Arizona State Carpenters Pension Trust Fund v. CitibankArizona State Carpenters Pension Trust Fund v. Citibank
The Arizona State Carpenters Pension Trust Fund and two other multi-employee pension trust funds (collectively referred to as “Trust Funds”) and their respective trustees (“Trustees”) appeal the district court’s partial summary judgment and dismissal of their action against Citibank (Arizona) (“Citibank”), brought pursuant to the Employee Retirement Income Security Act of 1974,
The district court granted Citibank’s partial summary judgment motion on the apрellants’ ERISA claims. The district court determined Citibank was not a fiduciary under ERISA. The district court also granted Citibank’s motion to dismiss, determining ERISA preempted the appellants’ state law claims. The district court then dismissed the appellants’ entire action.
We have jurisdiction pursuant to
I. BACKGROUND
A. Facts
Each Trust Fund is a Taft-Hartley trust fund, formed and operated pursuant to
From its acquisition of the assets and assumption of the liabilities of Great Western Bank through December 31, 1987, Citibank served as a depository and custodial agent for the Trust Funds. Citibank or its predecеssors entered into “Custodial Agency Agreements” (“Agreements”) with the Trust Funds. The Agreements, which the parties have stipulated are “plan documents” within the meaning of ERISA, required Citibank to perform the following services:
(a) Receive trust fund monies, and pay out trust fund monies as directed by the trustees or their agent.
(b) Receive and hold trust fund investments (and income from investments) for disposition as directed by the trustees or their agent.
(e) Invest and reinvest trust fund monies as directed by the trustees or their agents.
(d) Furnish regular reports listing (1) daily deposits of employer contributions to the trust funds, (2) the trust fund assets in the custоdian bank’s custody, (3) cash receipts and disbursements summaries, (4) summaries of sales or exchanges of trust fund assets, and (5) accruals of income to the trust funds.
The Agreements did not require Citibank to provide advice with respect to the Trust Funds’ investments. In fact, the Agreements specifically limited Citibank’s responsibilities and authority as follows: Citibank was not responsible for the adequacy of employers’ contributions and was not obligated to enforce the payment thereof. Citibank had no duty to recommend, select or approve investments or otherwise to furnish advicе with respect thereto. In acting upon any written authorization of the Trustees, Citibank was not required to ascertain whether a majority of the Trustees approved such action or whether such action was appropriately taken. Citibank was not responsible for monies or property paid or delivered to any person or company upon the written authorization of the Trustees. Citibank had no duty to prepare income tax returns and no power or duty to determine the rights or benefits of anyone claiming an interest under the Agreements or in the Trust Funds. The Agreements identified both a fund administrator and an investment counsel or manager. The Trustees delegated to each some authority to give directions to Citibank. The Trust Funds’ investment manager gave written directions to Citibank to disburse monies to fund all the Trust Funds’ investments.
Citibank provided the reports specified, but also provided reports to the investment counsel and to the Trust Funds’ auditors in a format that pertained to delinquencies. In 1988, the Trustees, through sources other than Citibank, discovered that the Trust Funds had. sustained substantial financial
On June 14,1991, appellants filed the present action against Citibank. An amended complaint filed on August 26, 1991, alleges breach of the custodial agreement through Citibank’s failure to notify the Trustees of defaults on interest and principal payments on investments the investment manager made on behalf of the Trust Funds. The first eight counts in the amended complaint are based on ERISA, and the remaining five counts are state law claims basеd on breach of the custodial agreement, breach of common law fiduciary obligations, breach of the implied covenant of good faith and fair dealing, negligence, and common law fraud.
Appellants moved for partial summary judgment on the first three counts of the amended complaint, on the grounds that the suit is a federal cause of action under ERISA, that Citibank is an ERISA fiduciary, and that Citibank breached its agreement with appellants by failing to inform the Trustees of the Trust Fund delinquencies. Citibank initially filed a cross-motion for summary judgment and two motions to dismiss under the doctrines of abstention and preemption. Later, Citibank conceded that ERISA applies, arguing instead that Citibank was not an ERISA fiduciary, that Citibank did not breach its agreement with appellants regarding notification of delinquencies, and that ERISA preempts appellants’ state law claims.
On February 23, 1994, the district court issued an order holding that ERISA governed the action, but that Citibank was not an ERISA fiduciary. The court denied appellants’ motion for partial summary judgment and granted Citibank’s cross-motion for partial summary judgment and motion to dismiss.
