Ronald C. TUSSEY; Charles E. Fisher; Timothy Pinnell, Plaintiffs-Appellees v. ABB, INC.; John W. Cutler, Jr.; Pension Review Committee of ABB, Inc.; Pension & Thrift Management Group of ABB, Inc.; Employee Benefits Committee of ABB, Inc., Defendants-Appellants. Fidelity Management Trust Company; Fidelity Management & Research Company, Defendants-Appellants. AARP; Barbara Jean Black; Tamar Frankel; David Webber, Amici on Behalf of Appellees. Ronald C. Tussey; Charles E. Fisher; Timothy Pinnell, Plaintiffs-Appellees v. ABB, Inc.; John W. Cutler, Jr.; Pension Review Committee of ABB, Inc.; Pension & Thrift Management Group of ABB, Inc.; Employee Benefits Committee of ABB, Inc., Defendants. Fidelity Management Trust Company; Fidelity Management & Research Company, Defendants-Appellants. AARP, Amicus on Behalf of Appellees. Thomas E. Perez, Secretary of the United States Department of Labor, Amicus Curiae. Barbara Jean Black; Tamar Frankel; David Webber, Amici on Behalf of Appellees.
Nos. 12-2056, 12-2060, 12-3794, 12-3875
United States Court of Appeals, Eighth Circuit
March 19, 2014
Rehearing and Rehearing En Banc Denied May 20, 2014
747 F.3d 327
AARP; Barbara Jean Black, Amici on Behalf of Appellees.
Thomas E. Perez, Secretary of the United States Department of Labor, Amicus Curiae.
Tamar Frankel; David Webber, Amici on Behalf of Appellees.
Fidelity Management Trust Company; Fidelity Management & Research Company, Defendants.
AARP, Amicus on Behalf of Appellees.
Thomas E. Perez, Secretary of the United States Department of Labor, Amicus Curiae.
Barbara Jean Black; Tamar Frankel; David Webber, Amici on Behalf of Appellees.
Jerome Joseph Schlichter, argued, Saint Louis, MO (Troy A. Doles, Heather Lea, Michael A. Wolff, on the brief, St. Louis, MO), for appellee.
David Ellis, argued, Washington, DC (Jay E. Sushelsky, Steven Gill Bradbury, Robert W. Helm, Andrew L. Oringer, Alexander R. Bilus, Ira D. Hammerman, Kevin Carroll, on the brief Washington, DC), for amicus curiae, the Secretary of Labor; amicus Securities Industry and Financial Markets Association in 12-2056 and 12-3875; (Barbara Jean Black, on the brief, Cincinnati, OH,) for Law Professors Frankel, Black, and Webber; (Melvin Radowitz Jay E. Sushelsky, on the brief Washington, DC), for amicus of AARP.
Before RILEY, Chief Judge, BRIGHT and BYE, Circuit Judges.
RILEY, Chief Judge.
These consolidated appeals arise from a class action led by Ronald C. Tussey, Charles E. Fisher, and Timothy Pinnell (participants) as representatives of a class of current and former employees of ABB, Inc. (ABB) who participated in two ABB retirement plans1 governed by the Employee Retirement Income Security Act of 1974 (ERISA),
I. BACKGROUND
A. The Plan
To attract and retain quality employees, ABB sponsored the Plan, whose stated goal was “to encourage employees to provide additional security and income for their future through a systematic savings program.” See
B. Revenue Sharing
Fidelity became the recordkeeper for the Plan in 1995 after a competitive bidding process. Initially, ABB paid Fidelity a flat fee for each Plan participant. Beginning in 2000, Fidelity primarily was paid through revenue sharing—a common method of compensation whereby the mutual funds on a defined contribution plan pay a portion of investor fees to a third party. Fidelity received a percentage of the income the Plan investment options received from the participants. By 2001, compensation for the non-union Plan came solely from revenue sharing, whereas ABB paid Fidelity $8 per participant and some revenue sharing for the union Plan.
