Fiduciary Faces ERISA Charges Over Alleged Affair

A federal judge in Atlanta allowed three ERISA claims to move forward against a former retirement plan fiduciary accused of carrying on an undisclosed affair with the plans’ outside investment adviser, while dismissing a separate request that would have reached into the couple’s ongoing divorce proceedings.

U.S. District Judge Sarah Geraghty ruled that claims for breach of fiduciary duty, prohibited transactions and co-fiduciary liability under the Employee Retirement Income Security Act can proceed against Jan Watkins. She served as a plan fiduciary for Accelerated Recovery Centers LLC’s 401(k) and cash balance plans from 2017 through 2021.

Watkins is accused of having an extramarital relationship with Christopher Norwood of Norwood Economics Inc., the investment adviser for the plans. The plaintiffs — including Kevin Kelly, the current plan fiduciary and her former spouse — allege the affair created conflicts of interest. They claim she favored Norwood, improperly allocated retirement assets and failed to monitor investment performance. The alleged misconduct caused more than $2 million in losses, according to the complaint.

Judge rejects effort to block federal ERISA claims based on divorce

Geraghty dismissed only one count in the lawsuit — a request for equitable relief and a constructive trust over funds tied to the parties’ divorce. She concluded that federal abstention principles under the Younger Doctrine prevented the court from intervening in matters already before a state domestic relations court.

In a 22-page order, Geraghty rejected Watkins’ argument that the entire federal action was barred by the Rooker-Feldman doctrine because of the prior state-court divorce proceedings. The judge found that the two retirement plans — the Accelerated Recovery Centers LLC 401(k) Plan and the Cash Balance Plan — were distinct parties with interests separate from Kelly’s individual interests. Therefore, the plans could pursue their federal ERISA claims.

That distinction matters. The plans themselves are suing, not just Kelly as an individual. The judge said they were not “losers” in the state case and were not trying to appeal a state ruling through federal court.

Geraghty also directed the parties to file a joint preliminary report and discovery plan within 14 days.

Statute of limitations fight pushed off for now

The court declined to dismiss the ERISA claims based on the statute of limitations at this early stage. She said it was not clear from the face of the complaint when the plans had actual knowledge of the alleged misconduct. The judge also held that the complaint plausibly alleged fraudulent concealment — that Watkins withheld documents, deleted communications and used nondisclosure agreements to hide the affair and the conflicts it created. That made a dismissal on limitations grounds inappropriate right now.

The practical effect for the parties is that discovery will begin. The plans will have to prove that Watkins knew what she was doing and that the fiduciary breaches actually cost them money. The ruling means the case survives the first major hurdle — a motion to dismiss — and now moves into the evidence-gathering phase.

Watkins is represented by Fisher & Phillips LLP, which replaced Cohan & Levy as counsel during the proceedings. The plaintiffs are represented by Johnson Trial Law LLC.

The case is one of those ERISA disputes where personal conduct and professional duties collide in a way that makes the legal questions straightforward — whether a fiduciary put personal interests ahead of plan participants — even if the underlying facts are messy. Geraghty’s order keeps the focus on the economic harm alleged, not on the personal relationship itself, which is now largely a matter of state divorce law.