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April 7, 1999


The opinion of the court was delivered by: Cote, District Judge.


This action has risen out of the rubble of an ill-fated law partnership between plaintiff Richard Sabatini ("Sabatini") and defendant Thomas Amon ("Amon"). Sabatini, and plaintiffs Jonathan Gray ("Gray") and Rocco Marciano ("Marciano"), a former associate and paralegal of the firm respectively, assert violations of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq., by defendants Amon, Walter Briggs ("Briggs"), and Janney Montgomery Scott, Inc. ("Janney"). Defendants Briggs and Janney have moved for summary judgment on plaintiffs' claims against them, or in the alternative, summary judgment on their cross-claim against Amon and counter-claim against Sabatini. The plaintiffs oppose the motion. Defendant Amon opposes his co-defendants' motion, except as to the plaintiffs' claims under Section 406, the allegedly "prohibited transactions." Briggs and Janney have further moved to exclude the report and testimony of the plaintiffs' expert, Robert Lau ("Lau"). Amon joins in this motion to exclude Lau's report and testimony, and also seeks to preclude the plaintiffs from offering any evidence concerning two withdrawals of assets that they allege violated ERISA. For the reasons set forth below, the Briggs' and Janney's motion for summary judgment is granted in part and denied in part, and their motion to exclude Lau's report and testimony is granted in part. Amon's motion to preclude the introduction of evidence concerning the two withdrawals of assets is granted.


Except as otherwise noted, the following facts are undisputed.

1. The Plans

In 1990, Sabatini and Amon agreed to open a law office called Amon & Sabatini in Manhattan, sharing space and expenses but not clients or profits. In 1992, Amon and Sabatini retained a law firm to establish two employee benefit plans, the Amon & Sabatini Pension Plan ("Pension Plan") and the Amon & Sabatini Profit-Sharing Plan ("Profit-Sharing Plan") (together, "the Plans"). Amon and Sabatini were designated as the sole trustees of the Plans, and each could act individually on behalf of the Plans.

On or about April 9, 1992, Amon contacted Briggs, a securities broker at Janney, to obtain investment and brokerage assistance from Briggs and Janney concerning the assets of the Plans. Briggs asserted in his deposition that Amon told him at that time to pursue a strategy of "aggressive growth" in his investments for the Plans, while Amon denies giving such instructions. After this discussion, $40,000 of the Plans' assets were transferred to Janney. No written agreements document the relationship between the Plans and Briggs and Janney. No written accounting was provided to Briggs or Janney indicating the proportion of the Plans' assets held and managed by those defendants.

Briggs provided regular investment advice to Amon concerning the Plans, and Briggs invested the Plans' assets on numerous occasions. Indeed, Amon followed all of Briggs' investment advice concerning the Plans' assets without exception. The parties dispute whether Briggs was aware that the Plans' investments were made entirely upon his advice, and whether Briggs acted unilaterally in investing assets of the Plans at any time. Briggs asserts that he had no authority to act without consent of a trustee, and never did so act. Amon testified, however, that despite the absence of such express authority, Briggs invested assets at times without first seeking his consent, and that Amon relied on Briggs to provide advice and to invest in that fashion. In any event, Briggs and Janney sent a confirmation slip to Amon & Sabatini after each investment transaction, as well as monthly account statements that documented all investment transactions for the Plans. Neither Amon nor Sabatini ever canceled such a transaction. Briggs testified, and no other party disputes, that he believed Amon's directions concerning the Plans to have been given with Sabatini's knowledge and consent.

Sabatini did not take an active role in managing or choosing investments for the Plans, and did not consult with Amon regarding the investments. The parties dispute the extent of Sabatini's knowledge of specific investments, although it is undisputed that Sabatini was aware of the FastComm investments, discussed further below, and spoke with Amon about those investments in 1993 or 1994. Sabatini did not take any steps to ensure that investments of Plan assets would be diversified. A bond on the Plans was maintained from some point until 1995, when it was canceled for failure to renew the policy.

In December 1995, Sabatini telephoned Barbara Murray of Witman, Stadtmauer & Michaels, counsel for the Plans, and requested that she establish new employee benefits plans in his name. Murray then sent to Amon, for his execution, amendments to the Plan documents that would change the names of the Plans to the Thomas G. Amon, Esq. Pension and Profit Sharing Plans, and remove Sabatini as a trustee of the Plans effective retroactively to January 1, 1995. Amon executed the amendments at some point, but did not advise Sabatini that he had done so. Sabatini did not learn that he had been removed as trustee of the Plans until March 1997.

Gray began working for Amon & Sabatini in 1990 after graduating from law school and was a participant in the Plans. He left the firm in 1994. In 1995, Gray contacted Sabatini and Amon by telephone in an effort to obtain his distribution from the Plans. After additional efforts in 1996 and 1997 in writing and by telephone, Gray received two checks from Amon on May 22, 1997.