C. Other Corporate Services
Over time, Fidelity provided additional administrative services to ABB unrelated to the Plan, including processing ABB‘s payroll and acting as recordkeeper for ABB‘s defined benefit plans and health and welfare plans. Fidelity incurred losses from these additional services, but made substantial profits from the Plan. In 2005, ABB and Fidelity negotiated a comprehensive agreement covering both Fidelity‘s services to the Plan and the other corporate services Fidelity provided to ABB. During negotiations, Fidelity advised ABB that Fidelity provided services for ABB‘s health and welfare plans at below market cost and did not charge for administering other ABB plans. An outside consulting firm advised ABB it was overpaying for Plan recordkeeping services and cautioned that the revenue sharing Fidelity received under the Plan might have been subsidizing the other corporate services Fidelity provided to ABB. ABB did not act on the information it received.
D. Plan Redesign
In 2000, a year after Cutler became director of the PTMG, Cutler drafted and the PRC adopted an Investment Policy Statement (IPS), which was designed “to provide plan participants with a range of investment options that spanned the risk-return spectrum.” The IPS provided a framework for selecting, monitoring, and removing Plan investment options. The IPS contemplated investments in three tiers based on the Plan participants’ willingness and ability to make personal asset allocation decisions. Cutler recommended that the Plan offer participants a life-cycle or target-date fund. Such managed allocation funds are dynamically managed to diversify a participant‘s portfolio across different funds and rebalanced to become more conservative as the participant nears a target retirement date. Cutler also suggested the PRC remove the Vanguard Wellington Fund, a balanced fund, from the investment platform as a result of “deteriorating performance and because participants would be empowered to create their own balanced fund.”
The PTMG considered three of the few target-date funds available at the time of the Plan redesign. Of the available funds, Cutler favored the Fidelity Freedom Funds because of their “glide path“—the manner in which the funds changed the asset allocation as the funds approached their respective target retirement dates. On the PTMG‘s recommendation, the PRC
E. Float
When a Plan participant or ABB made a contribution to the Plan, Fidelity processed the contribution to the Plan investment option designated by the participant and credited the participant‘s account with shares in that investment option based on the closing share price on the date of the contribution. The Plan became the owner of the selected investment option as of the date the contribution was made and the order was placed, entitling the Plan to any dividends or any other change in the fund that day. The contribution flowed into a depository account held at Deutsche Bank for the benefit of the Plan investment options. For logistical reasons, the contribution could not be distributed to the investment option until the next day. Money sitting in the depository account overnight before it is distributed to the Plan investment options is often described as “float.”4
As is common practice for such accounts, Fidelity temporarily transferred the funds from the depository account overnight to secured investment vehicles to earn interest often called “float interest” or “float income.” The following day Fidelity transferred the principal back to the depository account. Fidelity used the float income to pay fees on float accounts before allocating the remaining income to each investment option choosing to receive it in proportion to the option‘s share of the overnight account balance. The float income benefitted all the shareholders of the investment option receiving it. Fidelity did not receive the float or float interest.
F. Procedural History
On December 29, 2006, the participants sued the ABB fiduciaries and Fidelity, alleging various fiduciary breaches, see
(1) ABB [fiduciaries] violated their fiduciary duties to the Plan when they failed to monitor recordkeeping costs, failed to negotiate rebates for the Plan from either Fidelity or other investment companies chosen to be on the [Plan] platform, selected more expensive share classes for the [] Plan‘s investment platform when less expensive share classes were available, and removed the Vanguard Wellington Fund and replaced it with Fidelity‘s Freedom Funds; (2) ABB[] and the [EBC] violated their fiduciary duties to the Plan when they agreed to
pay to Fidelity an amount that exceeded market costs for Plan services in order to subsidize the corporate services provided to ABB by Fidelity, such as ABB‘s payroll and recordkeeping for ABB‘s health and welfare plan and its defined benefit plan; (3) Fidelity [] breached its fiduciary duties to the Plan when it failed to distribute float income solely for the interest of the Plan; and (4) Fidelity [] violated its fiduciary duties when it transferred float income to the Plan‘s investment options instead of the Plan.
