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Matrix Wins in Custodian Case Challenge

In a case that has been plagued since embezzlement by Vantage Benefits administrators in 2017, the custodian was finally able to clear its name.

The action followed a raid by the Federal Bureau of Investigation on October 31, 2017 into the offices of the Vantage Benefits Administrator. Vantage Benefits prides itself on being his full-service TPA specializing in corporate benefits programs, with a focus on smaller plans (under $10 million).

case history

In December 2017, MBA Engineering Inc. was sued by Vantage Benefits Administrators, Inc., Vantage CEO, for stealing approximately $2,269,653.43 from the company’s retirement plan between June 3, 2016 and June 7, 2017. of Jeffrey A. Richie and Vantage CFO Wendy K. Richie. And, prior to these transfers, the total plan balance was approximately $2.5 million.

The lawsuit at the time outlined a scheme in which Vantage would direct the Matrix Trust Company to make a series of transfers from the scheme’s trust accounts to accounts maintained by Vantage with Bank of America. Plan administrator. ”

In March 2018, plaintiffs in that lawsuit amended their lawsuit to include Matrix Trust Company as a defendant, stating that “Matrix, without MBA or any direction or authorization of any kind from MBA, has acquired these ERISA Plan assets. directly to Vantage Benefits.” Meidinger acted as her ERISA administrator and trustee of the plan, respectively. The lawsuit further states that “By holding Plan assets without plaintiffs’ permission and transferring Plan assets to Vantage Benefits without plaintiffs’ permission or direction, Matrix has exercised power and exercised control over the assets.” ” he claimed. ERISA controlled the Plan and held fiduciary status with respect to the Plan under ERISA. The complaint states, “Matrix alleges that all 35 fraudulent transfers were made to the same business bank account held in the name of Vantage Benefits itself, rather than in the name of the plan, and I knew that nearly the entire amount was used up by Millions of dollars in account balances held in the name of plans in the matrix. ”

These claims were subsequently rejected by Matrix Trust later that year, stating, among other things, that the claims were barred by the terms of a custodial account agreement. The question of whether or not it is binding is best left to the practice of summary judgment after discovery.”

current case

This has led to the recent decision (MBA Eng’g Inc. vs. Vantage Benefits Adm’rs, Inc.2022 BL 270264, ND Tex., No. 3:17-cv-03300, 8/3/22), rendered by Judge Brantley Starr of the United States District Court for the Northern District of Texas, noting that discovery is now being made. It did — and both plaintiffs and Matrix filed motions for summary judgment.

Judge Starr quickly dismissed plaintiffs’ claims regarding damages and position filing the lawsuit by Matrix Defendants, who argued that the financial claims were unfounded (most of the loss to the plan was at least temporarily was funded by plaintiffs)—but $96,109.97 still remains ($2,173,544.40 was temporarily covered). “Even if the matrix is ​​correct that the plaintiff’s position would be lost if the recovery of the plan eventually flowed entirely to the plaintiff himself, we would still need $96,109.07 to ‘recover’ the loss of the plan, so here The plaintiff has a position. They were plagued with alleged breaches of fiduciary duty,” he wrote.

Document “Ed”

Turning to Matrix’s claim for summary judgment (a judgment in their favor that does not require discovery or a trial), the court ruled that the plan itself “…will appoint MBA a custodian of the plan’s assets like Matrix.” ” by giving the ”

The court noted that the planning documents further provided that:

“Bar” tab?

