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Leister v. Dovetail

January 12, 2007


The opinion of the court was delivered by: Harold A. Baker United States District Judge


The plaintiff, Sandra C. Leister, Ph.D. ("Leister"), worked for defendant Dovetail, Inc. ("Dovetail") from March 1, 1997 until May 19, 2004. During all relevant times, defendant Michelle Peterson ("Michelle") was president of Dovetail. Michelle's husband, Evan Peterson ("Evan"), was Dovetail's vice-president.

Leister and Michelle had worked for Creative Care Management ("CCM"), a company that contracted to provide Employee Assistance Program services. In February 1997, Michelle created Dovetail, bought contracts from CCM, and recruited Leister to work for Dovetail. Included in Leister's compensation package at both CCM and Dovetail was a 401(k) deferred compensation plan. Under the Dovetail plan (the "Plan"), Leister could elect to contribute up to 10% of her compensation into the 401(k). Dovetail agreed to a provision for matching contributions.*fn1 Leister claims that Dovetail did not match her contributions from 1998 through 2003; Leister also contends that some of her own contributions were withheld from her paycheck but not timely deposited into the Plan.

Leister has filed a complaint alleging, among other things, that the defendants (1) breached their fiduciary duty by failing to make (a) matching contributions, and (b) timely deposits of Leister's elective deferrals; (2) while acting as trustees and/or administrators, failed to provide Leister with pertinent documents for the Plan and Dovetail's long term disability plan; (3) terminated Leister's dental and long term disability insurance without notice to Leister; and (4) failed to provide Leister with all compensation promised to her according to the terms of her employment agreement. Leister seeks an award for statutory penalties, attorney fees, unpaid compensation, unpaid dental bills, unpaid contributions to the Plan, and related lost investment income.

The parties have filed cross-motions for summary judgment [#26, #31]. For the following reasons, the defendants' motion is denied in its entirety. Leister's motion is granted in part and denied in part.


Summary judgment is granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). Summary judgment is proper when "a party . . . fails to make a showing sufficient to establish the existence of an element essential to that party's case[.]" Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The court must consider the evidence in the light most favorable to the party opposing summary judgment. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). The burden of establishing that no genuine issue of material fact exists rests with the movant. Jakubiec v. Cities Serv. Co., 844 F.2d 470, 473 (7th Cir. 1988). Once the movant has done so, the party opposing the motion bears the burden to respond, not simply by resting on the pleadings, but by affirmatively demonstrating that there is a genuine issue of material fact for trial. See Fed. R. Civ. P. 56(e); Celotex, 477 U.S. at 322-324.

In order to be a "genuine" issue, there must be more than "some metaphysical doubt as to the material facts." Matsushita Elec. Ind. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). "Summary judgment is not a dress rehearsal or practice run; it is the put up or shut up moment in a lawsuit, when a party must show what evidence it has that would convince a trier of fact to accept its version of the events." Hammel v. Eau Galle Cheese Factory, 407 F.3d 852, 859 (7th Cir. 2005). "If [the non-movant] does not [meet his burden], summary judgment, if appropriate, shall be entered against [the non-movant]." See Fed. R. Civ. P. 56(e).

As an initial matter, the court notes that the parties have filed lengthy statements of "material fact" and argument, and disputed each others' allegedly undisputed material facts supported by depositions, affidavits and counteraffidavits. Not surprisingly for a case involving a small employer, a closely held corporation owned by a married couple, and a benefit dispute affecting only one former employee, much of the case hinges on documents and the credibility of the witnesses. The case is not well suited to summary judgment based on statements contained in post-deposition affidavits and counteraffidavits. Although the Summary Plan Description ("SPD") might have aided in the resolution of some issues, the parties did not submit that document to the court. (The parties did, however, provide an Adoption Agreement, signed by Michelle, and a Certification of Investment Powers identifying Michelle as trustee.*fn2

I. The Defendants' Motion

The defendants argue they are entitled to summary judgment because (1) Leister cannot show that the defendants owed or violated a fiduciary duty; (2) Dovetail's temporary corporate dissolution does not cause a period of individual liability; (3) even if the defendants are fiduciaries, Section 404(c) of ERISA absolves them of liability; (4) Leister's claims are barred by waiver or the doctrine of laches or unclean hands; and (5) even if Leister prevails on a Section 502(a)(3) claim, that section of ERISA does not authorize money damages.

The essence of the defendants' first argument is that they acted as an employer and/or corporate officer, and owed no fiduciary duty to Leister by so acting. However, "employers who are also plan sponsors wear two hats: one as a fiduciary in administering or managing the plan for the benefit of participants and the other as employer in performing settlor functions such as establishing, funding, amending, and terminating the trust.*fn3 The fiduciary obligations imposed by ERISA are implicated only where an employer acts in its fiduciary capacity." Bauer v. RBX Indus., Inc., 368 F.3d 569, 582 (6th Cir. 2004). A fiduciary must discharge its duties solely in the interests of the plan's beneficiaries and recipients. Bauer, 368 F.3d at 582 (citing 29 U.S.C. § 1104(a)(1)(B)). The defendants owed a fiduciary duty to Leister to administer the Plan for her benefit.*fn4 Consequently, Evan and Michelle, as corporate officers, are not protected from a claim of breach of fiduciary duty simply because they were officers of Dovetail.

As noted above, the Certification of Investment Powers identified Michelle as trustee of the Plan. Michelle apparently made the decision not to submit matching 401(k) contributions for Leister. Evan and Michelle were the sole shareholders and officers of Dovetail, and they received substantial dividends for most of the years when Dovetail failed to make matching contributions for Leister. It is unclear whether, and to what extent, Evan was involved in the decision to keep Dovetail's profits for himself and Michelle rather than pay Leister's matching contributions. Consequently, there exists an issue of fact as to Evan's potential liability, his self-serving statements of passivity notwithstanding.

There being one basis for the defendants' potential liability as fiduciaries of the Plan, the court need not determine whether a brief corporate dissolution would ...

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