the facts on which play disclaims in this case are based are simple and straightforward first patella the surface trustee for government for me or is it governed retirement plans and in his capacity as trustee it's sold plan own mutual fund shares to obtain money necessary to make distributions to participants it deposited that money in the bank accounts on which checks were drawn to the participants and while the checks were outstanding it took that money invested it and used the earnings on the investment for its own purposes and for the purposes of third parties in the mutual funds mr johnson i want to be clear on one thing is either the plan was a particular beneficiary received less than the plan documents call for that person or the land received in specific plan provisions the plan got less than it was entitled to because the plan is entitle to the benefits of any earnings on plan assets you're talking now about an argument based on fiduciary responsibility under the statute i'm asking you a question at least i think you are i'm not asking you a question about the terms of the plan itself it anyone get less than the terms of the plans the civically required that person to receive that withdrew from the plans did not receive less but the plans receive less and they they would under the contract and the agreements have the had the trustee abided by its because you do interview answer is that the plan didn't specify what happened to float in fact it was silent and just the deal elton explained that silence actually means that the default position absent notice from the fishy he is that the float should have gone to step further and says that when you take the proceeds of mutual fund shares that are owned by the plan and posit them into an account and invest them in interest as are and that the the money is in that account because they were generated from the sale of mutual funds she was owned by the plan belong to the plan and therefore any earnings belong to the plan but we relied on all of the same authorities that relies on those guidances those were alleged in the complain the brief we did advocate that position we believe and our argument focused on the fact that these are planned assets i don't know how any other conclusion can be reached when the sale of mutual funds shares owned by the plan generate beneficiary who plan accounting still own those funds i don't think that can happen your honor because the nature of the transaction when there's a sale of the mutual funds the mutual mutual fund shares those shares are your honest question is is correct it's basically what the what fidelity is advocating as its third party beneficiary contract that if the documents themselves which is not in fact the case directed the mutual fund directed the mutual fund to pay the participants directly then it wouldn't be a planned asset but there's no evidence on the record of that there was no direction to the mutual funds and it really can't happen because if the mutual funds were paying the the participants directly the entire retirement rissa retirement structured loses tax advantages this money has to come not from the mutual fund but from the plan because for example in the case of a rollover of a distribution to another plan that only is a nontaxable that if it comes from a qualified trust to another qualified trust under the tax code and so suggesting and which is i think the basis of the third party beneficiary contract that the deli is arguing would undermine that those tax advantages so this now this is structured it has to be structured in such a way that legally speaking the money comes from the sale of the of the mutual fund shares that are owned by the plan to the plan and regardless of what kind of account it goes into because they were there assets of the plan and the earnings on those are assets of the plan and can't be used for the benefit of adeleke or for any third party the mutual fund has no relationship with the participants because the participants don't own the usual fund good morning me please the court elizabeth hopkins on the half of the secretary of labor is make a scary i support of participants and plaintiffs here i want to start not where i was going to with my argument but with with this question of whether the participants here got everything that they were entitled to it may well be that the participants who were paid out at the time who requested distributions are rollovers from the pla with they wanted but this isn't what they were entitled to under the plan in some sense but the logical implication of this argument this is a for a one k plan and if if they are if the  if the plan was entitled to the float and and we believe on the allegations here the plan was how how how would the how any individual account just calculate has to do with the contributions that are made in the earnings on those contributions so alternately in the future there will be more for each of the participants in each of the participants and some sense is and what will be entitled to more be the net distribution will be slightly marginally affected by changes in the plans overall and in i think that's right but you know over time these small amounts of float th small amount of expenses and can really add up they can really eat into a participants ultimate payout so it's not you know it's not just about the plan it never is ultimately about the plan it's at the end of the day about the p and in a four one k plan how you know how interest is allocated how expenses are allocated it makes a big difference so that's the first thing i sort of wanted to jump in and address i think the second thing i