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Rosen v. Rosen

July 11, 2006


The opinion of the court was delivered by: Sifton, Senior Judge.


Plaintiffs Jerome Rosen, Paul Rosen, Jay Rosen and Calvin Sinclair bring this action against defendant Irwin Rosen, trustee of the Rosen Plastering Corporation Employee Pension Plan, seeking to recover damages from the defendant for breach of fiduciary duties, pursuant to 29 U.S.C. §1104(a)(1)(A)(I) and 29 §1104(a)(1)(D). The matter was tried before the undersigned sitting without a jury on November 14, 2005 and November 15, 2005. For the reasons set forth below I conclude that defendant has not breached his fiduciary duties under 29 U.S.C. §1104(a)(1)(A)(I) and 29 §1104(a)(1)(D) and that defendant is entitled to judgment in his favor. What follows sets forth the findings of fact and conclusions of law on which this decision is based as required by Rule 52(a) of the Federal Rules of Civil Procedure.


Irwin Rosen and Jerome Rosen are brothers and equal owners of Rosen Plastering Corporation, a New York state corporation engaged in the business of plastering and fire proofing residential and commercial buildings. Tr. 6-7. Irwin and Jerome are also co-trustees of the Rosen Plastering Pension Plan. The only beneficiaries of the plan in question were Calvin Sinclair, Irwin Rosen, Jerome Rosen, and Jerome's two sons, Jay Rosen and Paul Rosen. Tr. 6.

The Pension Plan is governed by two documents: the American General Life Insurance Company of New York Defined Contribution Plan and Trust ("Contribution Plan") and the Money Purchase Adoption Agreement ("Adoption Agreement"). Ex. 1 and 2.

The Contribution Plan defines the Employer as, "the entity specified in the Adoption Agreement" or "any successor which shall maintain this plan." Ex. 2 ¶1.15. The Adoption Plan provides that the Employer here is Rosen Plastering. The Contribution Plan obligates Rosen Plastering to appoint trustees and an administrator and to fund the plan. Ex. 1. ¶2.3. The Contribution Plan permits an Employer to designate itself as Administrator, as Rosen Plastering did. It also controls the trustees decision making process, stating that, "[i]f there shall be more than one Trustee, they shall act by a majority of their number, but may authorize one or more of them to sign papers on their behalf." Ex. 1. ¶7.1(d).

The Contribution Plan also provides for the termination of the plan or the merger or consolidation of the plan with another plan. Specifically, the Contribution Plan provides as follows:


(b) Upon the full termination of the Plan the Employer shall direct the distribution of the assets to Participants in a manner which is consistent with and satisfies the provisions of Section 6.5. Distributions to a Participant shall be made in cash (or in property if permitted int the Adoption Agreement) or through the purchase of irrevocable non-transferable deferred commitments from the Insurer. Except as permitted by Regulations, the termination of the Plan shall not result in the reduction of "Section 411(d)(6) protected benefits" as described in section 8.1.


This Plan may be merged or consolidated with, or its assets and/or liabilities may be transferred to any other plan only if the benefits which would be received by a Participant of this Plan, in the event of a termination of the plan immediately after such transfer, merger or consolidation, are at least equal to the benefits the Participant would have received if the Plan had terminated immediately before the transfer, merger or consolidation and such merger or consolidation does not otherwise result in the elimination or reduction of any "Section 411(d)(6) protected benefits" as described in Section 8.1(e). Although the plan does not define the phrase "full termination" it is undisputed that if the plan has no Employer, the plan must be terminated. Ex. 10, pg. 2. The Adoption Plan specifies that if the plan is terminated and its assets distributed to the participants then the distributions must be made in "cash only." Ex. 2, E9(a).

From 1979 to 1998 Irwin had Jerome's authorization under the plan to act on behalf of the Pension Plan, to buy and sell securities for the Pension Plan, to make bank deposits, to deal with the bank accounts and to sign papers for the pension plan. Tr. 190:17-22; 70:2-9; 76:23. Irwin generally bought securities and held them until they matured, then reinvested the money in similar securities. Tr. 27.

In 1996 Irwin discovered that Jerome had formed a new corporation, J. Rosen Plastering, Inc., and that Jerome was diverting corporate opportunities to his new business. In August 1996 Irwin filed a petition in the Supreme Court of the State of New York to dissolve Rosen Plastering. Pl. Ex. 14. The dissolution was ordered and the court directed a receiver, Douglas Rosenberg, to take control of the Pension Plan's liquid assets, totaling $224,955.58. Tr. 139.

Irwin testified credibly that he believed, based on the plan documents, that the dissolution of Rosen Plastering required termination of the plan and distribution of its assets. Irwin also understood that he "could not give a security to one individual and another security to another. . . the securities had to be liquidated and to [sic] be paid in cash." Tr. 30:21-32:1.

Irwin testified that Fred Pierson, a plan analyst at Securities Administrators, a pension administration company hired by Rosen Plastering, told him that if the plan was terminated it would have to liquidate the securities and distribute cash. Tr. 36; Ex. 5. In an affidavit admitted by stipulation at trial Fred Pierson stated that Securities Administrators performed only administrative functions for Rosen Plastering (such as preparing annual statements indicating the value of pension benefits for each participant and preparing tax forms for the Pension Plan), but did not advise the trustees on any matters relating to the Pension Plan. Pierson Aff. ¶¶ 3, 8. However, Pierson's statement is contradicted by his statement in the same affidavit that he advised Jerome Rosen that the Pension Plan could either be terminated or could be continued under the auspices of J. Rosen Plastering. In any event, regardless of whether Irwin received advice from Pierson or not, I credit Irwin's testimony that both he and Jerome believed that the Pension Plan had to be liquidated because Rosen Plastering had been dissolved.

By letter dated June 29, 1998, Irwin wrote to Jerome addressing the question of what to do with the Pension Plan. Ex. 5. The letter presumes that the Pension Plan must be wound up. The letter goes on to state in relevant part as follows:

I was advised by Security Administrators, Inc. that we could not distribute the actual securities held by the trust to participants, and based upon the interest rates today, it would not be beneficial to do this anyway. In order to pay to each participant of the pension fund their appropriate shares of the total, all securities will have to be sold. As interest rates are the lowest that they have been in some thirty years, we have greatly benefitted by the price appreciation in the bonds and the high values that we can obtain for the entire portfolio of securities. No portion of the portfolio is subject to any penalties for selling the securities at this time.

Irwin closes by asking Jerome to agree to sell the securities immediately and states that Jerome should indicate his "agreement or disagreement" by faxing back his answer. Id. On the same day, Irwin also sent Jerome a letter for Jerome's signature directing Douglas Rosenberg to return the ...

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