Rejecting the participants’ “global damages theory” (i.e., “that the breaches infected all of [ABB‘s] investment decisions” and thus damages should be measured against ABB‘s defined benefit plan), the district court determined the damages resulting from each breach. Against the ABB fiduciaries, the district court awarded $13.4 million for failing to control recordkeeping costs and $21.8 million for losses the district court believed the Plan suffered as a result of mapping from the Wellington Fund to the Freedom Funds. See
II. DISCUSSION
“In reviewing a judgment after a bench trial, this court reviews ‘the court‘s factual findings for clear error and its legal conclusions de novo.‘” Outdoor Cent., Inc. v. GreatLodge.com, Inc., 688 F.3d 938, 941 (8th Cir. 2012) (quoting Tadlock v. Powell, 291 F.3d 541, 546 (8th Cir. 2002)); see also
A. Fiduciary Discretion
The Plan gave ABB‘s Plan administrator and its agents “sole and absolute discretion to determine eligibility for, and the amount of, benefits under the Plan and to take any other actions with respect to questions arising in connection with the Plan, including ... the construction and interpretation of the terms of the Plan.” Such a broad grant of discretionary authority entitles the Plan administrator “to deference in exercising that discretion.” Conkright v. Frommert, 559 U.S. 506, 509 (2010) (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111 (1989) (applying trust law principles in determining the appropriate standard of review for ERISA benefit claims)). The district “court reviews the plan administrator‘s construction of the plan terms for an abuse of discretion; and we review de novo the district court‘s application of that deferential abuse-of-discretion standard.” Sunder v. U.S. Bancorp Pension Plan, 586 F.3d 593, 602 (8th Cir. 2009) (internal citations omitted).
Under an abuse of discretion standard, the Plan administrator‘s “interpretation will not be disturbed if reasonable.” Firestone, 489 U.S. at 111. A reviewing “court must defer to [the fiduciary‘s] interpretation of the plan so long as it is ‘reasonable,’ even if the court would interpret the language differently as an
The ABB fiduciaries contend the district court erred in failing to afford any discretion to the Plan administrator, particularly with respect to interpreting the IPS.5 According to the ABB fiduciaries, the district court‘s de novo “substitution of its views for those of ABB fiduciaries infected its entire analysis.” While overstated, the ABB fiduciaries raise a legitimate question about whether the district court applied the appropriate standard of judicial review. The district court‘s opinion is silent as to the standard of review, and much of the district court‘s analysis gives little, if any, deference to the Plan administrator‘s determinations under the Plan documents.
The participants do not argue the district court afforded any deference to the Plan administrator. Rather, they suggest deference only applies “to discretionary benefits claim determinations.” In the participants’ view, federal courts must re-view fiduciary acts outside the benefit context de novo, otherwise plan sponsors will grant broad discretionary powers to fiduciaries and undermine ERISA‘s exacting standards. The participants misunderstand the nature of ERISA and ignore the application of trust principles to the exercise of fiduciary discretion under ERISA‘s provisions. See Firestone, 489 U.S. at 111 (“Trust principles make a deferential standard of review appropriate when a trustee exercises discretionary powers.“); Cox v. Mid-America Dairymen, Inc., 965 F.2d 569, 572 (8th Cir. 1992) (“Trust law plainly does not permit a reviewing court to reject a discretionary trustee decision with which the court simply disagrees.“).
