker 2000 Richard Jones Road Suite 250 Nashville, TN 37215 Mr. Leonard Howard Gerson U.S. Department of Labor Office of the Solicitor P.O. Box 1914 N-4611 Washington, DC 20013 Mr. John Rex Wingo Frost Brown Todd 424 Church Street Suite 1600 Nashville, TN 37219 Mr. Phillip Gary Young Jr. Garfinkle, McLemore & Young 22 Public Square Suite 12 Columbia, TN 38401