Dana Ltd. v. Aon Consulting, Inc.
2013 U.S. Dist. LEXIS 166739
| N.D. Ohio | 2013Background
- Dana (plan sponsor) contracted with Aon in 2008 to serve as third-party administrator for two defined-benefit plans; Northern Trust remained the Trustee holding and disbursing plan assets.
- The contract and its Scope of Services Document (SSD) assigned plan design, final appeal authority, and fiduciary responsibilities to Dana (Investment Committee); Aon was to follow the plan administrator’s directions and perform claims-processing/recordkeeping functions.
- Between 2009 and 2012, Dana discovered approximately $1.9 million in overpayments to at least 167 participants and that an Aon employee (Tisa Crawford) diverted $216,653 to fictitious accounts; Dana alleges Aon failed to reconcile data, ignored actuary warnings, and continued erroneous payments after notice.
- Dana sued under ERISA (breach of fiduciary duty, prohibited transaction, equitable relief), state-law contract, negligence, negligent supervision/entrustment, conversion, and fraud (fraudulent inducement to select Aon).
- Aon moved to partially dismiss under Rule 12(b)(6); Dana did not oppose dismissal of certain parties’ claims (Dana Holding Corp. and Investment Committee’s contract claim).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Aon was an ERISA fiduciary based on control of plan assets | Aon exercised "practical control" and diverted funds (employee theft shows control) | Aon never had unilateral authority to hold or disburse plan assets; Trustee retained custody and payment power | Aon was not a fiduciary for control-of-assets purposes; dismissal granted |
| Whether Aon was an ERISA fiduciary based on discretionary authority over plan management | Aon’s poor performance and shortcuts effectively conferred discretion over administration | Aon performed ministerial, contractually compelled claims-processing duties and lacked actual decision-making power | Aon was not a fiduciary for discretionary-authority purposes; dismissal granted |
| Whether Dana stated claims under ERISA §406/prohibited transactions or §502(a)(3) equitable relief | Acceptance of large fees while misadministering the plan constituted a prohibited transaction; equitable relief appropriate | §406 requires a fiduciary to have caused the transaction; Dana failed to plead Aon was a fiduciary or knew of fiduciary breaches | §406 and equitable-relief claims dismissed for failure to allege fiduciary status or knowing participation |
| Viability of state tort and fraud claims (negligence, negligent entrustment/supervision, conversion, fraud) | Aon negligently administered plan, negligently entrusted/supervised Crawford, converted funds, and fraudulently induced contract | Economic-loss rule bars tort claims that merely recast contract breaches; conversion requires identifiable funds; fraud must satisfy Rule 9(b) (knowledge/intent) | Negligence and negligent-entrustment dismissed (economic-loss rule; entrustment requires physical danger); conversion dismissed (no identifiable funds; theft not within scope of employment); fraud dismissed for failure to plead knowledge/intent with particularity |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for pleading)
- Erie County v. Morton Salt, 702 F.3d 860 (6th Cir. 2012) (pleading must nudge claim from conceivable to plausible)
- Briscoe v. Fine, 444 F.3d 478 (6th Cir. 2006) (third-party administrator treated as fiduciary where it controlled plan funds and disbursed payments)
- Pegram v. Herdrich, 530 U.S. 211 (2000) (fiduciary inquiry focuses on whether actions were fiduciary functions)
- Guyan Int’l, Inc. v. Prof’l Benefits Admin., 689 F.3d 793 (6th Cir. 2012) (administrator fiduciary where it received, managed, and disbursed plan assets)
- Pipefitters Local 636 Ins. Fund v. Blue Cross & Blue Shield of Mich., 722 F.3d 861 (6th Cir. 2013) (fiduciary status depends on particular activity; ministerial functions not fiduciary)
- Baxter v. C.A. Muer Corp., 941 F.2d 451 (6th Cir. 1991) (claims-processing roles are ministerial and typically non-fiduciary)
- Pappas v. Buck Consultants, Inc., 923 F.2d 531 (7th Cir. 1991) (discretion requires actual decision-making power)
- McDannold v. Star Bank, N.A., 261 F.3d 478 (6th Cir. 2001) (§502(a)(3) claim against non-fiduciary requires knowing participation in fiduciary breach)
- Peacock v. Thomas, 516 U.S. 349 (1996) (equitable relief under ERISA is limited to redressing/enforcing ERISA or plan provisions)
- Cataldo v. U.S. Steel Corp., 676 F.3d 542 (6th Cir. 2012) (no equitable relief where plaintiff fails to state ERISA violation)
- IT Corp. v. Gen. Am. Life Ins. Co., 107 F.3d 1415 (9th Cir. 1997) (power to err in a clerical role is not fiduciary discretion)
- Heinrich v. Waiting Angels Adoption Servs., Inc., 668 F.3d 393 (6th Cir. 2012) (Rule 9(b) requires more than conclusory allegations of knowledge)