Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-03283/USCOURTS-ca10-90-03283-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 

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; 

PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

JAMES R. ERSHICK; GARY R. FROST; ) 

FORREST D. JACKSON; HAROLD LUTTRELL; ) 

KENNETH L. LUTJEN; PAUL MATTHEWS; ) 

ADRIAN T. PEELER; TEDDY LINK PITTMAN) 

ROBERT K. RUSK; ERNEST D. SMITH; ) 

MICHAEL T. WALTER; ALAND. WEISS and) 

DAVID A. LINDBLADE, ) 

) 

Plaintiffs-Appellants, ) 

) 

FILED 

United St.at~s Court of Aprmab Tenth Circuit 

IJOV 4 1991 

ROBERT L. HOECKER 

Clerk . 

v. ) 

) 

No. 90-3283 

UNITED MISSOURI BANK OF KANSAS ) 

CITY, N.A., ) 

) 

Defendant-Appellee. ) 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF KANSAS) 

(D.C. No. 87-2362-V) 

Bruce Keplinger of Payne & Jones, Chartered, Overland Park, 

Kansas, attorney for Plaintiffs-Appellants. 

Gardiner B. Davis (Therese M. Schuele with him on the brief) of 

Kansas City, Missouri, attorney for Defendant-Appellee. 

Before SEYMOUR, BARRETT and BRORBY, Circuit Judges. 

BARRETT, Senior Circuit Judge. 

Appellate Case: 90-3283 Document: 010110096843 Date Filed: 11/04/1991 Page: 1 
James R. Ershick, et al., plaintiffs below, appeal from an 

order and judgment entered in favor of United Missouri Bank of 

Kansas City (UMB) following trial to the court. A summary of the 

relevant facts will facilitate our review. 

Gordon Greb founded Greb X-Ray Company (Greb X-Ray), a 

closely held corporation engaged in selling and servicing medical 

diagnostic equipment, in the 1950's. Greb X-Ray was a Missouri 

corporation with its principal place of business in Lenexa, 

Kansas. Gordon Greb served as the chief executive officer and 

chairman of the board of Greb X-Ray until his death in 1981. 

Donald Curtright (Curtright) succeeded Gordon Greb as chief 

executive officer and chairman of the board. 

In 1959, Greb X-Ray established the Greb X-Ray Profit Sharing 

Plan. In 1982, after Gordon Greb's death, the Greb X-Ray 

shareholders unanimously approved the adoption of the Greb X-Ray 

Company Employee Stock Ownership Plan (ESOP) to replace the Profit 

Sharing Plan. Appellants are all former employees of Greb X-Ray, 

who are fully vested in the ESOP. 

The ESOP was established pursuant to the Employee Retirement 

Income Security Act (ERISA), 29 U.S.C. §§ 1001, et seq. The ESOP 

provided that "This Plan ... is intended to invest primarily in 

Company stock . and shall be construed accordingly to permit 

investment of up to 100% of the Trust Fund therein." ( R., Vol. 

VII, Tab 164 at p. 3) • The ESOP also provided for two 

fiduciaries, a trustee and an administrator. At all times 

relevant hereto, Greb X-Ray served as the administrator and UMB 

served as trustee. In addition to serving as trustee, UMB was 

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also a major secured creditor of Greb X-Ray and was the executor 

of the Gordon Greb estate. 

The ESOP provided how the administrator would administer the 

plan: 

3. The Administrator shall administer this Plan and 

shall construe this Plan and Trust Agreement and 

determine all questions of interpretation or policy in a 

manner not inconsistent with this Agreement, and the 

Administrator's construction or determination in good 

faith shall be final and conclusive •• The 

Administrator may correct any defect, supply any 

omission or reconcile any inconsistency in this 

Agreement in such manner and to such extents as shall be 

deemed necessary or advisable by it to carry out the 

purpose of this Agreement ..•. 

4. The Administrator shall have all 

necessary or appropriate to accomplish its duties 

this agreement. Specifically, the Administrator 

have the following duties: 

* * * 

powers 

under 

shall 

(h) To pass upon administrative matters relative to this 

Plan and Trust; 

(1) 

purchases 

thereof. 

