Cappello v. Iola, No. 10-4154 (3d Cir. 2012)Annotate this Case
Barrett, a financial planner, induced the plaintiffs, small New Jersey corporations and their owners, to adopt an employee welfare benefit plan known as the Employers Participating Insurance Cooperative (EPIC). EPIC was promoted as a multiple employer welfare benefit plan for which contributions were deductible under 26 U.S.C. 419A(f)(6), but in fact was a method of deferring compensation. After the Internal Revenue Service audited the plans and disallowed deductions claimed on federal income tax returns, plaintiffs sued Barrett and other entities involved in the scheme, asserting claims under the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1001-1461; the civil component of the Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. 1961-1968; and New Jersey statutory and common law. A jury found Barrett liable of common law breach of fiduciary duty, but not liable on the RICO claim. The district court held a bench trial on the ERISA claim and issued partial judgment for plaintiffs. The Third Circuit affirmed in part, but vacated holdings that deemed certain state law causes of action preempted by ERISA, found certain ERISA claims time-barred, and limited the jury‘s consideration of one RICO theory of recovery.