Nicholas Danza v. Fidelity Management Trust Co, 533 F. App'x 120

Background

Plaintiff Nicholas Danza, a participant in A&P’s 401(k) plan, was charged $1,200 by Fidelity for manual review of a Domestic Relations Order (DRO) prepared by an outside firm.
A&P and Fidelity entered a Trust Agreement listing preset DRO review fees (including $300 web, $1,200 manual single-plan, $1,800 multi-plan manual) to be paid by participants.
Danza sued Fidelity under ERISA, asserting (1) breach of fiduciary duty (29 U.S.C. § 1104), (2) co‑fiduciary liability (29 U.S.C. § 1105), and (3) prohibited transactions (29 U.S.C. § 1106), alleging the fees were excessive and unlawful.
The District Court dismissed the complaint under Rule 12(b)(6); this appeal challenges that dismissal.
The panel treated two temporal points separately: (a) negotiation/signing of the Trust Agreement (Fidelity as arms‑length service negotiator), and (b) collection/administration of fees (Fidelity as plan fiduciary for administrative tasks but without discretion over fee structure).
The court concluded Fidelity was not a fiduciary when negotiating fees, and when acting as fiduciary in administration it lacked discretion to alter the pre‑set fees, so ERISA claims failed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Fidelity breached fiduciary duty under §404 by agreeing to/charging excessive DRO fees	Fidelity negotiated and collected excessive fees in breach of duty to defray only reasonable plan expenses	Fidelity negotiated fees at arm’s length (not a fiduciary then); when collecting fees it had no discretion over preset fees	Dismissed — Fidelity was not a fiduciary when negotiating; when administering it lacked discretion over fees, so no §404 breach
Whether Fidelity is liable as a co‑fiduciary under §405 for A&P’s alleged breach	Fidelity knowingly participated in or failed to remedy A&P’s breach by agreeing to the fee schedule	Fidelity was not a fiduciary at the time of the fee negotiation, so cannot be a co‑fiduciary for that act	Dismissed — no co‑fiduciary liability because Fidelity was not a fiduciary during negotiation and had no control over pricing when administering
Whether the fee arrangement constituted a prohibited transaction under §406(a) (plan ↔ party in interest)	Hiring and paying Fidelity (a party in interest) constituted a prohibited furnishing of services/transfer of plan assets	The Trust Agreement negotiation was arms‑length; Fidelity was not a party in interest/ fiduciary when the agreement was executed	Dismissed — no §406(a) violation: negotiation was at arm’s length and did not reflect the insider transactions §406(a) targets
Whether Fidelity’s receipt of fees violated §406(b) (self‑dealing by fiduciary)	Even if fees were pre‑set, a fiduciary receiving plan assets for itself is a §406(b) violation without exceptions	§406(b) targets self‑dealing where fiduciary has discretion/control; accepting pre‑bargained fixed compensation without control is not prohibited	Dismissed — no §406(b) violation where Fidelity lacked discretion/control over the pre‑set fees and merely accepted agreed compensation

Key Cases Cited

Santomenno v. John Hancock Life Ins. Co., 677 F.3d 178 (3d Cir. 2012) (standard of appellate review for Rule 12(b)(6))
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard framework)
Pegram v. Herdrich, 530 U.S. 211 (2000) (definition and scope of fiduciary functions under ERISA)
Renfro v. Unisys Corp., 671 F.3d 314 (3d Cir. 2011) (service provider not fiduciary for fee negotiations absent discretionary control)
Lockheed Corp. v. Spink, 517 U.S. 882 (1996) (§406(a) targets insider commercial bargains posing underfunding risk)
Harris Trust & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238 (2000) (party‑in‑interest liability and disgorgement remedy under §502(a)(3))
Chi. Dist. Council of Carpenters Welfare Fund v. Caremark, Inc., 474 F.3d 463 (7th Cir. 2007) (service provider not fiduciary with respect to fixed fees set by arms‑length agreement)
Nat’l Sec. Systems, Inc. v. Iola, 700 F.3d 65 (3d Cir. 2012) (examples of §406(b) liability where fiduciary receives consideration tied to plan transactions)
Reich v. Compton, 57 F.3d 270 (3d Cir. 1995) (purpose of §406(b) to prevent dual loyalties and self‑dealing)