BOARD OF TRUSTEES OF BRICKLAYERS AND ALLIED CRAFTSMEN LOCAL 6 OF NEW JERSEY WELFARE FUND, Appellant v. WETTLIN ASSOCIATES, INC.
No. 00-1382
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
January 8, 2001
2001 Decisions. Paper 3.
Before: SLOVITER, AMBRO, and WEIS, Circuit Judges
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (D.C. No. 99-cv-04874) District Judge: Honorable Garrett E. Brown, Jr. Argued November 14, 2000
OPINION OF THE COURT
WEIS, Circuit Judge.
The issue in this case is whether ERISA‘s definition of “fiduciary” includes an entity that receives contributions from employers and awards benefits to participants pursuant to an agreement with trustees of a union welfare fund. We conclude that the allegations in plaintiff‘s complaint were sufficient to preclude a ruling that no fiduciary status existed as a matter of law. Accordingly, we will reverse the District Court‘s ruling that the complaint failed to state a claim.
The facts are taken from the plaintiff‘s proposed amended complaint. Plaintiff is the Board of Trustees of Bricklayers and Allied Craftsman Local 6 of New Jersey Welfare Fund, an employee benefit plan within the meaning of ERISA,
In 1988, the Board entered into an agreement providing that defendant Wettlin Associates, Inc. would provide administrative services to Local 6 Fund. The Board delegated to Wettlin the day-to-day responsibility to control, manage, hold, safeguard, and account for the fund‘s assets and income. Wettlin determined the legitimate expenses of the fund, wrote checks, and disbursed assets from the fund‘s bank account in accordance with such determinations. That conduct was within Wettlin‘s discretion and it was not required to seek approval from the Trustees in advance.
| Welfare Fund | $2,208.33 |
| Pension Fund | $ 833.33 |
| Annuity Fund | $ 833.33 |
| Apprentice Training Fund | $ 41.67 |
| TOTAL | $3,916.66 |
According to the complaint, “effective as of January, 1996, the [Local 6] Fund also collected fringe benefit funds from contributing employers which, in turn, were to be transferred by the Fund for deposit to the New Jersey Bricklayers and Allied Craftworkers Health Fund [(`state-wide fund‘)].” In carrying out this arrangement, Wettlin was to transfer ninety-eight percent of the employer contributions earmarked for the state-wide fund to that entity. The amended complaint alleges that the two percent not transferred became an asset of Local 6 Fund.
In February 1998, the Board notified Wettlin that its services would terminate on April 1, 1998. Beginning on March 1 and continuing through March 31, Wettlin paid itself $42,743.71 from the Local 6 Fund account, the amount representing the two percent withheld from payments to the state-wide fund.
Upon learning of this series of payments, the Board demanded reimbursement, and when this was refused, filed suit in the District Court of New Jersey. The Board alleged that Wettlin was a fiduciary under ERISA and had breached its duty to the fund. The complaint also pleaded various state law claims.
Relying on
We exercise plenary review when examining the grant of a motion to dismiss pursuant to
The Board of Trustees argues that Wettlin can be a fiduciary under ERISA because discretion is not always a prerequisite for such a role. Even if discretion is required, the Board contends that the amended complaint sets forth a factual basis for concluding that Wettlin did function in that manner. Wettlin contends that it was not a fiduciary because it acted in a ministerial capacity, exercised no discretion, and additionally asserts that the money in question was not an asset of Local 6 Fund.
The ERISA provision at the heart of this case sets out the description of a fiduciary:
“[A] person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary 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 has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.”
This statutory definition requires that a fiduciary “must be someone acting in the capacity of manager, administrator, or financial advisor to a `plan.’ ” Pegram v. Herdrich, 530 U.S. ___, 120 S.Ct. 2143, 2151 (2000). The
Subsection (i) of
This distinction was emphasized in IT Corp. v. General American Life Insurance Co., 107 F.3d 1415 (9th Cir. 1997). In that case, the administrator had check-writing authority over the money received from the employer that was deposited in the plan‘s bank account. Id. at 1417. Noting that the “statute treats control over the cash differently from control over administration,” the Court concluded that “`[a]ny’ control over disposition of plan money makes the person who has the control a fiduciary.” Id. at 1421.
The Court of Appeals noted that because the employer had the responsibility to keep an amount in a bank account sufficient to cover checks validly issued by the administrator, “as a practical matter, a substantial amount of money would [have been] under the control of [the administrator], in the form of a bank account which it could deplete by writing checks.” Id. Where there is such “authority or control,” the District Court could not hold that
In Yeseta v. Baima, 837 F.2d 380, 386 (9th Cir. 1988), the same Court of Appeals held that a corporate officer who withdrew plan funds for the company‘s benefit was a fiduciary, despite authorization for the withdrawal from other officers. Noting that
A corporate officer in LoPresti v. Terwilliger, 126 F.3d 34, 40 (2d Cir. 1997), commingled company assets with benefit funds, and used them to pay company debts. Hinting that the District Court had apparently failed to appreciate the significance of the second clause of subsection (i), the Court of Appeals reversed. Id. It held that an individual may also become an ERISA fiduciary by exercising any authority or control in connection with the management or disposition of plan assets. Id.