* * * 

To direct the Trustee(s) with regard to 

of Company stock and the fair market value 

(Addendum to Brief of Appellants, Vol. I, Tab 1 at pp. 38-39). 

The ESOP also detailed the duties of the trustee, including: 

[T]he Trustee shall have the following powers in 

addition to those vested elsewhere in the plan or by law . . . . . 

* * * 

(1) To invest any or all of the Trust Fund in Company 

Stock. . . All purchases and sales of Company Stock 

shall be made only at the direction of the 

Administrator. The Administrator shall determine the 

terms upon which all purchases of Company stock shall be 

made. All purchases shall be at prices which, in the 

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best judgment of the Administrator, do not exceed the 

fair market value of the securities in question. 

(Addendum to Brief of Appellants, Vol. I, Tab 1 at p. 30). 

Following Gordon Greb's death in 1981, Greb X-Ray's fortunes 

declined precipitously under the direction of Curtright. (R., 

Vol. VII, Tab 164 at p. 4). By the summer of 1983, Greb X-Ray's 

prospects were undermined by a number of factors, including: 

Curtright's management style, which had alienated Greb X-Ray's 

employees and customers; Greb X-Ray's obligation to purchase 

company stock from Gordon Greb's estate; UMB's lowering of Greb XRay's borrowing limit to three and one-half million dollars; Greb 

X-Ray's spending of $50,000 per month for a company airplane; and 

Greb X-Ray loans made to Curtright at Curtright's direction 

totalling approximately $120,000. Id. at 4-5. 

The ESOP did not purchase any Greb X-Ray stock in 1982. 

However, the ESOP did purchase 410 shares in 1983 at a price of 

$300 per share and .899 shares in 1984 at a price of $285 per 

share. The stock was purchased from Greb X-Ray employees. With 

these stock purchases, the ESOP became the majority shareholder in 

Greb X-Ray. 1 The ESOP did not purchase any Greb X-Ray shares 

after 1984. 

These stock purchases were all made by UMB at the direction 

of Greb X-Ray as the ESOP's administrator. Before implementing 

these purchase directives, UMB ascertained that a current stock 

valuation was on file and that it was used to fix the purchase 

1 As a closely held corporation, Greb X-Ray's stock was subject 

to a stock purchase agreement. The agreement restricted the sales 

of Greb X-Ray stock to the employees of Greb X-Ray, Greb X-Ray, 

and to the ESOP. 

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l • 

price of the stock acquired. (R., Vol. VII, Tab 164 at p. 5). The 

stock valuations ($300 in 1983 and $285 in 1984) were established 

annually by an independent appraiser not affiliated with Greb XRay. Id. 

From 1982 to 

fluctuated from a 

$1,062,668 in 1985. 

1985, the net asset 

high of $2,430,658 

(R., Vol. IX at p. 

balance 

in 1983 

308). 

of the ESOP 

to a low of 

Similarly, the 

ESOP's general (non-Greb X-Ray stock) investments declined from 

$936,206 in 1982 to $117,061 in 1985. Id. During this same 

period, Greb X-Ray's net pre-tax profits were: 1982, profit of 

$532,472; 1983, loss of $264,709; 1984, profit of $129,852; 1985, 

loss of $829,793. (R., Vol. VII, Tab 164 at p. 4). 

Between March, 1985, and January, 1986, the appellants left 

the employ of Greb X-Ray. As fully vested ESOP participants, 

each appellant received an annual statement from UMB relative to 

their individual accounts. The 1986 statement reflected that 

their account values had declined by approximately 75% of their 

former values. (R., Vol. VIII at p. 128; Plaintiff's Exhibits 10, 

56-67). 

Appellants filed this action in 1987 alleging that Greb XRay, UMB, the ESOP, and Curtright had violated their fiduciary 

duties under Section 404(a) of ERISA, 29 u.s.c. § 1104(a) by 

imprudently investing in Greb X-Ray stock (Count I), and by 

participating in prohibited transactions in violation of Section 

406 of ERISA, 29 U.S.C. § 1106 (Count II). Appellants sought 

damages representing "the value of what their plan assets would 

have been worth, had they been prudently and properly invested" 

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(R., Vol. I, Tab 4 at p. 4), interest, punitive damages, and 

attorney fees. Appellants also sought immediate distribution of 

benefits from the ESOP (Count III). 