want to talk  about is that that makes sense to address here is sort of the point of difference between what the department of labor is arguing and what the plaintiffs are arguing here we we agree that all the same provisions that the participants point to as general loyalty provisions and to have prevented transaction provisions were violated here if as alleged by the which was trustee through all these four one k pension plans use the cash generated when it sold the mutual fund investments own by the plan the shares owned by the plan following these distribution or rollover requests to generate float income that it didn't distribute to the play and we don't we don't take the position that there were no plants that's involved there have to be plants that's involved to show violations of the two prohibited transaction provisions that issue the plan sale of those shares in order to generate this float income it was using it was not operating the plan solely in the interest of plan participants and beneficiaries and for the exclusive purpose of paying them benefits as is required by section four a for loyalty and it was it was using using it was a it was acting as a plan fishery directly or indirectly using plant assets to benefit itself o third parties and it was using plant dealing with plan assets and its own interests and for its own account the only place where we differ from from the purchase of pence is whether those plan assets remain plan assets throughout the distribution process and polluting and when including when they're put into interest bearing accounts that presented you know a long time ago when we were giving guidance on this raised a lot of issues under banking watch we looked at the issue and said it doesn't really matter certainly there were plan assets you know that were that were at issue here or that were the shares being sold and so if they were tain their whether or not they retained their  their characterised plan assets throughout the throughout the distribution process really doesn't matter it's the fact that fidelity uses its responsibilities as trustee in making his distributions to earn interest for itself and not for the plans or for third parties and not for the plans that violates the statute and i see that my time is up so unless the court has further question float is a plan asset is simple but it's flawed they assume that because the plan own the mutual fund shares the plan takes title ownership title to the mutual funds cash at reasons why that's not true it's just an assumption outside the thing for it and it's not correct for a number of reasons the first one is that no mutual fund share owner in any circumstances ever receives interest on the redemption funds as his or her check is being processed an ownership in a mutual fund constitutes only the right to payment in due course by a check as here but for the value of the shares at four o'clock on the day of redemption it never certainly acting this isn't disputed either as the transfer agent file is according to the press press prospectuses the transfer agent for the mutual funds this is the same process that would occur in a retail transaction a check has to be cut just as a current silicate ing the distribution of funds owned by the mutual fund to the participants who are withdrawing their funds from the plan the plan the only only reason they are doing or in a position to do that is that they are insurance company  name would never plan asset that's not quite correct on the life insurance policy was a plan asset the life insurance policy reflected a right to payment upon a certain condition a payment from the life insurer to the beneficiary and same is true now in a roll sitting and so fidelity went and picked up the shares to bring them over to me and on the way over it given in check from  it would either be that on the it would be a question of what the superior ownership claim is between the beneficiary or the mutual fund in terms of titles of the underlying assets that's the question here but the one thing we know which isn't disputed is there is no point in this transaction never does the plant assume any risk of loss which this court has said is the central characteristic of ownership is not of ordinary property the plan never assume any risk of loss more than that the plan also explicitly prohibits three different provisions of the can be paid for from plant assets so if the work plan expenses they could be paid for out of plan assets to the extent these are planned as it was permissible to pay any accounts that were owned by the  direction here for fidelity to be holding cash it's not what was contemplated what was contemplated was that the fidelity we do its function provide the service of providing the t explicitly say that the owner of a share is not entitled to interest upon a distribution from unusual fund so if you take the plaintiff's position to be true and it's that it's strictly accurate that the plan is the owner of the mutual fund the plans who after all brought the mutual funds to us we didn't choose the mutual funds we were directed to have relationship of mutual funds chosen by the plans who necessarily performing their fiduciary function read the mutual funds prospectuses the plans knew from those prospectuses that they were not going to receive interest because no mutual fund owner receives interest on of on  us mutual funds to deal with so the plans came to us with mutual funds that said the plans won't be getting interest on distributions so there's that point there's the second point that beyond that the plans you all along that they weren't receiving interest were not being