Law.Com reports this case Acosta v. PACE Local I-300 Health Fund, 04-CV-3885

"A New Jersey federal judge’s dismissal of legal malpractice and breach-of-fiduciary-duty claims against counsel in an ERISA case shows that trustees sued for misfeasance can’t easily pass the buck to their lawyers.

Though he dismissed the claims on procedural grounds, U.S. District Judge Joel Pisano held that even if attorney Gary Carlson knew of prohibited transactions and failed to disclose them, the fund’s trustees "cannot show that Carlson’s conduct — rather than that of the actual wrongdoers — was the proximate cause of any losses they allegedly suffered."

Carlson was counsel to the PACE Local I-300 Union and its health fund. The ERISA suit, Acosta v. PACE Local I-300 Health Fund, 04-CV-3885, alleged that the trustees and administrators of the fund drained it of money, paying themselves excessive salaries, leasing fancy cars, using funds for the benefit of the union and other improper purposes. The plaintiffs are hundreds of workers whose health claims went unpaid, the companies they worked for, and health care providers seeking to recover unpaid medical bills.

The trustees, Matthew DiMinno and Allan Funk, turned around and sued Carlson, alleging he was aware of the improper expenditures and had a duty to inform the trustees but failed to do so, resulting in a loss of more than $1 million.

The third-party complaint alleged the failure to act was a breach of fiduciary duty and of legal ethics rules and constituted malpractice by Carlson, his current firm, Kroll Heineman Giblin, and the firm he left in 2004, Lynch Martin.