Attorney not Liable for Plan Fiduciary Misconduct

February 14, 2007 (PLANSPONSOR.com) - A federal judge has dismissed legal malpractice and breach of fiduciary duty claims brought by health plan trustees against an attorney who represented them in an Employee Retirement Income Security Act (ERISA) suit.

The New Jersey Law Journal reports that U.S. District Judge Joel Pisano dismissed the claims because the required affidavit of merit was filed late, but said even if the attorney was aware of prohibited transactions and did not inform the plan trustees, it cannot be shown the plan suffered loss due to the attorney’s conduct rather than that of the wrongdoers. Pisano ruled the claims for breach of fiduciary duty under ERISA were without merit because attorneys are usually not considered fiduciaries and the trustees had not shown their attorney exceeded his normal role as a lawyer.

The trustees and plan administrators of the PACE Local I-300 Union health fund were accused of misusing fund assets by paying themselves excessive salaries, leasing fancy cars, using funds for the benefit of the union and other improper purposes. The trustees sued attorney Gary Carlson, claiming he was aware of the improper expenditures and failed in his duty to inform the trustees, resulting in a loss of more than $1 million, according to the New Jersey Law Journal. The trustees also said Carlson failed to advise them the ERISA suit was filed or of their right to assert cross claims and filed an answer on their behalf without their knowledge or consent.

Pisano also said the fact the other interested parties did not join the suit against Carlson indicated the claims were without merit.

The plaintiffs in the ERISA suit are hundreds of workers whose health claims went unpaid, their employers, and health care providers seeking to recover unpaid medical bills.

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