Unreported / Non-Citable
Background
Kelly Sills was the president and sole owner of Coastal Bridge Company, which sponsored an employee welfare benefit plan. Employees paid their share of dental, vision, supplemental, and medical coverage through payroll deductions. Coastal stopped forwarding certain employee contributions to insurers in 2019 but continued withholding money from employees’ paychecks. Coastal also failed at times to reimburse Blue Cross Blue Shield of Louisiana under the company’s self-funded medical plan, resulting in suspended payments and denied claims.
The Acting Secretary of Labor sued Sills for breaching his fiduciary duties under the Employee Retirement Income Security Act. Sills did not respond to requests for admission concerning his authority over the plan and its assets, and he did not properly controvert the Secretary’s statement of material facts. The district court granted summary judgment, awarded $209,466.34 plus interest, and permanently barred Sills from serving as a fiduciary to an ERISA-covered employee-benefit plan.
The Court’s Holding
The Fifth Circuit affirmed in all respects. It held that the district court did not grant summary judgment by default. Because Sills failed to controvert the Secretary’s statement of material facts, the court properly treated those facts as undisputed, verified that they were supported by the record, and determined that they entitled the Secretary to judgment.
The uncontroverted evidence established that Sills acted as a functional fiduciary when deciding not to remit employee contributions and not to pay Blue Cross invoices. The panel also upheld the $209,466.34 award, consisting of $172,351.35 in denied medical claims and $37,114.99 in unremitted employee contributions. Sills was not entitled to offset a separate $78,119.85 payment because it reimbursed Blue Cross for claims already paid and did not overlap with the denied claims included in the judgment.
The court further held that a surety’s control over Coastal’s receivables did not excuse Sills’s failure to remit employee contributions. It affirmed the permanent injunction and found no abuse of discretion in denying additional discovery under Rule 56(d), because Sills supplied no required affidavit or declaration, or in denying his Rule 59(e) motion, which repeated his summary-judgment arguments.
Key Takeaways
- A corporate owner who exercises discretionary authority over an employee-benefit plan and its assets may be an ERISA functional fiduciary.
- A court may deem properly supported facts admitted when the nonmovant fails to controvert them under applicable summary-judgment rules, but it must still determine whether those facts justify judgment as a matter of law.
- Financial distress or a third party’s control over company receivables does not excuse a fiduciary’s failure to remit employee payroll contributions to an ERISA plan.
Why It Matters
The decision underscores the personal exposure faced by business owners who control plan finances. Delegating plan-related work or identifying the company as the named fiduciary does not eliminate liability when an individual actually exercises fiduciary authority over employee contributions and benefit payments.
It also highlights the procedural consequences of failing to answer requests for admission, properly dispute a summary-judgment movant’s facts, or support a request for additional discovery with the affidavit or declaration required by Rule 56(d).