“ERISA represents a ‘careful balancing between ensuring fair and prompt enforcement of rights under a plan and the encouragement of the creation of such plans.‘” Conkright, 559 U.S. at 517 (quoting Aetna Health Inc. v. Davila, 542 U.S. 200, 215 (2004)). Preserving that balance “by permitting an employer to grant primary interpretive authority over an ERISA plan to the plan administrator,” Firestone deference (1) encourages employers to offer ERISA plans by controlling administrative costs and litigation expenses; (2) creates administrative efficiency; (3) “promotes predictability, as an employer can rely on the expertise of the plan administrator rather than worry
Like most circuits to address the issue, we see no compelling reason to limit Firestone deference to benefit claims.6 “Where discretion is conferred upon the trustee with respect to the exercise of a power, its exercise is not subject to control by the court except to prevent an abuse by the trustee of his discretion.” Firestone, 489 U.S. at 111 (quoting Restatement (Second) of Trusts § 187 (1959) (alterations omitted)). “This deferential standard reflects our general hesitancy to interfere with the administration of a benefits plan.” Layes v. Mead Corp., 132 F.3d 1246, 1250 (8th Cir. 1998). Given the grant of discretion in this case, the district court should have reviewed the Plan administrator‘s determinations under the Plan for abuse of discretion. With that in mind, we now turn to the ABB fiduciaries’ substantive challenges to the district court‘s judgment.
B. Recordkeeping
“ERISA imposes upon fiduciaries twin duties of loyalty and prudence, requiring them to act ‘solely in the interest of [plan] participants and beneficiaries’ and to carry out their duties ‘with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.‘” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 595 (8th Cir. 2009) (alteration in original) (quoting
1. Range of Investment Options
The ABB fiduciaries contend the fact the Plan offered a wide range of investment options from which participants could select low-priced funds bars the claim of unreasonable recordkeeping fees. In
The ABB fiduciaries’ reliance on Hecker I and its progeny is misplaced. Such cases are inevitably fact intensive, and the courts in the cited cases carefully limited their decisions to the facts presented. See Hecker v. Deere & Co., 569 F.3d 708, 711 (7th Cir. 2009) (explaining “the opinion was tethered closely to the facts“); Loomis, 658 F.3d at 671; Renfro, 671 F.3d at 327 (deciding “the range of investment options ... [is a] highly relevant fact[] ... against which the plausibility of claims ... should be measured“). The facts of this case, unlike the cited cases, involve significant allegations of wrongdoing, including allegations that ABB used revenue sharing to benefit ABB and Fidelity at the Plan‘s expense. See, e.g., Loomis, 658 F.3d at 671 (noting there was “no reason to think [the defendant] chose these funds to enrich itself at participants’ expense“). Such allegations of wrongdoing with respect to fees state a claim for fiduciary breach. See Braden, 588 F.3d at 590, 598.
2. Breach
The ABB fiduciaries claim the district court erred in concluding they breached their fiduciary duties by failing to monitor and control recordkeeping fees and for paying excessive revenue sharing from Plan assets to subsidize ABB‘s other corporate services. According to the ABB fiduciaries, the district court erroneously (1) “implied that certain business arrangements, such as bundling of investment management and recordkeeping services through a single provider,” were automatically improper, (2) failed to give proper weight to the recognized benefits of revenue sharing, and (3) “relied on unwarranted inferences” in finding ABB and the EBC favored ABB‘s and Fidelity‘s interests at the Plan‘s expense. We disagree.
The district court did not condemn bundling services or revenue sharing, which are common and “acceptable” investment industry practices that frequently inure to the benefit of ERISA plans. Rather, the district court found the ABB fiduciaries breached their duties to the Plan by failing diligently to investigate Fidelity and monitor Plan recordkeeping costs based on the ABB fiduciaries’ specific failings in this case. The district court found, as a matter of fact, that the ABB fiduciaries failed to (1) calculate the amount the Plan was paying Fidelity for recordkeeping through revenue sharing, (2) determine whether Fidelity‘s pricing was competitive, (3) adequately leverage the Plan‘s size to reduce fees, and (4) “make a good faith effort to prevent the subsidization of administration costs of ABB corporate services” with Plan assets, even after ABB‘s own outside consultant notified ABB the Plan was overpaying for recordkeeping and might be subsidizing ABB‘s other corporate services.