B. Statutory Scheme
1. Named and Delegated Fiduciaries
“In enacting ERISA, Congress set out to protect participants in employee benefit plans by establishing standards of conduct, responsibility, and obligations for fiduciaries of employee benefit plans, and by providing for appropriate remedies.” Yeseta v. Baima,
ERISA permits suits for breach of fiduciary duty only against ERISA defined fiduciaries. Gibson v. Prudential Ins. Co.,
ERISA § 405(c)(3),
A named fiduciary also may delegate responsibility for making investment decisions to an investment manager. See ERISA
If an investment manager or managers have been appointed undersection 1102(c)(3) of this title, then, notwithstanding subsections (a)(2) and (3) and subsection (b) of this section, no trustee shall be liable for the аcts or omissions of such investment manager or managers, or be under an obligation to invest or otherwise manage any asset of the plan which is subject to the management of such investment manager.
ERISA § 405(d),
2. Other Fiduciaries
ERISA § 3(21),
C. District Court Conclusions
The district court concluded that Citibank was not an ERISA fiduciary, for the following reasons: (1) as custodial bank for the Trust Funds, Citibank was bound by the Agreements, and the Agreements gave Citibank no discretionary authority; (2) there was no allocation of managerial responsibility, and Citibank was not permitted to act, and did not act, without the authority of the Trustees or their agents; (3) Citibank was required to follow the investment manager’s directions; and (4) Citibank’s obligation to report account activities did not constitutе the degree of discretion necessary to create a fiduciary relationship. The court cited Yeseta,
D. Issues Presented
Appellants assert, and we agree, that the appeal presents the following issues:
1. Whether, pursuant to ERISA § 405(c)(1)(B), the trustees delegated to Citibank fiduciary responsibilities to hold, safeguard, and account for the plans’ assets and income, thereby making Citibank a fiduciary under ERISA§§ 3(21)(A), 404(a), 405(a), 409(a), and 502(a)(2).
2. Whether, by its actions, decisions, and functions, Citibank exercised sufficient authority and control respecting the management and administration of each plan so as to be a fiduciary.
3. Assuming, arguendo, that ERISA does not regulate the parties, relationship, whether ERISA preempts all state causes of action, thereby granting immunity to Citibank.
II. DISCUSSION
A. Standard of Review
Dismissal, pursuant to
B. Whether Citibank was an ERISA Fiduciary
1. Delegation of Fiduciary Status
Appellants argue that while Citibank initially had no responsibility for making invеstment decisions through the Agreements, the named fiduciaries (the Trustees) delegated to Citibank fiduciary responsibilities (to monitor for and report on material delinquencies). Appellants argue that the ERISA scheme contemplates that under ERISA § 405(e)(2),
The Agreements do not purport to delegate any fiduciary duty to Citibank, nor do they provide Citibank with independent authority or managerial responsibility over the operation or administration of the Trust Funds. Rather, the Agreements expressly limit Citibank’s responsibilities and authority, such that Citibank had no duty to furnish advice with respect to investments, no responsibility for monies or property paid upon written authorization of the Trustees, and no power or duty to determine the rights or benefits of anyone claiming an interest in the Trust Fund. Meanwhile, the Trustees expressly delegated authority to a fund administrator and an investment manager. Therefore, there is no evidence to support appellants’ contention that Citibank had been delegated responsibility or authority over the Trust Funds, beyond the non-fiduciary duties set out in the Agreements.
2. Implied Fiduciary Duty
Appellants argue that Citibank performed funсtions which constitute the exercise of discretion within the meaning of ERISA § 3(21)(A),
A person or entity who performs only ministerial services or administrative
Citibank was obliged to furnish the Trustees with reports of accоunt activities. Preparing reports of account activities and determining whether to use a particular format to inform the Trustees of delinquencies do not amount to an assumption of control or authority over the Trust Funds which, by the terms of the Agreements, Citibank did not have. Citibank did provide the Trustees with all information it was required to provide by the Agreements. That it also chose to provide information to the Trustee’s named investment manager did not convert Citibank into a volunteer fiduciary. To hold otherwise would discourage depository institutions from voluntarily making information available to fund administrators, investment managers, and other fiduciaries. It would also risk creating a climate in which depository institutions would routinely increase their fees to account for the risk that fiduciary liability might attach to nonfiduciary work. We therefore conclude that Citibank undertook no fiduciary obligation by providing information to the investment manager.