We come then to Confer v. Custom Engineering Co., 952 F.2d 34 (3d Cir. 1991), on which the District Court relied in the present case. Confer, a participant in an employee health benefit plan, alleged a breach of fiduciary duty when he was denied medical benefits following an accident. Id. at 35. He sued his employer, Custom Engineering Co., which was the plan‘s administrator and fiduciary, as well as the officers of that company. Id. He also named as a defendant Self-Funded Plans, Inc., which had been delegated day-to-day administrative tasks for the plan. Id. We affirmed summary judgment in favor of the company officers, concluding that corporate officers acting on behalf of a corporation are not themselves fiduciaries unless they have individual discretionary roles in plan administration. Id. at 37.
More important to the case before us, we also held that Self-Funded, the day-to-day administrator, was not responsible for wrongfully denying benefits to the plaintiff. Id. at 39. “Since discretionary authority, responsibility or control is a prerequisite to fiduciary status, it follows that
There are important distinctions between Confer and the case at hand. Self Funded‘s alleged breach was with regard to its responsibilities in the administration of benefits under the plan; therefore, its fiduciary status under ERISA was determined by subsection (iii) of
Wettlin does not argue that subsection (iii) applies in the present case. Although Confer addressed subsection (iii), id., Wettlin contends that the statements in that opinion linking fiduciary status and discretion apply to all ERISA fiduciaries. We reject this argument as contrary to the statutory text. “Discretionary” authority or responsibility is required to confer fiduciary status for plan administration under subsection (iii), and “discretionary” authority or “discretionary” control is required for plan management under subsection (i). As noted earlier, however, the adjective “discretionary,” so carefully selected for plan administration and management, is omitted in subsection (i) when dealing with authority or control over the management or disposition of plan “assets.” “The statute treats control over the cash differently from control over administration.” IT Corp., 107 F.3d at 1421.
That Congress established a lower threshold for fiduciary status where control of assets is at stake is not surprising, given that “[a]t common law, fiduciary duties characteristically attach to decisions about managing assets and distributing property to beneficiaries.” Pegram, 120 S.Ct. at 2155 (“[T]he common law trustee‘s most defining concern historically has been the payment of
Finally, Confer cited a series of interpretive questions and answers promulgated by the Department of Labor and published at
This is not the first case in which we have noted that the structure of subsection (i) is significant in its interpretation. In Curcio v. John Hancock Mutual Life Insurance Co., 33 F.3d 226, 233 (3d Cir. 1994), we observed that although the party in that case was not a fiduciary under the second half of subsection (i), separate analysis was necessary to
Unlike the defendant in Confer, Wettlin‘s potential liability is created by subsection (i), which addresses fund assets and directs that fiduciary status be assigned to the extent that a person “exercises any authority or control respecting management or disposition of its assets.”
The contract attached to the plaintiff‘s amended complaint lists the functions to be performed by Wettlin. Most of these appear to be purely ministerial and are specifically subject to the direction of the trustees. The provisions directing Wettlin to collect contributions and write checks on Local 6 Fund‘s account, however, are quite general in scope. Wettlin would have us construe these terms narrowly, in effect establishing it as a mere depository of Local 6 Fund assets. See IT Corp., 107 F.3d at 1421.
We are inclined to agree that ERISA does not consider as a fiduciary an entity such as a bank when it does no more than receive deposits from a benefit fund on which the fund can draw checks. The allegations in the amended complaint, however, do not describe Wettlin‘s role as so circumscribed. Rather, the amended complaint alleges that the Board delegated to defendant the “day to day responsibility to control, manage, hold, safeguard, and account for the Fund‘s assets and income.”
Moreover, the contract provides that Wettlin is to “[r]eceive request for benefits from employees and take appropriate action thereon.” Notably lacking in the record is a description of the various benefits that are available and what actions the parties have considered to be “appropriate.”
At this stage we are left with substantial doubt that there exist no facts that might establish that Wettlin did indeed exercise such authority and control over the management and disposition of Local 6 Fund assets so as to come within the statutory definition of a fiduciary. Further development
The Order of the District Court will be reversed and the case will be remanded for further proceedings in accordance with this Opinion.
A True Copy:
Teste:
Clerk of the United States Court of Appeals for the Third Circuit