In the case of Thomas v. Bostwick, the U.S. District Court for the Northern District of California disagreed with the plan trustee’s claim that the case was moot, determining that since it was capable of actions such as finding the defendant in breach of fiduciary duties and awarding the plaintiff damages, the case was therefore not moot.
The court also said the fact that the retirement plan was terminated did not make trustee James S. Bostwick immune from liability for improperly giving the funds to the employer, pointing to the fact that with an Employee Retirement Income Security Act (ERISA) plan “all benefits [needed to] be distributed to participants before the plan trust is terminated” and that based on the plaintiff’s allegations, this was clearly not done.
Finally, the court disagreed with the Bostwick’s claim that the case of United States v. Novak provided an exception to “the anti-alienation provision in an ERISA pension plan where there is a criminal restitution order.” The garnishment in Novak was done under the standard of the Mandatory Victims Restitution Act (MVRA), but the court felt the MVRA did not apply here, since only the government could enforce such a judgment and not the employer.
The original lawsuit was filed by Richard Todd Thomas, who claimed Bostwick, as trustee of Bostwick & Associates’ retirement plan, violated his fiduciary duties by sending Thomas’s retirement account balance to his employer instead of to him. According to the court opinion, Bostwick’s rationale for doing so was that Thomas had embezzled money from his employer and in subsequent court proceedings, a court entered a judgement in favor of the company for an amount in excess of $19 million, which entitled Thomas’s employer to seize his plan account balance as part of that restitution.
The full text of the court’s ruling can be found here.
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