3. Preemption of State Law Claims
With exceptions not applicable here, ERISA preempts state laws “insofar as they may now or hereafter relate to any employee benefit plan.” ERISA § 514(a),
There can be little doubt that Congress intended to sweep away any state law whose administration might interfere with or complicate the administration of ERISA. “Congress sought to eliminate the problem of inconsistent state and local regulation in the area of employee benefit plans by enacting express statutory preemption provisions as part of ERISA.” The Meadows,
Congress’ desire for uniform regulation and the elimination of inconsistent obligations has fostered some rather sweeping judicial pronouncements on the scope of ERISA preemption. A state law “relates to” an employee benefit plan “if it has a connection with or reference to such a plan.” Shaw v. Delta Air Lines, Inc.,
If ‘relate to’ were taken to extend to the farthest stretch of its indeterminacy, then for all practical purposes pre-emption would never run its course.....But that, of course, would be to read Congress’s words of limitation as mere sham, and to read the presumption against preemption out of the law whenever Congress speaks to the matter with generality. Id. at 655,115 S.Ct. at 1677 .
With the teaching of Travelers firmly in mind, we have reexamined our original decision and conclude that the Trust Funds’ state law claims against Citibank are not connected with ERISA. As we noted, but did not adequately incorporate in our earlier opinion, “there are limits to the unusually broad preemptive sweep we have afforded ERISA.” Concha v. London,
First, Congress intended ERISA to preempt state laws that “mandate[ ] employee benefit structures or their administration.”
Second, Congress intended tо preempt state laws that bind employers or plan administrators to particular choices or preclude uniform administrative practice, thereby functioning as a regulation of an ERISA plan itself.
Third, in keeping with the purpose of ERISA’s preemption clause, Congress intended to preempt “state laws providing alternate enforcement mechanisms” for employees to obtain ERISA plan benefits.
Coyne,
The state law claims in this case for breach of contract, breach of common law duties, negligence, and fraud fall outside the three areas discussed in Travelers and summarized in Coyne. The state law claims do not address the employee benefit structure or the administration of benefits; they are not aimed at binding employers or plan administrators to particular practices, nor do they preclude uniform administrative practices; and they are not an alternative enforcement mechanism for employees to obtain benefits. Of course, there remains the possibility that while the claims fall into another category, that category is one where preemption would also be appropriate.
In Coyne, the plaintiff employer (which the circuit court concluded had the status of a plan fiduciary for purposes of the litigation) pled a state law malpractice claim against an insurance consultant for professional malpractice in obtaining insurance for its ERISA plan. After concluding that the malpractice clаim fell outside the three categories recognized in Travelers, the Coyne court went on to hold that the employer’s malpractice claim
The state law at issue in this case imposes a duty of care on all professionals, including all insurance professionals. Common law imposes the duty of care regardless of whether the malpractice involves an ERISA plan or a run-of-the-mill automobile insurance policy. Thus, the duty of care does not depend on ERISA in any way. Finally, the state law malpractice claim does not affect relations among the principal ERISA entities.
Coyne,
In the instant matter, the Trust Funds’ state law claims, like those pled by the employer in Coyne, fall outside the three areas identified in Travelers. Like the claims in Coyne, the state law claims here arise from state law doctrines of general application. As in Coyne, the Trust Funds’ state law claims against Citibank do not depend on ERISA. Finally, once the Trust Fund’s characterization of Citibank as a fiduciary is stripped away, it is clear that the state law claims here do not affect relations among the principal ERISA entities.
This court has previously said:
The key to distinguishing between what ERISA preempts and what it does not lies, we believe, in recognizing that the statute comprehensively regulates certain relationships: for instance, the relationship between plan and plan member, between plan and employer, between employer and employee (to the extent an employee benefit plan is involved), and between plan and trustee. * * *
But ERISA doesn’t purport to regulate those relationships where a plan operates just like аny other commercial entity-for instance, the relationship between the plan and its own employees, or the plan and its insurers or creditors, or the plan and the landlords from whom it leases office space.
General American Life Ins. Co. v. Castonguay,
As a service provider offering nonfidueiary custodial services, Citibank’s relationship with the Trust Funds was no different from that between Citibank and any of its customers. In the circumstances of this case, the connection between the state common law principles and ERISA’s regulation of employee benefit plans is simply too “tenuous, remote, or peripheral” to trigger preemption. See Shaw,
We believe that Coyne provides a useful amplification of Castonguay and hold that where state law claims fall outside the three areas of concern identified in Travelers, arise from state laws of general application, do not depend upon ERISA, and do not affect the relationships between the principal ERISA participants; the state law claims are not preempted. Employing this approach we now hold that the Trust Funds’ state law claims against Citibank are not preempted by ERISA.