All parties moved for summary judgment. The district court 

entered an order in which it: denied appellants' motion for 

summary judgment; granted summary judgment to Greb X-Ray, the 

ESOP, and Curtright as to Count III; granted UMB's motion for 

summary judgment in full. Thereafter, appellants moved for 

reconsideration and Greb X-Ray, the ESOP, and Curtright moved for 

summary judgment on Counts I and II. 

Subsequent thereto, the district court entered an order in 

which it granted appellants' motion for reconsideration in part by 

reinstating their Count I claim against UMB. The court also 

granted summary judgment to Greb X-Ray, the ESOP, and Curtright on 

Count II but denied their motion for summary judgment on Count I. 

Prior to trial, appellants settled with Greb X-Ray, the ESOP, 

and Curtright. Thereafter, a two-day trial to the court proceeded 

on appellants' Count I claim against UMB within which appellants 

alleged that UMB had violated§ 1104(a) 2 by imprudently investing 

in Greb X-Ray during a time when the financial condition of Greb 

X-Ray was deteriorating and by failing to attempt to sell some or 

2 29 u.s.c. 1104(a)(l)(B) provides in part: 

[A] fiduciary shall discharge his duties with respect to a 

plan solely in the interests of the participants and beneficiaries 

and---

* * * 

(B) 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 .... (Emphasis 

supplied). 

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all of the Greb X-Ray stock held by the ESOP as it learned that 

the financial condition of Greb X-Ray was deteriorating. 

UMB defended on the basis that it did not make or participate 

in any imprudent investments in violation of§ 1104. UMB argued 

that it purchased the Greb X-Ray stock at the direction of Greb XRay as the ESOP's administrator in accordance with the specific 

provisions of the ESOP. 

Following trial to the court, the district court entered a 

memorandum order, finding that UMB had not violated any duty it 

owed appellants under ERISA. In so doing, the court found, inter 

alia, that: UMB purchased Greb X-Ray stock for the ESOP from Greb 

X-Ray employees who wished to sell their stock, which purchases 

were made at the direction of ESOP administrator; the value of the 

stock was determined annually by an independent appraiser not 

affiliated with Greb X-Ray; the credible evidence shows that the 

valuations were not done improperly; there was no credible 

evidence to show any prospective buyers, other than Greb X-Ray, 

its employees, or the ESOP for Greb X-Ray stock in the mid-1980's; 

UMB was not informed of any potential buyers for Greb X-Ray stock 

nor did it make any inquiries concerning the existence of 

potential buyers; in 1985, unbeknownst to UMB, five employees 

attempted to oust Curtright; UMB routinely gave its proxy to 

Curtright; there was no evidence to indicate that UMB's motive in 

giving Curtright its proxy was to perpetuate Curtright's control 

of Greb X-Ray; and plaintiffs (appellants) introduced no credible 

evidence to show that UMB was aware of Curtright's mismanagement. 

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The court concluded that UMB, as a directed trustee under 29 

u.s.c. § 1103(a)(1) 3 , was required to follow the proper directions 

of the administrator unless the instructions violated ERISA; UMB 

was entitled to rely on the independent appraisal assessing the 

value of the Greb X-Ray stock; UMB did not violate its duties 

under ERISA by following the administrator's directions to 

purchase additional shares of Greb X-Ray stock; 0MB did not 

violate its duties under ERISA by retaining the Greb X-Ray stock 

in the absence of any offers to purchase the stock and in the 

absence of any directions from the administrator to sell the 

stock; ERISA did not require UMB to tender the stock back to Greb 

X-Ray and such action would have run counter to the ESOP; the 

decline in the price of the Greb X-Ray stock during 1985 and 1986 

was insufficient to show imprudence on the part of UMB; and that, 

as a directed trustee, UMB was not required to weigh the merits of 

an investment in Greb X-Ray stock against all other available 

investment vehicles each time the administrator directed the 

acquisition or retention of Greb X-Ray stock. (R., Vol. VII, Tab 

164 at pp. 8-9). 