The district court‘s factual findings find ample support in the record, and its legal conclusion that the ABB fiduciaries breached their fiduciary duties to the Plan was not in error. Any failure by the district court to afford discretion to the Plan administrator‘s interpretation of the Plan with respect to recordkeeping and revenue sharing was harmless under the circum
3. Damages
The ABB fiduciaries maintain there is no basis for the district court‘s award of $13.4 million in excessive recordkeeping fees because the award rested on the unreliable testimony of the participants’ expert, Al Otto. According to the ABB fiduciaries, the district court abused its discretion by (1) failing to rule on Otto‘s reliability; (2) rejecting the ABB fiduciaries’ Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), challenge; (3) admitting Otto‘s testimony; and (4) relying on that testimony in awarding damages resulting from excessive recordkeeping fees. See Eckelkamp v. Beste, 315 F.3d 863, 869 (8th Cir. 2002) (standard of review). These arguments are unavailing.
In a bench trial, we not only give the trial court “wide latitude in determining whether an expert‘s testimony is reliable,” Khoury v. Philips Med. Sys., 614 F.3d 888, 892 (8th Cir. 2010) (quoting Fireman‘s Fund Ins. Co. v. Canon U.S.A., Inc., 394 F.3d 1054, 1057 (8th Cir. 2005)), we also “relax Daubert‘s application,” David E. Watson, P.C. v. United States, 668 F.3d 1008, 1015 (8th Cir. 2012). Contrary to the ABB fiduciaries’ assertion that the district court failed to rule on Otto‘s reliability, the district court denied the Daubert challenge before trial, stating the Daubert issues in the case were “matters for the court to consider in terms of weighing the evidence [in this bench trial] as opposed to finding that the evidence is so unreliable that it should not even be considered.” The district court‘s reliability ruling is inherent in that determination, and the district court‘s rejection of the ABB fiduciaries’ challenge was well within its discretion.
The ABB fiduciaries also had a full opportunity to test Otto and his methodology on cross-examination, which they did. See id. (“Generally, ‘the factual basis of an expert opinion goes to the credibility of the testimony, not the admissibility, and it is up to the opposing party to examine the factual basis for the opinion in cross-examination.‘” (quoting Neb. Plastics, Inc. v. Holland Colors Ams., Inc., 408 F.3d 410, 416 (8th Cir. 2005))). The district court did not abuse its discretion in awarding damages based on Otto‘s testimony.
C. Selection of Plan Investment Options and Mapping
1. Timeliness
Absent fraud or concealment not present here,
The last fiduciary acts constituting the alleged breach—amending the trust agreements, removing the Wellington Fund as an investment option, selecting the Freedom Funds, and mapping Plan assets to the Freedom Funds—all took place during or after March 2001, bringing them within the six-year statute of limitation. The district court correctly determined the participants’ mapping claim was timely.
In determining the ABB fiduciaries breached their fiduciary duties with respect to selecting investment options and mapping from the Wellington Fund to the Freedom Funds, the district court relied heavily on its interpretation of the Plan and the provisions of the IPS. The ABB fiduciaries challenge the district court‘s factual findings, methodology, and conclusions. Although the ABB fiduciaries maintain the IPS is not a Plan document, they assert that even if it is, neither the IPS nor ERISA required the investment selection and removal process the district court required.
According to the ABB fiduciaries, the district court erroneously substituted its own de novo interpretation of the Plan and view of the ideal Plan investments for the reasoned judgment of “those bodies legally charged with the actual exercise of discretion.” The ABB fiduciaries also contend the district court‘s analysis reflects an improper hindsight bias as demonstrated by the district court “reason[ing] ex post that ‘between 2000 and 2008, the Wellington Fund[] outperformed the Freedom Funds.‘” (quoting the district court opinion). See Roth, 16 F.3d at 918 (“[T]he prudent person standard is not concerned with results; rather, it is a test of how the fiduciary acted viewed from the perspective of the time of the challenged decision rather than from the vantage point of hindsight.” (internal marks omitted) (quoting Katsaros v. Cody, 744 F.2d 270, 279 (2d Cir. 1984))).
