Mandelbaum v. Fiserv, Inc., 107 AFTR 2d 2011-1651 (Dist. Ct. of CO, 3/29/2011)

In Mandelbaum, the District Court of Colorado dismissed all of the claims brought in a class action suit by the owners of self-directed IRAs against the IRA Trustees for losses incurred by IRA assets invested with Bernard Madoff's firm. Pursuant to instructions given by the IRA owners, the IRA Trustees sent the IRA funds to be invested with Madoff. These funds were eventually lost in Madoff's ponzi scheme.

The IRA owners sought to hold the IRA Trustees responsible for their role in the losses. The IRA owners argued that the IRA Trustees, as fiduciaries of the IRAs, owed the duty to hold, preserve and keep safe the IRA assets and to avoid commingling them with other assets and that the Trustees failed to fulfill these duties. The IRA agreements clearly stated that the IRA owners were solely responsible for making investment decisions in connection with the funds in their IRAs and that the IRA Trustees would not provide any investment advice.

The Court dismissed all of the claims of the IRA owners. Specifically, the Court rejected the federal common law claims based on IRC Section 408, finding that it does not impose a specific duty of care on an IRA Trustee or create a private right of action for fiduciary breaches. The Court also rejected the negligence claim by finding that the IRA Trustees owed no duties to the IRA owners independent of those in the IRA agreements which explicitly indemnified the IRA administrators from liability resulting from any claims arising from the IRAs and made the IRA owners solely responsible for the investment of the IRA funds.