United States District Court, D. Arizona
Honorable G. Murray Snow United States District Judge
before the Court are Plaintiff's Motion for Partial
Summary Judgment, (Doc. 81), Defendants' Motion for
Summary Judgment, (Doc. 83), Plaintiff's Motion to
Strike, (Doc. 86), Plaintiff's Motion to Bifurcate Case
and Stay, (Doc. 94), and Plaintiff's Motion to Disregard
New Arguments, (Doc. 95). The Court rules as follows on these
motions as further explained below.
30, 2000, Paul B. Maniatis organized Carinos Properties, LLC
(“Carinos”). (Doc. 82 ¶¶ 1, 3).
Carinos's original Operating Agreement states,
“This Company has been formed to engage in purchasing,
financing, refinancing, developing, managing, operating,
selling, exchanging or otherwise disposing of real property,
and may engage in any other activities that may be lawfully
engaged in by limited liability companies.” (Doc. 84
¶ 63, Doc. 84-1 Exh. A). Carinos was managed by another of
Mr. Maniatis's entities-Defendant Recorp Investments,
Inc. (“RII”). (Doc. 82 ¶ 3). On August 9,
2000, Plaintiff Hart Interior Design, LLC 401(k) Profit
Sharing Plan (“the Plan”), acquired a 28 percent
membership interest in Carinos. (Doc. 82 ¶ 6).
September 2000, Carinos purchased more than 1, 250 acres of
property near Albuquerque, New Mexico, where five other of
Mr. Maniatis's entities owned the surrounding 9, 750
acres. (Doc. 84 ¶¶ 18-19). In June 2001, Mr. Gary
Lane of the related company Recorp Management Inc. submitted
the “Rio West Community Master Plan” for the 12,
000 acres to establish “land use designations and
regulations, intensities, provisions for public facilities,
design regulations, phasing schedules, and procedures for
administration and implementation.” (Doc. 84-1 Exh. C).
Although the trustee of the Plaintiff, Ms. Athena Hart-Kolle,
generally knew about the Rio West Community, she understood
that Carinos's purpose was simply to “purchase
land, hold it and sell it.” (Doc. 82-8, Exh. 7).
2006, Recorp Inc. (a non-existent entity that was allegedly
used to refer to all of the Maniatis companies with a stake
in Rio West) acquired interests in deep well groundwater
appurtenant to the Maniatis-owned properties, and in 2007,
Recorp Inc. executed a memorandum of understanding with the
local county to develop the deep water wells. (Doc. 84
¶¶ 25-33). Recorp Inc. continued to develop the
water interests, and two water wells were drilled on
IMH Financial Corporation (“IMH”) is an
institutional real estate lender and investor that loaned
money to Mr. Maniatis. (Doc. 84 ¶¶ 4, 6). In 2010,
Mr. Maniatis defaulted on these loans, and in 2012, IMH won a
multi-million dollar judgment against Mr. Maniatis in Arizona
state court. (Doc. 84 ¶¶ 6, 8). As part of the
judgment, Mr. Maniatis transferred ownership of RII to a
wholly-owned IMH entity named Stockholder, LLC, and the state
court appointed David M. Reaves to serve as the receiver over
Stockholder. (Doc. 84 ¶¶ 10-11). Since this
transfer and appointment in June 2013, IMH is the sole member
of Stockholder, and Stockholder is the sole shareholder of
RII. (Doc. 84 ¶ 12). Also, as a result of the winding up
of Mr. Maniatis's estate, IMH affiliates gained a 36
percent membership interest in Carinos. (Doc. 84 ¶ 16).
short, IMH owns Stockholder; Stockholder owns RII; and RII
manages Carinos. IMH owns 36 percent of the membership
interest in Carinos, and the Plan owns 28 percent of the
November 2015, an IMH subsidiary sued Carinos and other
Recorp entities in New Mexico state court to recover funds
due on an alleged secured debt executed by Maniatis in 2010.
(Doc. 84 ¶ 47). In February 2016, IMH sued Carinos in
Arizona state court to recover unpaid management fees that
Carinos should have paid RII, as well as unpaid funds on an
alleged unsecured debt. (Doc. 84 ¶ 49). Neither Carinos
nor RII has had any income or funds since at least the filing
of the lawsuits in the two states. (Doc. 84 ¶ 54).
Consequently, RII notified Carinos's members that Carinos
lacked sufficient funds to defend itself, (Doc. 84 ¶
53), and the Plan subsequently intervened to defend Carinos
against the IMH lawsuits. (Doc. 84 ¶ 60).
underlying state lawsuits, the Plan challenges the legitimacy
and amounts of Carinos's alleged unpaid debts to IMH and
RII. (Doc. 91 ¶¶ 15-29). The Plan claims that IMH
and RII knew that Carinos could not pay the alleged debts or
defend the lawsuits, and the lawsuits would therefore cause
Carinos to be in default. (Doc. 91 ¶¶ 28-29). IMH
could then obtain a judgment lien against Carinos's
properties. (Doc. 29). Plaintiff Plan intervened in the
Arizona and New Mexico litigations and Carinos did not
default. (Doc. 84 ¶ 60).
is a qualifying plan under the Employee Retirement Income
Security Act (“ERISA”). In the present lawsuit,
Plaintiff alleges that RII and IMH are fiduciaries under
ERISA, and that their actions surrounding the New Mexico and
Arizona lawsuits breached their duties. (Doc. 29).
