Duffy v. Cavalier11/27/1989
COURT OF APPEAL OF CALIFORNIA, FIRST APPELLATE DISTRICT, DIVISION THREE
No. A035279
1989.CA.40123 ; 215 Cal. App. 3d 1517; 264 Cal. Rptr. 740
November 27, 1989
ELMORE DUFFY ET AL., INDIVIDUALLY AND AS TRUSTEES, ETC., PLAINTIFFS, CROSS-DEFENDANTS AND RESPONDENTS,
v.
KING CAVALIER ET AL., DEFENDANTS, CROSS-COMPLAINANTS AND APPELLANTS
Superior Court of the City and County of San Francisco, No. 802659, John A. Ertola, Judge.
Tod L. Gamlen, Robin L. Filion and Baker & McKenzie for Defendants, Cross-complainants and Appellants.
Howard M. Hoffman for Plaintiffs, Cross-defendants and Respondents.
Opinion by Barry-Deal, J., with White, P. J., and Strankman, J., concurring.
Barry-deal
This appeal by King Cavalier (Cavalier), Lehman Brothers Kuhn Loeb, Inc. (Lehman Brothers), together with Shearson Lehman/American Express, Inc., and Shearson Lehman Brothers, Inc., the successor corporations to Lehman Brothers, is from a judgment entered on a jury verdict finding that appellants had breached their fiduciary duties to respondents Elmore Duffy (Duffy), Frank Ghilarducci (Ghilarducci), and Walter Chokan (Chokan), trustees of the Capital Wholesale Electric Company (Capital Wholesale) Profit Sharing and Trust Fund (the profit-sharing plan), in their handling of a stock brokerage account. We previously considered this appeal and affirmed the judgment in an opinion filed on May 31, 1989. Thereafter, in a petition for rehearing, appellants raised for the first time the argument that respondents' entire action was preempted by the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. ยง 1001 et seq.). After carefully considering this newly raised issue, we denied the petition for rehearing. On September 5, 1989, our Supreme Court granted appellants' petition for review and transferred the matter to us "with directions to vacate opinion and to consider whether this action is preempted by [ERISA]." In compliance with the directive of the Supreme Court, therefore, we have again considered the issue of preemption. Our conclusion remains the same. We therefore again affirm the judgment.
I
Capital Wholesale is a supplier of electrical materials. Duffy was employed by Capital Wholesale since 1952, starting out as a vice-president, becoming president in 1960 and chairman of the board in 1975. At the time
of trial, Ghilarducci was president, and Chokan was vice-president of Capital Wholesale; all three were participants in the profit-sharing plan.
In 1960, Capital Wholesale instituted a profit-sharing plan. The purpose of this plan was to share company profits with, and to provide for the retirement security of, Capital Wholesale's employees. Capital Wholesale made contributions of profits to a trust fund, which in turn were invested. The initial trustee of the profit-sharing plan was the Wells Fargo Bank. In 1963, Duffy, Ghilarducci, and Chokan became the trustees in place of Wells Fargo Bank.
When Duffy became the chairman of the board, he became the trustee principally involved in managing the profit-sharing plan and handling the trust fund's investments. At the outset, the profit-sharing plan funds were invested in real estate and in some stocks and bonds. In 1977, Duffy expressed an interest in options to Kidder Peabody & Co., Inc., which in turn asked Duffy to obtain a letter from an attorney
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