4. Attorneys’ Fees
Citibank requests attorneys’ fees and costs with respect to this appeal, pursuant to ERISA § 502(g)(1),
We apply a five-factor test to determine whether to award fees and costs. Tingey v. Pixley-Richards West, Inc.,
(1) the degree of the opposing party’s culpability or bad faith; (2) the ability of the opposing party to satisfy an award of fees;(3) whether an award of fees against the opposing party would deter others from acting under similar circumstances; (4) whether the pаrty requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA; and (5) the relative merits of the parties’ position.
Id.
The degree of the Trust Funds’ culpability or bad faith does not weigh significantly in favor of Citibank. While the Trust Funds’ assertion that Citibank was an ERISA fiduciary was not consistent with the plain terms of the Agreements which the parties stipulated to be plan documents, the Trust Funds were correct in their insistence that ERISA did not preempt their state law claims.
The ability of the Trust Funds to satisfy an award of fees cаnnot be applied on the record before us. That record does not address the Trust Funds’ current financial status.
The third factor, whether an award of fees would deter others in similar circumstances, weighs only slightly in favor of Citibank. While it is appropriate to deter litigation of claims plainly inconsistent with plan documents, it would be inappropriate to deter the pleading of viable claims that are not preempted by ERISA Moreover, viability of the Trust Funds’ state law claims did depend on establishing that Citibank was not a fiduciary (thus Citibank’s status as a fiduciary would have to be examined-even if the examination might have been simplified had the Trust Funds paid more heed to the plan documents.)
The fourth consideration, whether Citibank sought to benefit all participants and beneficiaries of the plan or to resolve a significant legal question regarding ERISA, is “ ‘more appropriate to a determination of whether to award fees to a plaintiff than a defendant.’ ” Id. (quoting Marquardt v. North Am. Car Corp.,
The fifth factor, the relative merits of the parties’ positions, weighs heavily in favor of Citibank on the issue of its status as a fiduciary, but in favоr of the Trust Funds on the issue of preemption.
A look at all the factors does not show that the balance struck significantly favors Citibank. Mindful that awarding appellate attorneys’ fees in close cases might deter participation in the appellate process, we conclude that an award of appellate attorneys’ fees to Citibank would be inappropriate.
III. CONCLUSION
We affirm the district court’s grant of partial summary judgment on the appellants’ ERISA claims. We reverse the district court’s dismissal of the appellants’ state law claims and rеmand the action to the district court to determine whether to exercise supplemental jurisdiction over the state law claims. We deny Citibank’s request for attorneys’ fees and costs on appeal.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
Notes
. The district court did not address counts four, seven, and eight, because no motions were filed regarding those claims. The parties later stipulated to dismiss those counts.
. The statute reads:
Except as otherwise provided in subparagraph (B), a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionаry control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan. Such term includes any person designated undersection 1105(c)(1)(B) of this title.
ERISA § 3(21)(A);
.
D-2 Q: Are persons who have no power to makе any decisions as to plan policy, interpretations, practices or procedures, but who perform the following administrative functions for an employee benefit plan, within a framework of policies, interpretations, rules, practices and procedures made by other persons, fiduciaries with respect to the plan:
(1) Application of rules determining eligibility for participation or benefits;
(2) Calculation of services and compensation credits for benefits:
(3) Preparation of employee communications material;
(4) Maintenance of participants' service and emрloyment records;
(5) Preparation of reports required by government agencies;
(6) Calculation of benefits;
(7) Orientation of new participants and advising participants of their rights and the options under the plan.
(8) Collection of contributions and application of contributions as provided in the plan;
(9) Preparation of reports concerning participants’ benefits;
(10) Processing of claims; and
(11) Making recommendations to others for decisions with respect to plan administration?
A: No. Only persons who perform one or more of the functions described in section 3(21)(A) of the Act with respect to an employee benefit plan are fiduciaries. Therеfore, a person who performs purely ministerial functions such as the 1ypes described above for an employee benefit plan within a framework of policies, interpretations, rules, practices and procedures made by other persons is not a fiduciary because such person does not have discretionary authority or discretionary control respecting management of the plan, does not exercise any authority or control respecting management or disposition of assets of the plan, and does not render investment advice with respect to any money or other property of the plan and has no authority or responsibility to do so____
. Although the parties do not specifically discuss the "refers to” prong of the "relates to” test, we also conclude the Trust Funds’ state law claims are not preempted under this prong. As discussed above, the state law claims do not have a sufficient effect on the plans. See WSB Elec., Inc. v. Curry,