than show that Principal failed to make reasonable efforts to remedy the trustees breach. He must also show that, if Principal had made such efforts, the loss to the Plan, or at least some portion of it, could have been prevented. To be sure, § 405(a)(3) does not, on its face, contain any such requirement of causation. As written, the statute appears to impose liability on a fiduciary whenever it has knowledge of a breach, and fails to make reasonable efforts under the circumstances to remedy the breach.
Nor are the authorities that Principal cites in support of its claim that § 405(a)(3) contains a causation requirement highly persuasive. Neither the district court opinion nor the Seventh Circuit's opinion in Brandt addressed § 405(a)(3) at all. Those opinions merely held that the language of § 405(a)(2) implies a causal link between a fiduciary's misconduct and loss to a plan. Omni Funding Grout, concluded that § 405(a)(3) requires a causal link, but did not identify a clear textual basis for that conclusion, concluding simply that it was necessary to prevent "manifest unfairness." 731 F. Supp. at 176. In Brink v. DaLesio, 496 F. Supp. 1350 (1980), aff'd in part and rev'd on other grounds, 667 F.2d 420 (4th Cir. 1981), the court held that § 405(a) requires a causal link. The opinion, however, simply restates the language of § 405(a) and cites to its legislative history, without specifically discussing § 405(a)(3).
Nonetheless, the court is persuaded that plaintiff cannot prevail in this action without showing that, but for Principal's actions, all or part of the loss to the Plan could have been prevented. As discussed above, the jurisdictional vehicle for this lawsuit is § 502(a)(2) of ERISA, which allows fiduciaries to sue for appropriate relief under § 409. It is beyond dispute that § 409 requires a showing of causation. See Diduck, 974 F.2d at 270; Brandt, 687 F.2d at 898. The plain language of that statute makes a fiduciary liable for "losses to the plan resulting from . . . [a] breach." 29 U.S.C. § 1109 (emphasis added). In this respect, as in many others, ERISA is similar to the common law of trusts, under which a trustee is liable for a breach of trust only to the extent that the breach causes loss. See Restatement (Second) of Trusts § 205 (1959). Since this action must arise under § 502(a)(2), for reasons discussed above, plaintiff is bound by the requirements of § 409 as well as § 405. Plaintiff therefore can recover against Principal only to the extent that its actions actually caused a loss to the Plan.
Plaintiff also suggests that, once he has shown a breach, the burden of persuasion should shift to Principal to demonstrate a lack of causation. That argument stems from a misreading of Martin v. Feilen, 965 F.2d 660, 671 (8th Cir. 1992), cert. denied, 506 U.S. 1054 (1993). The issue in Martin involved the calculation of damages after a plaintiff has proved a prima facie case of loss to the plan or resulting from a breach of duty. Once a prima facie case of causation has been proved, the burden shifts to the defendant to demonstrate that any loss to the plan, or profit to the fiduciary, did not result from the breach. See Donovan v. Bierwirth, 754 F.2d 1049, 1056 (2d Cir. 1985). The initial burden of proving causation, however, rests with the plaintiff.
To prevail, then, plaintiff must demonstrate not only that Principal failed to take reasonable steps to remedy the breach. He must be able to show that, if Principal had taken reasonable steps, at least some portion of the loss to the Plan could have been prevented. If reasonable efforts could not have remedied the breach, Principal cannot be held liable. Moreover, in order to survive a motion for summary judgment, plaintiff must "do more than simply show that there is some metaphysical doubt as to the material facts," Heilweil v. Mount Sinai Hosp., 32 F.3d 718, 723 (2d Cir. 1994) (citations and internal quotations omitted), cert. denied, 130 L. Ed. 2d 1063, 115 S. Ct. 1095 (1995). He must "produce 'significant probative evidence tending to support [his position].'" Project Release v. Prevost, 722 F.2d 960, 968 (2d Cir. 1983) (quoting United States v. Pent-R-Books, Inc., 538 F.2d 519, 529 (2d Cir. 1976), cert. denied, 430 U.S. 906 (1977)). At the very least, then, plaintiff must demonstrate that some reasonable alternative course of conduct would have prevented the loss.
