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Court Holds Worker Liable as Fiduciary

A federal judge has held a former plan participant liable as a plan fiduciary for failing to return overpayments from her former retirement plan.
  

In this case, the U.S. District Court for the State of New Jersey held that the former participant of the Alcatel-Lucent’s Lucent Technologies Inc. Pension Plan (and defendant in this case) became a plan fiduciary because she retained control over plan assets she was not entitled to.

Case History

The defendant was a participant in the Lucent Technologies Inc. Pension Plan. Before 2012, she received payment from the LTPP in satisfaction of the benefits to which she was entitled. Subsequently (November 2012), the LTPP mistakenly paid her an additional $233,691.92 that she was not entitled to. The mistake didn’t go unacknowledged for long; the court noted that the LTPP notified her of the error and demanded return of the overpayment by written letters sent on Jan. 16, 2013 and Feb. 15, 2013.

The defendant didn’t return the payment, and in short order (on July 26, 2013) the plaintiffs filed suit, seeking to recover the overpayment of LTPP assets from the defendant for breach of fiduciary duty under 29 U.S.C. 1109(a). The defendant/participant responded on Oct. 21, 2013, and was appointed pro bono counsel on May 19, 2014. She filed a motion to dismiss on Aug. 15, 2014, which was denied, filed an amended answer on April 3, 2015, and then, on Oct. 27, 2015, failed to appear for a court-ordered settlement conference.

Counsel Conflict?

Three days later, her appointed counsel filed a motion to withdraw due to “an irretrievable breakdown in the attorney-client relationship” and an inability to communicate with her for the past three months. That motion to withdraw was granted on Dec. 18, 2015 and the defendant was ordered to either file a letter of intent to appear pro se or to obtain new counsel by Jan. 15, 2016.

Well, she didn’t — disregarding the order and failing to appear or otherwise defend against this action since.

On Feb. 4, 2016, the court ordered that the defendant be found in default, and on March 22, 2016, the plan sponsor/plaintiffs moved for entry of default judgment. Which the court, having established its discretion to enter default judgement, determined that it had the subject matter jurisdiction and personal jurisdiction over the defendant, that she breached her fiduciary duty owed to the LTPP by failing to return the erroneous overpayment and instead using it for her own benefit, resulting in losses to the plan in the amount of $233,691.92.

The case is Alcatel-Lucent USA Inc. v. Borlabi, 2016 BL 192977, D.N.J., No. 2:13-cv-04543, unpublished 6/16/16.