The ABB fiduciaries’ points are well taken. The district court‘s opinion shows clear signs of hindsight influence regarding the market for target-date funds at the time of the redesign and the investment options’ subsequent performance. While it is easy to pick an investment option in retrospect (buy Apple Inc. at $7 a share in December 2000 and short Enron Corp. at $90 a share), selecting an investment beforehand is difficult. The Plan administrator deserves discretion to the extent its ex ante investment choices were reasonable given what it knew at the time. It is also not manifest the district court afforded any deference to the ABB Plan administrator‘s determinations under the Plan documents. “As the more deferential discretionary standard of review could have affected any facet of the district court‘s analysis, we are far from certain the district court would have arrived at the same conclusions” had it applied the required deferential standard of review in evaluating whether the ABB fiduciaries, at the time they made their investment decisions, breached their fiduciary duties in implementing the redesign and evaluating and selecting Plan investment options in accordance with the Plan. Jobe v. Med. Life Ins. Co., 598 F.3d 478, 486 (8th Cir. 2010); accord Wallace v. Firestone Tire & Rubber Co., 882 F.2d 1327, 1330 (8th Cir. 1989) (explaining that when an improper standard of review is “interwoven into almost all of the court‘s factual findings, we cannot be sure it would have made the same factual conclusions if it had employed the required ... standard of review“). As such, we vacate the district court‘s judgment and award on this claim and remand for further consideration.
3. Damages
On remand, the district court should reevaluate its method of calculating the damage award, if any, for the participants’ investment selection and mapping claims.7 See Peabody v. Davis, 636 F.3d 368, 373 (7th Cir. 2011) (clarifying in an ERISA case
Second, the district court determined “it [was] a reasonable inference that participants who invested in the Freedom Funds would have invested in the Wellington Fund had it not been removed from the Plan‘s investment platform.” Such an inference appears to ignore the investment provisions of the IPS, participant choice under the Plan, and the popularity of managed allocation funds. And the participants fail to cite any evidentiary support for inferring the participants’ voluntary, post-mapping investments in the Freedom Funds would have instead been made in the Wellington Fund, even if that fund remained as a Plan option for all of the years at issue. “A reasonable inference is one ‘which may be drawn from the evidence without resort to speculation.‘” Sip-Top, Inc. v. Ekco Grp., Inc., 86 F.3d 827, 830 (8th Cir. 1996) (quoting Hauser v. Equifax, Inc., 602 F.2d 811, 814 (8th Cir. 1979)). As calculated, the $21.8 million damage award for the participants’ mapping claim is speculative and exceeds the “losses to the plan resulting from” any fiduciary breach.
D. Float
Fidelity appeals the district court‘s conclusion that Fidelity breached its fiduciary duties of loyalty by failing to pay float income to the Plan.8 Fidelity asserts “Fidelity was not required to credit the Plan with income earned on overnight investments of float” because “[f]loat was not a Plan asset” within the meaning of ERISA and “Fidelity was paid nothing for the float“—“no fees” and “none of the float earnings.” Fidelity maintains that, as a matter of basic property rights, the investment options—not the Plan—owned the float and bore the risk of loss with respect to the float accounts and thus were entitled to any benefits of ownership. Fidelity‘s appeal to basic property rights is persuasive on this record.