treated as owners of plan assets so there's certainly that much it doesn't require more than silence choir's and disclosure while there there hasn't been any regulatory guides there's no regulation on this they have an extensive disclosure kind of disclosure that would be the issue here that the fact that fidelity that the interest is being used first to pay bank fees and then return the mutual funds who were the beneficial owners of the accounts is the exact same situation and to the extent that you well criterion with the assumption of my own ownership of well that i think that reflects the fact that the plan which i think ultimately helps us the plan is only in fact holding the shares on behalf of the individual participants this is a directed do contract rather than because of the concept of property ownership well it's because the i mean the plan is holding any cash as trustee just as the plan is holding any mutual fund as trustee so the concept of ownership can't be the criterion for distinguishing one from the other it has to be the terms of a contract isn't that correct distinguishing one i'm not sure i understand  to talk about ownership of this year's themselves as being trustee ownership and that's why there's no risk of loss in the same criterion would apply to the cash and if we're going to distinguish between the treatment of the cash and the treatment of the sheers it's going to have to be on the basis of contract rather than on the basis of a concept of ownership which would distinguish could distinguish between yash in the sheers that's the first of all i think  contract helps us because the contract prohibits the holding of cash but second of all i don't think there needs to be that rigorous comparison between ownership of the shares because that's not it's not a dispute everybody agrees as a matter of contract and ownership of the plan own the shares that's absolutely on question the question the issues of ordinary property rights come in because we're trying to determine what arguably is an otherwise specified which is does the plan assume title to the cash and if so when  prohibits the holding of cash the plans knew all along they weren't being treated as owners and under ordinary principles of property law what were fundamentally trying to do was ascertain what the party's understanding was and at no point did the plans ever understand themselves to of the mutual fund that were being paid just as they would be paid in any unusual fund transaction in the same way that they would need paid in any mutual fund fun transaction through a check processing period at which it's understood that neither the plan as the thank you owners i'd like to address first the issue that my brother is about the plan not becoming the owner of the cash that's generated from the mutual fund shares which is an argument i don't really understand it seems to me that the moment the mutual fund shares are redeemed the mutual fund takes those shares back it pays out cash cash is generated who owns that cash it seems to me again that the plan is the owner of the shares so the plan is the owner of the cash generated an my brother says that well it's just it's not owned by the plan because it's just being processed but we know there is hash there because it is earning interest and the hell of these using that interest for its own benefit or giving it back to the mutual funds it makes no sense for fidelity to take it there the trustee it makes no sense for mutual fund it they've already required the shares and paid out the cash why would they earn interest on cash that they've already paid out so i think that the the notion that this is somehow just money that's in process and doesn't belong to anybody or actually apparently belongs to the mutual funds or fidelity is the  this is smoke and mirrors there is cash there it's cash that's generated from the sale of planet has it's so it belongs to the plant and it's illegal for the deli as trustee to use it for its own purposes or to divert it to a third party or there are cases before the the i r s where there's a question of whether a transaction is a loan or a sale and risk is just one factor of indicating in those and to give us situations whether this is a loan or sale there's no ambiguity here we have a sales transaction that's clear the delany as trustee sold the mutual fund shares their own for the plan and they acquire the cash again as trustee and that cash belongs to the mutual fund she belongs to the plan because the plan was the owner of the shares there's no ambiguity ambiguity you don't need to look to risk and even if you didn't look to risk the name of the account holder on these  used to make checks to to have participants doesn't affect the plans risk the plan under the plan documents always has an obligation to pay the beneficiaries to pay the participants what they owe them under the plan even if the delegate were to go under the plan still has an obligation so there's not really an issue of risk here similarly the issue of whether the plan can can hold cash the provisions in the agreement simply are designed to don't we can't answer just a honest question about whether there's actually cash held but it's the tail wagging the dog to say that because there is a cat because this is cash therefore the planet doesn't own it if there's cash then it means maybe that there was a violation of the agreement in terms of investment but it doesn't dictate who the owner of the ass it's our and this cash was clearly that the proceeds of the sale of mutual fund shares owned by the the plan and they were there for plan assets that should not have been used by