Regions Bank Dodges Suit For Actions of Rogue Adviser
Regions Bank Dodges Suit For Actions of Rogue Adviser
(CN) - A federal appellate
panel let Regions Bank off the hook in an ERISA action after a rogue
investment adviser pillaged retirement funds depostited at the bank.
The Sixth Circuit Court of Appeals affirmed the trial court's finding that neither the victims nor the bankruptcy trustee for the adviser who absconded with their savings can hold Regions Bank liable under state law for not preventing the theft.
Investment adviser Barry Stokes "purloined millions of dollars from the employee-benefits plans that he managed" and left victims with little recourse to recover their money after he filed bankruptcy.
Stokes' bankruptcy trustee and several victims sued Regions Bank for "negligently or knowingly allow(ing) Stokes to steal from the fiduciary accounts held at Regions."
While the trustee was able to demonstrate to the court that Stokes indeed was an "Employee Retirement Income Security Act (ERISA) fiduciary representing the plans' rather than as a bankruptcy trustee suing to enlarge the debtor's estate interests," a point of contention in the appeal, the court dismissed his claims and those of the victims.
A trial court had dismissed state claims stating that they were superseded by ERISA.
"In dismissing plaintiffs' state-law claims, the district court found that Tennessee's Uniform Fiduciaries Act ("UFA") limited plaintiffs' claims to allegations of knowing or bad-faith conduct and that ERISA preempted any allegation that survived the UFA's bar," wrote Sixth Circuit Judge Deborah L. Cook who authored the opinion.
"Under ERISA, a plan participant, beneficiary, or fiduciar" may seek an injunction against a non-fiduciary who knowingly participates in a fiduciary's violation of ERISA," the opinion states.
When the ERISA claims were dismissed by a district court, the claims reappeared as state-law claims for unjust enrichment.
"Peering through the state-law disguise, the district court rejected the claim as a reframing of the previously dismissed ERISA claim," Cook writes.
"To the extent that plaintiffs' claims stem from Regions' negligence, the UFA bars them; to the extent they arise from Regions' knowledge of or bad-faith acquiescence in Stokes' scheme, ERISA preempts them."
The Sixth Circuit Court of Appeals affirmed the trial court's finding that neither the victims nor the bankruptcy trustee for the adviser who absconded with their savings can hold Regions Bank liable under state law for not preventing the theft.
Investment adviser Barry Stokes "purloined millions of dollars from the employee-benefits plans that he managed" and left victims with little recourse to recover their money after he filed bankruptcy.
Stokes' bankruptcy trustee and several victims sued Regions Bank for "negligently or knowingly allow(ing) Stokes to steal from the fiduciary accounts held at Regions."
While the trustee was able to demonstrate to the court that Stokes indeed was an "Employee Retirement Income Security Act (ERISA) fiduciary representing the plans' rather than as a bankruptcy trustee suing to enlarge the debtor's estate interests," a point of contention in the appeal, the court dismissed his claims and those of the victims.
A trial court had dismissed state claims stating that they were superseded by ERISA.
"In dismissing plaintiffs' state-law claims, the district court found that Tennessee's Uniform Fiduciaries Act ("UFA") limited plaintiffs' claims to allegations of knowing or bad-faith conduct and that ERISA preempted any allegation that survived the UFA's bar," wrote Sixth Circuit Judge Deborah L. Cook who authored the opinion.
"Under ERISA, a plan participant, beneficiary, or fiduciar" may seek an injunction against a non-fiduciary who knowingly participates in a fiduciary's violation of ERISA," the opinion states.
When the ERISA claims were dismissed by a district court, the claims reappeared as state-law claims for unjust enrichment.
"Peering through the state-law disguise, the district court rejected the claim as a reframing of the previously dismissed ERISA claim," Cook writes.
"To the extent that plaintiffs' claims stem from Regions' negligence, the UFA bars them; to the extent they arise from Regions' knowledge of or bad-faith acquiescence in Stokes' scheme, ERISA preempts them."
Copyright Courthouse News Service 2012
http://www.cnssecuritieslaw.com/2012/06/14/406.htm
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