Although “ERISA does not exhaustively define the term ‘plan assets,’ ... [t]he Secretary of Labor has repeatedly defined ‘plan assets’ consistently with ordinary notions of property rights.” Kalda v. Sioux Valley Physician Partners, Inc., 481 F.3d 639, 647 (8th Cir. 2007) (quotation omitted). Here, the participants failed to adduce any evidence the Plan had any property rights in the float or float income. To the contrary, the record evidence indicates that when a contribution was made, Fidelity credited the participant‘s Plan account and the Plan became the owner of the shares of the selected investment option—typically shares of a mutual fund—the same day the contribution was received. The Plan received the full benefit of ownership—including any capital gains or dividends
The participants do not rebut Fidelity‘s simple assertion that “[o]nce the Plan became the owner of the shares, it was no longer also owner of the money used to purchase them,” which flowed to the investment options through the depository account held for their benefit. Under the evidence and circumstances of this case, the Plan investment options held the property rights in the depository float and were entitled to the float income. Fidelity did not breach any fiduciary duties with respect to the depository account.
The participants also fail to establish the Plan had any rights in the redemption account balance, which, like the depository account, was registered for the benefit of the investment options.9 Fidelity proposes, “As a matter of black-letter commercial law, the payee of an uncashed check has no title in or right to interest on the account funds.” See U.C.C. § 3-112(a)(i) (explaining “an instrument is not payable with interest” “[u]nless otherwise provided in the instrument“). According to Fidelity, when a participant chose to receive a check rather than an electronic disbursement, the relevant Plan investment options retained all rights to the redemption float until the disbursement check was cashed.
The participants agree with Fidelity that “the funder of the check owns the funds in the checking account until the check is presented, and thus is entitled to any interest earned on that float,” but the participants contest the ownership of the funds at issue. The participants assert, “In this case, the owner is the Plan [],” making the float income a Plan asset. But the participants do not cite any record evidence establishing the Plan as “the funder of the check” or the owner of the funds in the redemption account. Absent proof of any ownership rights to the funds in the redemption account, the Plan had no right to float income from that account.
Because the participants have failed to show the float was a Plan asset under the circumstances of this case, the district court erred in finding Fidelity breached its fiduciary duty of loyalty by paying the expenses on the float accounts and distributing the remaining float to the investment options.
E. Attorney Fees
Under
Although the hourly rate the district court applied for attorney work is generous and the resulting fee award substantial, we are unable to say the district court abused its discretion in determining the
III. CONCLUSION
We affirm the district court‘s judgment and award against the ABB fiduciaries with respect to recordkeeping, but vacate the judgment and award on the participants’ investment selection and mapping claims. We reverse the district court‘s judgment against Fidelity, vacate the attorney fee award as to all defendants, and remand for further proceedings consistent with this opinion.
BYE, Circuit Judge, dissenting in part.
Unlike the majority, I would conclude float is a Plan asset under these circumstances and Fidelity therefore breached its fiduciary duty of loyalty by transferring float to the Depository Account for the benefit of investment options and by using float income to pay for bank expenses.
In concluding float is not a Plan asset, the majority has been persuaded by principles of property law. However, I find basic principles of property law are not persuasive in light of regulations which specifically define Plan assets in the context of ERISA. Regarding the definition of Plan assets, the Department of Labor regulations implementing ERISA provide:
[T]he assets of the plan include amounts (other than union dues) that a participant or beneficiary pays to an employer, or amounts that a participant has withheld from his wages by an employer, for contribution or repayment of a participant loan to the plan, as of the earliest date on which such contributions or repayments can reasonably be segregated from the employer‘s general assets.
I would also find Fidelity breached its fiduciary duty of loyalty in handling the float as well as the float income. The Department of Labor expects that parties should, “as part of their fee negotiations, provide full and fair disclosure regarding the use of float[.]” U.S. Dep‘t of Labor, Field Assistance Bulletin 2002–3 (2002), available at http://www.dol.gov/ebsa/regs/fab2002-3.html. As such, if Fidelity had “openly negotiated” to retain float income “as part of its overall compensation,” a breach of fiduciary duties by Fidelity would not be before this court. Id. How
Accordingly, I respectfully dissent from the majority‘s conclusion that the district court erred in assessing damages for Fidelity‘s handling of float and income generated from such float.