Plaintiff's Motion for Partial Summary Judgment and
Defendants' Motion for Summary Judgment both concern the
ERISA fiduciary claim and are presently before the Court.
Court grants summary judgment when the movant “shows
that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). In making this determination, the Court
views the evidence “in a light most favorable to the
non-moving party.” Warren v. City of Carlsbad,
58 F.3d 439, 441 (9th Cir. 1995). Where the parties have
filed cross-motions for summary judgment, the Court
“evaluate[s] each motion independently, ‘giving
the nonmoving party in each instance the benefit of all
reasonable inferences.'” Lenz v. Universal
Music Corp., 815 F.3d 1145, 1150 (9th Cir. 2015)
(quoting ACLU v. City of Las Vegas, 333 F.3d 1092,
1097 (9th Cir. 2003)).
party seeking summary judgment always bears the initial
responsibility of informing the district court of the basis
for its motion, and identifying those portions of [the
record] which it believes demonstrate the absence of a
genuine issue of material fact.” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). The party
opposing summary judgment “may not rest upon the mere
allegations or denials of [the party's] pleadings, but .
. . must set forth specific facts showing that there is a
genuine issue for trial.” Fed.R.Civ.P. 56(e); see
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586-87 (1986); Brinson v. Linda Rose Joint
Venture, 53 F.3d 1044, 1049 (9th Cir. 1995). Substantive
law determines which facts are material, and “[o]nly
disputes over facts that might affect the outcome of the suit
under the governing law will properly preclude the entry of
summary judgment.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). “A fact issue is
genuine ‘if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.'”
Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054,
1061 (9th Cir. 2002) (quoting Anderson, 477 U.S. at
Defendant IMH's Control of the Plan's Assets
Employee Retirement Income Security Act (“ERISA”)
“governs the administration of employer-provided
benefit pension plans.” Metro. Life Ins. Co. v.
Parker, 436 F.3d 1109, 1111 (9th Cir. 2006). The ERISA
statute defines a fiduciary as a person who exercises any
discretionary authority respecting management of a plan's
assets, renders investment advice for a fee to the plan, or
has any discretionary authority in the administration of the
plan. 29 U.S.C. § 1002(21)(A)(i)-(iii). In short, a
fiduciary is “someone acting in the capacity of
manager, administrator, or financial adviser to a
‘plan.'” Pegram v. Herdich, 530 U.S.
211, 222 (2000) (citing 29 U.S.C. §
1002(21)(A)(i)-(iii)). This definition is “functional
rather than formal” and depends on the person's
exercise of discretionary authority instead of any
designations as a fiduciary. Parker v. Bain, 68 F.3d
1131, 1139-40 (9th Cir. 1995); see also Santomenno v.
Transamerica Life Ins. Co., 883 F.3d 833, 837 (9th Cir.
2018) (holding that a party not named in the plan may be a
functional fiduciary if it exercises discretionary authority
of plan assets as described in 29 U.S.C. § 1002(21)(A)).
As described in Section II.B, infra, if an ERISA
plan holds 25 percent or more of the value of equity
interests in an entity, then the plan's assets include
the underlying assets of the entity, and any person
“who exercises authority or control respecting the
management or disposition of such underlying assets . . . is
a fiduciary of the investing plan.” 29 C.F.R. §
2510.3- 101(a)(2)(ii). Neither party disputes that the
Plaintiff Plan owns a 28 percent interest in Carinos, and
therefore, the question is whether IMH exercises authority or
control respecting the management or disposition of
Carinos's underlying assets.
connection to Carinos's assets is not direct. IMH owns
Stockholder; Stockholder owns RII; and RII manages Carinos.
As further attenuation, the Arizona state court supervises
the Stockholder receiver and may override his decisions.
However, notwithstanding the indirect chain, the Plan
presents contending facts that IMH does exercise
discretionary authority over Carinos's assets. IMH
represents itself as the owner of Carinos's properties.
(Doc. 91, Exhs. 35, 112). IMH has obtained appraisals of the
property, (Doc. 91, Exhs. 41-43), and IMH has discussed the
sale of Carinos's property to potential buyers, as
evidenced by an email from the IMH CEO discussing the sale of
various Rio West properties owned by IMH entities including
the Carinos properties. (Doc. 91, Exhs. 74-79). IMH controls
physical access to Carinos's ...