Appeal from the United States District Court For the Northern District of Texas.
Before Emilio M. Garza, DeMOSS, Circuit Judges, and Zagel, District Judge.*fn*
This is an appeal of a summary judgment granted in favor of Southwestern Life Insurance Co. (SWL). Kral sued SWL for breach of fiduciary duties in violation of 29 U.S.C., § 1109 (a) (1985).
Plaintiffs include: (1) Ed's Automatic Transmission Service Defined Benefit Plan, a qualified defined benefit plan under the terms of ERISA (the Kral Plan); (2) Kral, Inc. d/b/a Ed's Automatic Transmission Service (Kral, Inc.), the Kral Plan's designated plan administrator; (3) Edwin V. Kral, a Trustee of the Kral Plan and a Plan participant who owed fiduciary duties to the Kral Plan; and (4) Calvin Kral, the Kral Plan's other Trustee and a Kral Plan participant who owed fiduciary duties to the Kral Plan. The defendant is SWL, which is not a designated fiduciary of the Kral Plan and has never been designated by a fiduciary named in the Kral Plan to carry out fiduciary responsibilities.
Plaintiffs contend that SWL is liable to them for breach of fiduciary duty and for theft of almost $500,000 in pension plan funds by Robert Joseph Zeigler (Zeigler). Zeigler is the president and sole shareholder of Administrative Pension Services, Inc. (APS) which, pursuant to contract acted as the Kral Plan's third-party administrator. Plaintiffs assert the theory of respondeat superior to hold SWL liable for Zeigler's allegedly fraudulent conduct.
On May 1, 1983, Zeigler's wife, Peggy, became an authorized soliciting agent for SWL. Apparently Peggy Zeigler was only authorized to "solicit applications for life insurance, annuities, and other insurance products offered by [Southwestern] for sale to the general public." Neither Joseph nor Peggy Zeigler was ever an authorized recording agent for SWL, and neither ever had the authority to bind SWL to an insurance or annuity contract. Moreover, neither of the Zeigler's was authorized to make or modify any contracts or policies on behalf of SWL.
On March 18, 1985, the Kral Plan contracted with Farzaroli & Davey Pension Services Corporation (Farzaroli), to provide it with administrative services. At the time, Joseph Zeigler was an employee of Farzaroli.
In 1985 or 1986, the Kral Plan hired APS as their contract administrator. APS was directly compensated for the services it rendered. Zeigler was the president and sole shareholder of APS. Plaintiffs solicited and received recommendations from Zeigler concerning investment of their retirement funds. On April 26, 1986, Zeigler used forged SWL Annuity Contracts which he and Ed Kral executed for $62,000. Simultaneously, Zeigler received a check for $62,000 from the Kral Plan which he instructed Kral to make payable to APS. SWL did not authorize APS to receive funds on its behalf. Neither Zeigler nor APS ever forwarded the contracts or funds to SWL.
On August 11, 1986, Peggy Zeigler appointed her husband as her sub-agent, for SWL. SWL approved of Zeigler's appointment only for the solicitation of applications for insurance to be submitted through Peggy Zeigler.
From April 1986 to 1988, Plaintiffs contributed approximately $400,000 of the Kral Plan funds on the representation of Zeigler that the money would go toward purchasing GIC's from SWL. Each time that plaintiffs sought to purchase GIC's from SWL, Zeigler had plaintiff fill out an SWL application form. All checks were made payable to APS at Zeigler's request.
On October 29, 1990, Zeigler plead guilty to one count of misapplication of fiduciary property of the value of $10,000 or more, a second degree felony in Texas State court, pursuant to a plea bargain agreement. On May 13, 1991, the Plaintiffs obtained in the United States Bankruptcy Court for the Northern District of Texas a judgment against Peggy and Zeigler for $500,000. Kral also filed this suit against SWL to enforce rights under an employee benefit plan on December 14, 1990 in the United States District Court for the Northern District of Texas.
On Feb 21, 1992, SWL filed a motion for summary judgment. The District Court found that there were no genuine issues of material fact on any of the three elements of vicarious liability under ERISA and granted SWL's motion. On appeal, plaintiffs allege that the district court erred in awarding defendant SWL summary judgment on ...