The Court held, “In summary, these provisions from both the Plan Document and the Custodian Account Agreement expressly and unequivocally set out all of Plaintiff’s claims against Matrix by releasing liability, waiving claims, and indemnifying them.” Clearly aware of this, plaintiffs offer no meaningful argument for their applicability based on the terms of these documents themselves. , they argue that the parties did not in fact enter into a custody account agreement, and even if they did, both provisions of the custody account agreement and the plan document intended to indemnify Matrix from liability are implied by ERISA. claims to be invalid under

On the latter allegation, the court held that “While Discovery was apparently unable to produce a signed copy of the Custodian Account Agreement, MBA did produce a Vantage signed by Meidinger and an Addendum to the Master Services Agreement executed by MBA.” “Meidinger said he did not remember seeing the Master Services Agreement either, and that Discovery was unable to produce a signed copy of the Master Services Agreement…” Said it said

The Court therefore held that “the signed addendum expressly acknowledges the existence of, and incorporates, a master services agreement, and plaintiffs have offered no alternative interpretation or explanation of its terms. Accordingly, these The absence of a signed copy of the agreement indicates that the signed addendum, Plaintiff’s own execution of the form of the Master Services Agreement, Matrix’s contract with Vantage, and the actions of both parties combined to establish that Master A Custodian Account Agreement has been agreed and is now in effect.”

Directly “Shuns”

And there were claims by plaintiffs that Matrix was a fiduciary and therefore could not seek protection under the aforementioned provision as “contrary to public policy.” After a brief discussion of the definition of trustee, the court cited Fifth Circuit precedent. What is purported to be a fiduciary is actually a fiduciary “without succumbing to the improper influence of title or label.” Rather, “Section 1002(21)(A) provides that a person ‘exercises discretionary power or discretionary control, or exercise power or control over the administration of such plan’ as a fiduciary.” provides a functional definition of He respects the management or disposal of that property.

“Here, in the plaintiff’s own words,” the court wrote: [Vantage]The Court continued, “Matrix’s service agreement with Vantage provides that Vantage shall have the necessary authority from each customer to act on its behalf in connection with this Agreement at all times during the term of this Agreement.” The contract further stipulated that Matrix “shall not be liable for any actions based on instructions from.” [Vantage]”and its Matrix” shall have the right to ultimately rely on the veracity of any notices or other communications received from it. [Vantage] as long as [Matrix] reasonably believe[s] that the notice or other communication is genuine; ”

cause, control

Plaintiffs here argue that, as in other recent lawsuits, Matrix believes that the funds in question “hold their assets in their own accounts and are not subject to the control of anyone other than Matrix.” He claimed to be the trustee because he manages the assets. , When [by directing] JPMorgan Chase Makes Illegal Payments.” Plaintiffs argue that ERISA’s trustee is “the person who exercises custody of the plan’s assets” and “does not require discretionary powers,” which is sufficient to make Matrix a trustee. claimed to be. However, the Court has changed its stance to “Section 1002(21)(A), where plaintiffs are supposed to derive this minimum “voluntary control” standard, and the Fifth Circuit case law set forth above. It is completely inconsistent with the standard that was established.” ”

However, the court noted that “by merely providing custodial services and initiating the transfer of matters in accordance with Vantage’s orders, Matrix did not exercise any such powers,” and that “Plaintiffs argue that Matrix actually did Nothing else has been pointed out to suggest that it exercised such powers, nor has it done anything here other than follow Vantage’s instructions in completing its assigned ministerial duties. Matrix was therefore not a functional fiduciary under ERISA”—so there was no public policy conflict.

“And of course, even in the absence of such a provision, Matrix’s non-trustee status means that plaintiffs’ ERISA claims against Matrix brought only against trustees are still subject to dismissal. .”

Nonetheless, the court denied plaintiffs’ motion for partial summary judgment, granted Matrix’s motion for summary judgment, and prejudicedly dismissed all plaintiffs’ claims against Matrix.

what this means

Several recent lawsuits have attempted to equate the ability of record keepers to spend funds with the control of plan assets. That is not the case in this case — here there is a contractual custodian acting on the instructions of the party authorized to issue those instructions — and ostensibly could have blocked those transfers. There are plaintiffs trying to recover embezzled funds from parties—which would have required going outside the terms of their agreement. The underlying events are indeed tragic, but the issue ruled here appears to be relatively simple contract law, yet it took five years to come to a final conclusion.