The district court also concluded that: ERISA requires 

trustees to carry out the aims of the plans they administer; 

3 § 1103(a)(l) provides in part: 

[T]he trustee . . shall have exclusive authority and 

discretion to manage and control the assets of the plan, except to 

the extent that---

(1) the plan expressly provides that the trustee or trustees 

are subject to direction of a named fiduciary who is not a 

trustee, in which case the trustees shall be subject to proper 

directions of such fiduciary which are made in accordance with the 

terms of the plan and are not contrary to this chapter ..•. 

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' ' 

trustees who disregard the stated purpose of an employee stock 

ownership plan to invest primarily in employer securities and who 

instead invest in non-employer investments may be liable for 

breach of fiduciary duties; federal agencies regulating banks had 

recommended that banks with commercial loan departments and trust 

departments separate the two; the federal agencies had developed 

and promoted the concept of erecting a "Chinese Wall" to obstruct 

the flow of information between bank lending and trust 

departments; and UMB's commercial loan personnel had acted in 

conformity with the Comptroller of the Currency and Federal 

Reserve directives by not communicating Greb X-Ray's commercial 

loan performance to UMB's trust department personnel. Id. at p. 

9. 

On appeal, appellants contend: (1) the court erred in finding 

that UMB had not violated§ 1104; (2) the court erred in finding 

that UMB was absolved of liability because its actions were 

allowed by the ESOP and made pursuant to the directions of the 

administrator; (3) UMB, once the ESOP became the majority 

shareholder of Greb X-Ray, was acting in violation of its 

fiduciary duties; (4) the court erred in finding that the stock 

purchase agreement restricted the ESOP sale of Greb X-Ray stock; 

(5) the court erred in finding that there were no other 

prospective buyers for Greb X-Ray stock in the mid-1980's; (6) the 

court erred in granting summary judgement in favor of UMB on Count 

II and holding that UMB did not violate § 1106 by serving 

simultaneously as a trustee and secured creditor; and (7) that the 

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payment of UMB attorney fees from ESOP assets was a prohibited 

transaction. 

At the outset, we observe that Congress, in enacting ERISA, 

did not explicitly enumerate all the powers and duties of trustees 

and other fiduciaries. Central States Pension Fund v. Central 

Transport Inc., 472 U.S. 559, 570 (1985). Rather, Congress 

invoked the common law of trusts to define the general scope of 

their authority and responsibility. Id. Under the common law, 

trustees are understood to have such powers as are necessary or 

appropriate for carrying out the purposes of the trust. Id. In 

exercising their powers, however, ERISA fiduciaries are required 

to interpret their plans "in accordance with the documents 

governing the plan insofar as such documents and instructions are 

consistent with ERISA § 1104(a)(l)." Pratt v. Petroleum 

Production Management Employee Savings Plan, 920 F.2d 651, 657 

(10th Cir. 1990). 

The decisions of a fiduciary will be upheld unless they are 

arbitrary and capricious, not supported by substantial evidence 

or erroneous on a question of law. Woolsey v. Marion Laboratories, 

Inc., 934 F.2d. 1452, 1457 (10th Cir. 1991), citing Pratt v. 

Petroleum Production Management Employee Savings Plan, supra. 

Judicial review of fiduciary actions is highly deferential. 

Anderson v. Ciba-Geigy Corporation, 759 F.2d 1518, 1522 (11th Cir. 

1985). Deferential judicial review applies to the interpretation 

and implementation of a plan by a plan fiduciary. Hoover v. Blue 

Cross and Blue Shield of Alabama, 855 F.2d 1538, 1541 (11th Cir. 

1988). 

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Where, as here, trial is to the court, the resolution of 

factual issues and conflicting evidence lies solely within the 

province of the district court. Raydon Exploration, Inc. v. Ladd, 

902 F.2d 1496, 1499 (10th Cir. 1990). "The factual findings of 

the district court are 

aside on appeal unless 

presumed 

they are 

correct and should not be set 

clearly erroneous." Id. 