Plaintiff has not met this burden. Although he repeatedly claims that Principal took no action at all to recover the missing funds, nowhere does he state what Principal might have done, or explain how such action could have led to the recovery of the money. As the legislative history to ERISA notes, the question of what efforts a fiduciary must take to remedy a co-fiduciary's breach is highly fact-specific, depending on "the relationship of the fiduciary to the plan and to the co-fiduciary, the duties and responsibilities of the fiduciary in question, and the nature of the breach." H.R. Conf. Rep. 93-406, 1974 U.S.C.C.A.N. at 5080. Depending on the circumstances, the appropriate remedy may be "to notify the plan sponsor of the breach or to proceed to an appropriate Federal court for instructions, or to bring the matter to the attention of the Secretary of Labor." Id; see also Morrissey v. Curran, 567 F.2d 546, 550 (2d Cir. 1977) (Lumbard, J. concurring) (quoting above language from House conference report). To demonstrate that any of these actions could have resulted in a recovery to the Plan, plaintiff would have to produce some evidence concerning what the trustees did with the money and what their financial condition was during the relevant time period.
Plaintiff has not produced sufficient evidence concerning these matters to raise a genuine issue of material fact. Indeed, he acknowledged in response to interrogatories posed by Principal that he had not investigated what the trustees did with the money because he considered it irrelevant to this action. Wolfson Aff., Ex. F. The only evidence that plaintiff has submitted concerning the financial condition of the trustees and of Unitron Graphics consists of a portion of a bankruptcy petition filed by Unitron Graphics pursuant to Chapter 11 of the Bankruptcy Code and a confidential internal memorandum, written on Unitron Graphics stationary, describing a tentative plan of reorganization. The petition appears to have been filed on January 6, 1992, and the memorandum is dated September 7, 1992. These documents do indicate that Unitron Graphics had assets in excess of its liabilities to secured creditors. In response, however, Principal has submitted copies of two orders of the Bankruptcy Court. Those orders indicate that Unitron Graphics never submitted a reorganization plan and that the case was converted into a proceeding under Chapter 7 of the Bankruptcy Code. Furthemore, Principal has submitted a copy of the bankruptcy trustee's report, dated July 23, 1993, stating that he had not "received any property nor paid any money on account of this estate except exempt property" and that, after conducting a diligent inquiry into the debtor's affairs, he had determined that "there is no property available for distribution from the estate over and above that exempted by law . . . ." Wolfson Rep. Aff. Ex. C. Thus it appears that Unitron Graphics did not have sufficient assets to pay any of its unsecured creditors. In light of this subsequent determination, plaintiff's submissions do not raise any genuine issue of material fact as to whether Principal could have recovered the missing funds from Unitron Graphics.
Plaintiff also argues that the fact that Zucker and Fertig have been able to make partial restitution to the Plan in the wake of their criminal prosecution suggests that Principal could have recovered even more money from them if it had acted sooner. This conclusion is unsupported by the record. Plaintiff has submitted no evidence as to the financial condition of the trustees in the relevant period, and documents submitted by Principal indicate that the restitution payments Zucker and Fertig did make came from money that they borrowed, rather than from their personal assets.
Without some indication from plaintiff as to what Principal might have done to remedy the trustees' breach, given the specific knowledge that it possessed, and some explanation of how such action would have benefitted the Plan, the court cannot conclude that Principal's conduct caused a loss. Since proof of causation is an essential element of plaintiff's action, Principal is entitled to summary judgment.
For the foregoing reasons, Principal's motion for summary judgment is granted, and plaintiff's motion is denied. Furthermore, since plaintiff does not seek any relief against Zucker and Fertig, the sole remaining defendants, this action is dismissed without prejudice against them. In addition, all cross-claims and counter-claims are dismissed as moot. The Clerk of the Court is instructed to enter judgment accordingly.
Allyne R. Ross
United States District Judge
Dated: May 16, 1996
Brooklyn, New York