Marciano also began working for Amon & Sabatini in 1990 and left the firm in March 1994. Between June 1994 and February 1997, Marciano contacted Sabatini numerous times to obtain his distribution from the Plans. Sabatini replied that Marciano's interest in the Plans needed to be calculated before a distribution could be made. In March 1997, Marciano began to call Amon to receive his distribution. On or about July 9, 1997, Marciano received a check from Amon.

2. The FastComm Stock Purchases

On November 11, 1992, Briggs purchased 1000 shares of FastComm for the Profit Sharing Plan at a price of $3.6250 per share. On March 22, 1993, Briggs made an additional purchase of 150 shares of FastComm stock for $7.75 per share. It is undisputed that Sabatini had access to the monthly account statements from Janney that included this purchase, as well as all other purchases of stock, on behalf of the Plans. Sabatini was also aware in 1992 that Amon acted as counsel to FastComm at that time, and did not express any concern to any of the defendants that Amon's dual role as trustee and counsel represented a conflict of interest. Over the next nine months, the value of FastComm stock fluctuated substantially, reaching a high of $14.75 per share on September 24, 1993. On December 10, 1993, Briggs purchased 2000 additional FastComm shares for $11.3125 per share. By June 24, 1994, the value of FastComm stock had fallen to $5.75 per share. On July 12, 1994, Briggs purchased 500 additional FastComm shares for $4.75 per share. The parties dispute whether Briggs made these purchases at the direction of Amon or in his own discretion.

In December 1994, Amon was appointed to serve on FastComm's Board of Directors. He then recused himself from all decisions regarding the Plans' investments in FastComm, and notified Sabatini and Briggs of his recusal. Amon received options to purchase 10,000 shares of FastComm stock every year beginning at that time.

On February 21, 1997, Sabatini wrote to Briggs concerning the FastComm stock:

  With respect to the investment in FastComm stock, I
  request that you hold our present position in the
  stock but keep me regularly advised of changes in its
  price. Due to the apparent conflict of interest
  resulting from Tom's position in the company, I
  believe we should be out of the stock by the end of
  the year.

To date, no instructions have been given to Briggs to sell the Plans' FastComm stock.

3. The Marcum Stock Purchases

On January 19, 1993, Briggs purchased 500 shares of stock in Marcum Natural Gas Services Corporation ("Marcum") for $7.75 per share. Basil Briggs, defendant Briggs' brother, sat on Marcum's Board of Directors beginning in July 1991 and throughout the period at issue. At the time of the purchase, Basil Briggs held stock options for 50,000 Marcum shares as well. The parties dispute whether Briggs disclosed Basil Briggs' presence on Marcum's Board prior to purchasing the Marcum shares. Briggs asserts that he disclosed it to Amon prior to the purchase; Amon testified that he learned of Basil Briggs' position only after receiving a letter from Sabatini's former counsel in April 1997. Amon further testified that "[h]ad [he] known [Basil Briggs] was on the board of directors of Marcum, I would have looked at the company." Sabatini knew nothing about Basil Briggs' position on the Board of Directors until 1997.

On March 3, 1993, Briggs sold the Marcum shares at a profit for $9.75 per share. On July 12 and November 8, 1994, Briggs purchased a total of 18,000 Marcum shares for $4.625 and $3.25 per share, respectively. As with Briggs' purchases of FastComm stock, the parties dispute whether Briggs acted with Amon's prior approval or in his own discretion. The value of the Marcum stock decreased steadily from that time.

4. The Transfers of Plan Assets

By facsimiles dated October 17, 1996, and January 13, 1997, bearing handwritten signatures above the signature lines for both Amon and Sabatini, Janney was directed to transfer $10,000 on each occasion from the Plans' account to a Marine Midland Bank account held in the name of Amon & Sabatini. While Briggs asserts that he believed that Sabatini's signatures on the two letters were genuine, Sabatini denies signing the two facsimiles or sending any information concerning the Marine Midland account to Briggs or Janney. Both transfers were made as requested by Briggs and Janney on October 17, 1996, and January 14, 1997, respectively. Sabatini asserts that he did not learn of the October 1996 transfer until February 1997, and of the January 1997 transfer until some time thereafter.

Amon distributed checks for $7,198.80 and $722.55 to David Norman on April 30, 1997. It is undisputed that these amounts constituted Norman's full interest in the Plans. Amon retained $1,978.69, which he remitted to the Internal Revenue Service as withholding taxes for Norman. In May 1997, Amon wrote two checks to Gray from the Marine Midland account for $4810.39 and $818.66 to cover his full interest in the Plans. In June 1997, Amon directed Janney to make several distributions to Marciano of his full interest in the Plans. In addition, on June 15, 1997, Amon paid $4,588.31 and $916.63 back to the account at Janney from which he had transferred the $20,000 originally. Those checks covered the difference between the distributions made to Norman and Gray and the transferred funds, and the interest earned on those funds while in the Amon & Sabatini account at Marine Midland, respectively. In total, Amon paid $21,034.03 to cover distributions to Gray ...

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