In denying a motion to dismiss by Mihir Taneja, the CEO, secretary and director of Geopharma, U.S. District Judge Virginia M. Hernandez Covington of the U.S. District Court for the Middle District of Florida noted that ERISA’s definition of fiduciary includes those “exercising any authority or control over the management or disposition of plan assets” (italics added). She agreed with U.S. Department of Labor Secretary Thomas E. Perez that since employees’ contributions toward payments of their benefits were commingled with Geopharma’s general assets and never remitted or used to pay claims, Taneja allegedly exercised fiduciary authority or control over both Geopharma’s assets and benefit plan assets simultaneously.

In addition, as Geopharma’s CEO, secretary, director and signatory on Geopharma’s bank accounts, Taneja plausibly had a fiduciary duty to monitor the actions of Geopharma and those appointed to act as fiduciaries on behalf of Geopharma, the judge concluded.

According to the court opinion, Perez contends that, for payroll periods between October 3 and December 26, 2009, and between January 2 and October 9, 2010, Geopharma withheld employee premium contributions to the company’s Group Welfare Plan from payroll in the amounts of $115,707.19 and $101,751.29, respectively, failed to segregate the contributions from company assets as soon as it reasonably could do so, and failed to use the funds to pay claims. In addition, Geopharma received Consolidated Omnibus Budget Reconciliation Act (COBRA) premium payments totaling $16,507.24, failed to segregate the premiums from the company assets as soon as it reasonably could do so, and failed to use the funds to pay claims.

Perez also asserts that the named defendants in the case, as fiduciaries and parties in interest to the plan, violated their respective duties under ERISA by: (1) participating knowingly in an act of another fiduciary, knowing such act was a breach, (2) failing to monitor or supervise another fiduciary and thereby enabling a breach, or (3) having knowledge of a breach by another fiduciary and failing to make reasonable efforts under the circumstances to remedy the breach.

Taneja argues that the complaint does not sufficiently or plausibly allege facts necessary to establish that he is a fiduciary of the plan since it fails to establish that he performed any function or exercised any authority with respect to the “particular activity” of remittance of employee premium contributions to the plan. Taneja further emphasizes that the mere fact that he allegedly possessed signature authority on Geopharma’s corporate bank accounts is insufficient to make him a fiduciary, saying “[i]f this alone were sufficient to trigger ERISA fiduciary responsibilities on the part of corporate officers, it would transform nearly every member of senior management of any corporation into an ERISA fiduciary.”

However, Perez emphasizes that the plain language of ERISA permits a person to become a fiduciary by exercising authority or control over the management or disposition of plan assets without requiring “discretionary” authority or control. He argues that, because Geopharma was named the plan administrator and fiduciary within the plan itself, Geopharma had a duty to monitor the actions of those administering the plan on its behalf. Likewise, as Geopharma’s CEO, secretary, director, and signatory on Geopharma’s bank accounts, Taneja allegedly had a fiduciary duty to monitor other fiduciaries as well as Geopharma’s management and administration of the plan. Perez asserts that Taneja knew or should have known that Geopharma was having cash flow issues and was using employee compensation and COBRA payments to fund operations instead of using the funds to pay medical claims, and such knowledge should have triggered an investigation to determine whether Geopharma and its fiduciaries were administrating the plan in accordance with ERISA and the terms of the plan.

According to Hernandez Covington, “in light of these factual allegations, the court can reasonably infer that Taneja exercised authority or control over Geopharma’s Plan assets as an ERISA fiduciary when employee premiums were commingled with Geopharma’s general assets.”

She also found the plain language of ERISA reasonably supports Secretary Perez’s position that a person can become a fiduciary, even without discretion, if he or she exercises any authority or control respecting management or disposition of its assets, but declined to decide whether a person with authority or control over plan assets must also exercise “discretion” over those assets in order to become an ERISA fiduciary, saying that “determination is more appropriately decided at the summary judgment stage of the proceedings.”

The opinion in Perez v. Geopharma, Inc. is here.