interest. This is not a case of an "honest mistake" or "bad judgment" on the part of Theresa Unger. Rather, it is more akin to a "gross delinquency," given that Theresa Unger entirely failed to comply with her duty to protect the beneficiaries of the plans by turning a blind eye to the self-enriching actions taken by Alan Unger.
Additionally, in accordance with their duty to maximize trust assets, the defendants do not dispute that as trustees they were under a duty to reinvest interest earned on the funds. Although Magistrate Judge Lee correctly noted that periodic distributions were required to be made to beneficiaries of the funds, there is no reason to believe that the trustees were not obligated to reinvest that portion of the interest that was not distributed.
The conclusion that compound interest is proper under the circumstances of this case comports with ERISA's aim to fully compensate the plans for the loss of the money. In a recent case involving the award of prejudgment interest on back pay under Title VII, the Second Circuit concluded, "Given that the purpose of back pay [under Title VII] is to make the plaintiff whole, it can only be achieved if the interest is compounded." Saulpaugh v. Monroe Community Hosp., 4 F.3d 134, 145 (2d Cir. 1993).
Similarly, in this case the funds will be placed in the position they would have occupied if the defendants had performed their duties only if compound interest is awarded. Any interest earned by the funds should have been reinvested by the trustees in compliance with common commercial practice and in order to maximize the funds' assets. An award of only simple interest would not adequately reflect this reinvestment requirement and would not fully compensate the beneficiaries for the value of the misappropriated funds.
In the Memorandum Opinion and Order dated November 20, 1991, this Court granted an award of attorneys' fees against Alan Unger for the cost of prosecuting the action against him, excluding efforts to recover $ 52,384.18 in damages. After oral argument, Magistrate Judge Lee recommended a "nominal" award of $ 5,000 to the Pension Benefit Guaranty Corporation ("PBGC") and an award of $ 40,000 to the individual plaintiffs, "in addition to that previously paid to their counsel." Report and Recommendation at 2. The individual plaintiffs have been represented in this action by the law firm of Blum, Gersen and Stream ("Blum, Gersen").
Several objections have been made to the recommended awards. Defendant Alan Unger contends that the awards are excessive in view of the allegedly minimal time spent by both PBGC and Blum, Gersen in prosecuting the action against him. The individual plaintiffs, taking the opposite view, urge the Court to award them a larger amount of fees in light of the assertedly considerable efforts by Blum, Gersen in prosecuting the action against Alan Unger. Additionally, because Magistrate Judge Lee did not quantify the amount "previously paid to their counsel," the individual plaintiffs request the Court to find that such amount is equal to $ 25,312.00.
Magistrate Judge Lee's award of attorneys' fees is affirmed substantially for the reasons stated at pp. 78-82 of the Transcript. While I do have some greater awareness of the efforts of counsel in this case, nothing in my awareness causes me to disagree with Magistrate Judge Lee's conclusion. As to the recommended award to the individual plaintiffs of amounts "previously paid to their counsel," because no party has disputed the precise dollar figure, I find the amount to be as Blum, Gersen proposes: $ 25,312.00.
Defendants must pay prejudgment interest at a rate to be computed according to 26 U.S.C. § 6621, using the "overpayment rate" for relevant periods after the effective date of the 1986 amendment to that section. This interest is to be compounded daily. Attorneys' fees are to be awarded according to the Report and Recommendation of Magistrate Judge Lee dated March 26, 1993.
Plaintiffs are directed to settle judgment upon seven days' notice within thirty days from the date of this Order.
It is SO ORDERED.
Dated: New York, New York
January 26, 1994
CHARLES S. HAIGHT, JR.
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