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Perez v. Hutcheson

United States District Court, D. Idaho

December 15, 2016

THOMAS E. PEREZ, Secretary of the United States Department of Labor, Plaintiff,
v.
MATTHEW D. HUTCHESON, HUTCHESON WALKER ADVISORS LLC, GREEN VALLEY HOLDINGS LLC, and the RETIREMENT SECURITY PLAN AND TRUST, f/k/a PENSION LIQUIDITY PLAN AND TRUST. Defendants.

          ORDER GRANTING SUMMARY JUDGMENT, PERMANENT INJUNCTION AND DENYING DEFENDANT'S MOTION FOR DECLARATORY RELIEF

          Edward J. Lodge United States District Judge

         The Secretary of the United States Department of Labor (the "Secretary") has moved for summary judgment and a permanent injunction permanently barring Matthew D. Hutcheson from acting as a fiduciary or service provider under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001, et seq. ("ERISA") and ordering Jeanne B. Bryant of Receivership Management, Inc. to continue to serve as the independent fiduciary to RSPT and the ERISA-covered plans that RSPT and Hutcheson managed (the "Plans") (Dkt. 91). Hutcheson was granted an extension of time to respond and he filed his response on June 29, 2016. The Secretary filed his reply brief on July 14, 2016. Hutcheson filed a Motion for Declaratory Relief (Dkt. 105) on July 11, 2016 and that motion is also ripe for this Court's review.

         In the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, this motion shall be decided on the record before this Court without oral argument. Dist. Idaho Loc. Civ. R. 7.1(d)(2)(ii). Based on the following findings of facts and conclusions of law, the Court finds as follows:

         I. Summary Judgment and Permanent Injunction Standard:

         The legal standards for summary judgment are well-established. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

         The Secretary has authority to seek relief from breaching fiduciaries and those who knowingly participate in their breaches under ERISA sections 409(a) and 502(a)(2) & (5), 29 U.S.C. §§ 1109(a) and 1132(a)(2) & (5), to restore plan losses, to recover unjust profits and to obtain other remedial and equitable relief as the court may deem appropriate. See Herman v. S. Carolina Nat. Bank, 140 F.3d 1413, 1425-26 (11th Cir. 1998); Solis v. Couturier, No. 08-2732, 2009 WL 1748724 (E.D. Cal. June 19, 2009). Courts have repeatedly found that, under ERISA's broad remedial provisions, injunctive relief is appropriate. See, e.g., Donovan v. Mazzola, 716 F.2d 1226, 1238-39 (9th Cir. 1983), cert. denied, 464 U.S. 1040 (1984). Appropriate injunctive relief includes removing existing plan fiduciaries and appointing independent fiduciaries to carry out the proper administration and management of benefit plans. Mazzola, 716 F.2d at 1238-39; Solis v. Vigilance, Inc., No. C-08-05083, 2009 WL 2031767, at *3 (N.D. Cal. July 9, 2009); Chao v. Zoltrix, No. C-07-00610, 2007 WL 2990429, at *3 (N.D. Cal. Oct. 11, 2007). It also includes permanent enjoining breaching fiduciaries from ever serving as fiduciaries or service providers to ERISA plans. See Chao v. Malkani, 452 F.3d 290, 293-94 (4th Cir.2006) (breaching fiduciaries removed from all positions of authority); Reich v. Lancaster, 55 F.3d 1034, 1054 (5th Cir. 1995); Martin v. Feilen, 965 F.2d 660 (8th Cir. 1992) (finding an abuse of discretion for district court not to issue injunction barring individuals from providing fiduciary or other services to ERISA plans); Beck v. Levering, 947 F.2d 639, 641 (2d Cir. 1991); Delgrosso v. Spang & Co., 769 F.2d 928, 937 (3d Cir. 1985).

         II. Findings of Fact:

         Based on the records in this case, the Court finds as follows:

         1. This Court has jurisdiction and venue is proper. Hutcheson resides in Idaho. ERISA § 502(e)(1) & (2), 29 U.S.C. §§ 1132(e)(1) & (2).

         2. On April 10, 2012, Matthew D. Hutcheson was indicted by the Attorney General of the United States in this Court on wire fraud theft from employee pension benefit plans.

         3. Shortly before the indictment, Hutcheson and Hutcheson Walker Advisors LLC ("HWA") had admitted, on an annual return that ERISA requires to be submitted to the United States (a document called a "Form 5500"), to having taken part in a prohibited transaction in violation of ERISA section 406, 29 U.S.C. § 1106.

         4. Between April 3, 2013, and April 15, 2013, Hutcheson was tried by a criminal jury in this Court. United States v. Hutcheson, 1:12-cr-00093-WFN (D. Idaho). In its case-in-chief, the Attorney General presented 25 witnesses and over 200 exhibits.

         5. On April 15, 2013, the jury returned a verdict finding Hutcheson guilty beyond a reasonable doubt of 17 felony counts, including five counts of wire fraud respecting RSPT.

         6. On July 31, 2013, the Court sentenced Hutcheson to 210 months of incarceration and three years of supervised release, during which time Hutcheson "shall not be employed in any capacity related to fiduciary duties or financial transactions nor shall defendant perform any unpaid or volunteer activities in this area during the term of supervised release without the permission of the probation officer." SOF ¶ 11. Hutcheson was also ordered to repay RSPT (through the Independent Fiduciary) $3, 276, 000. Id.

         7. On August 7, 2013, Hutcheson filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit. United States v. Hutcheson, No. 13-30218 (9th Cir.). Crim. Dkt. 148. Following briefing, on May 7, 2015, the Ninth Circuit heard oral argument on the appeal. On May 15, 2015, the Ninth Circuit affirmed this Court's judgment and sentencing. On June 1, 2015, Hutcheson moved for rehearing. On July 9, 2015, the Ninth Circuit denied rehearing. App. Dkt. 62. On July 23, 2015, the Ninth Circuit issued its mandate to this Court. Although Hutcheson continues to maintain in this civil action there was legal error regarding rulings in his criminal case, such arguments are not relevant to this civil proceeding and are rejected based upon the Ninth Circuit's affirmation of his convictions and sentence. There is no indication in the record that a writ of certiorari, if requested, was ever granted so the Court finds all direct appeals have concluded.

         8. The Court notes that Hutcheson filed a 28 U.S.C. Section 2255 writ of habeas corpus motion on October 3, 2016., Hutcheson v United States, 1:16cv442 (D. Idaho). The Court does not find the filing of a writ of habeas corpus does not justify continuing the stay in this matter and the Court will lift the stay previously entered.

         9. Meanwhile, on November 14, 2013, Green Valley Holdings LLC ("GVH") was administratively dissolved, and, on February ...


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