Bank Did not Violate ERISA by Seizing Plan Sponsor’s Bank Account

July 29, 2010 ( – A claim that Sovereign Bank breached fiduciary duties under the Employee Retirement Income Security Act (ERISA) when it seized an employer’s bank account which contained employee benefit plan funds has been dismissed.

U.S. District Judge Richard G. Stearns of the U.S. District Court for the District of Massachusetts noted that it was undisputed that Sovereign was not a named plan fiduciary, and found that Sovereign was not a functional fiduciary.   

JetDirect Aviation (JDA), an aircraft management company, argued that Sovereign became a functional fiduciary when it took control of the commingled plan funds in JDA’s general operating account. However, Stearns pointed out that Sovereign, acting as a secured creditor seeking to offset a corporate debt, did not know that JDA had commingled employee benefit contributions, including contributions to employee 401(k) plans in the operating account. 

Current and former employees of JDA filed a complaint against the company alleging it violated ERISA by improperly withholding and diverting employee benefit plan funds from their paychecks to meet JDA’s obligations to its creditors. JDA then brought a third-party complaint against its successor company, Wayfarer Aviation, Inc. and one of its creditors, Sovereign, claiming breach of fiduciary duty, contribution, and indemnity.  

According to the opinion, in 2008, JDA’s business plan began to unravel as the demand for private charter jet services collapsed. Despite selling off many of its assets, JDA was unable to meet all of its obligations to secured creditors – some $112 million.   

On March 3, 2009, Sovereign declared JDA to be in default and began seizing JDA’s assets, including funds that had been deposited in JDA’s general operating account at Sovereign.  

The case is Anthony v. JetDirect Aviation Inc., D. Mass., No. 09-10527-RGS.