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California Ironworkers Field Pension Trust, a Jointly Trusteed Management Labor Trust Fund California and Vicinity Field Ironworkers Annuity Trust, a Jointly Trusteed Management Labor Trust Fund California Ironworkers Field Welfare Plan Richard Zampa, Michael Newington Thomas J. Bernsen Jim Butner James Murphy James Pruett Joe Roth Joe Standley Elwood Tweet Gene Vick Glenn Bustrum John Everhart Richard Hoertig Charles Krebs Nick Lee Stephen P. Lyons John Ware Dave McEuen in Their Capacities as Trustees of Each of the Aforesaid Trust Funds, Plaintiffs-Appellants-Cross-Appellees v. Loomis Sayles & Company, a Limited Partnership Loomis Sayles & Company, Inc., a Corporation, Defendants-Appellees-Cross-Appellants

Citations: 259 F.3d 1036; 26 Employee Benefits Cas. (BNA) 2317; 2001 Cal. Daily Op. Serv. 6680; 2001 Daily Journal DAR 8221; 2001 U.S. App. LEXIS 17411Docket: 99-56520

Court: Court of Appeals for the Ninth Circuit; August 6, 2001; Federal Appellate Court

Narrative Opinion Summary

In this ERISA action, the Ninth Circuit Court of Appeals reviewed a dispute involving three employee benefit trust funds against Loomis Sayles Company for breach of fiduciary duties. The district court found that Loomis breached its fiduciary duties only to the California Field Ironworkers Health and Welfare Trust Fund by imprudently investing 30% of its assets in inverse floaters, while it found no breach concerning the Annuity and Pension Trusts. The court awarded damages of $1,107,213 to the Welfare Trust but denied attorney's fees and costs to both parties. On appeal, the Ninth Circuit affirmed the district court's findings on liability and its decision on attorney's fees, but remanded for a recalculation of damages, adopting a standard that considers the permissible percentage of investment in high-risk assets. The court found no breach of the duty of disclosure or loyalty under ERISA, as Loomis disclosed relevant facts to the Trustees' consultant, and the alleged non-disclosures were not material. The decision not to award attorney's fees was upheld, given Loomis' good faith and the parties' respective valid legal positions.

Legal Issues Addressed

Application of the Prudence Rule under ERISA

Application: The court evaluated Loomis' adherence to the prudence rule, determining that the allocation of assets in inverse floaters for the Welfare Trust was imprudent due to its conservative investment objectives.

Reasoning: The court concluded that the allocation of thirty percent of the Welfare Trust’s assets to long-duration inverse floaters breached the Trust’s conservative investment guidelines.

Attorney's Fees and Costs under ERISA

Application: The district court's decision not to award attorney's fees was upheld as it determined Loomis acted in good faith and both parties had valid positions.

Reasoning: The court concluded that both parties had valid positions, and this weighed against awarding fees, despite the judgment benefiting all plan participants.

Breach of Fiduciary Duties under ERISA

Application: The court found Loomis breached its fiduciary duties specifically to the Welfare Trust by imprudently allocating 30% of its assets to high-risk inverse floaters.

Reasoning: A twelve-day bench trial revealed that while the guidelines did not explicitly ban inverse floaters and Loomis acted within its discretion, investing 30% of the Welfare Trust's assets in these securities breached the prudence rule.

Calculation of Damages for Breach of Fiduciary Duty

Application: The court adopted a standard for calculating damages based on a permissible percentage standard for investment in high-risk assets, vacating the judgment for recalculation.

Reasoning: The court decides to adopt this standard for calculating damages but vacates the district court's judgment due to its failure to specify an acceptable percentage for investment in inverse floaters, remanding the case for recalculation based on the permissible percentage standard.

Duty of Disclosure under ERISA

Application: The court found no breach by Loomis in its duty to disclose, as the asserted facts were not sufficiently material to trigger a disclosure obligation.

Reasoning: The court determined that the asserted facts were not sufficiently material to trigger a disclosure obligation, and noted that Loomis had disclosed many relevant facts to the investment consultant hired by the Trustees.

Standard of Review for Damages Computation

Application: The district court's computation of damages is reviewed for clear error, while the application of the correct legal standard in computing damages is reviewed de novo.

Reasoning: The standard of review for a district court's computation of damages following a bench trial is for clear error, while the application of the correct legal standard in computing damages is reviewed de novo.