Conclusions of law are reviewed de novo. In re Thompson, 894 F.2d 

1227 (10th Cir. 1990). 

Mixed questions of fact and law are reviewed under either the 

clearly erroneous or de novo standards, depending on whether the 

mixed question involves primarily a question of fact or the 

consideration of legal principles. Supre v. Ricketts, 792 F.2d 

958, 961 (10th Cir. 1986); Love Box Company v. Commissioner of 

Internal Revenue, 842 F.2d 1213, 1215 (10th Cir. 1988) (quoting 

Supre v. Ricketts), cert. denied, 488 U.S. 820 (1988). Inasmuch 

as appellants' allegations of error involve primarily questions of 

fact, we will uphold the findings of the district court unless the 

findings are clearly erroneous. 

I. 

Appellants contend that the court erred in finding that UMB 

had not violated§ 1104. 

UMB breached § 1104 

Specifically, appellants contend that 

by failing to discharge its duties for the 

the ESOP's participants with the care, 

diligence under the circumstances then 

exclusive benefit of 

skill, prudence, and 

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prevailing that a prudent man acting in a like capacity would have 

used. 

Appellants argue that UMB did not act for the exclusive 

benefit of the ESOP's participants and their beneficiaries. 

Without citing to the record, appellants allege that UMB 

"unquestioningly participated with Mr. Curtright in the purchase 

and retention of sufficient stock to make the ESOP the majority 

shareholder in the Company", allowed Curtright "to deal with the 

assets of the plan [ESOP] in his own interests", and "aided Mr. 

Curtright in his misuse of the plan assets thereby depriving the 

plaintiffs [appellants] of their retirement security." (Brief of 

Appellants at pp. 22-23.) 

Appellants also argue that UMB failed to discharge its 

fiduciary duties as 

Appellants contend that 

the ESOP's trustee in a prudent manner. 

prudence required UMB to take an active 

role in monitoring the ESOP's investments; UMB could not take a 

passive role and "blindly and uncritically" accept the 

administrator's directions to purchase the Greb X-Ray stock; UMB 

"should have known" that Greb X-Ray's financial condition was 

deteriorating; UMB should not have acquired the Greb X-Ray stock 

and should not have retained it; UMB was imprudent in giving 

Curtright its proxy to vote the Greb X-Ray stock; and UMB was 

imprudent in not obtaining independent investment advice. 

As set forth, supra, fiduciaries are required to interpret 

their plans in accordance with the documents governing the plans 

insofar as the documents and instructions are consistent with 

ERISA. Pratt v. Petroleum Production Management Employee Savings 

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Plan, supra. The decisions of a fiduciary will be upheld unless 

they are arbitrary and capricious, not supported by substantial 

evidence, or erroneous on a question of law. Woolsey v. Marion 

Laboratories, Inc., supra. Judicial review of fiduciary actions is 

highly deferential. Anderson v. Ciba-Geigy Corporation, supra. 

Applying these standards, we hold that the district court's 

findings that UMB did not violate ERISA are not clearly erroneous. 

Contrary to appellants' allegations that UMB "unquestioningly 

participated with Mr. Curtright" and "aided Mr. Curtright in his 

misuse of plan assets" and failed to discharge its duties as a 

trustee in a prudent manner in violation of ERISA, the district 

court specifically found, and we agree, that UMB did not violate 

ERISA. 

The ESOP expressly provided that it was "intended to invest 

primarily in Company stock" and that the administrator, Greb XRay, would administer the plan, including, "direct[ing] the 

Trustee(s) with regard to purchases of Company stock and the fair 

market value thereof." Under § 1103 ( a) ( 1), UMB, as a directed 

trustee, was "subject to [the] proper directions of [Greb X-Ray as 

administrator] which are made in accordance with the terms of the 

plan and are not contrary to this chapter." 

Appellants have failed to establish that the ESOP was 

inconsistent with ERISA. Appellants have also failed to establish 

that UMB's 1983 and 1984 purchases of Greb X-Ray stock, at the 

direction of Greb X-Ray as the ESOP's administrator, were not made 

in "accordance with the terms of the" ESOP or "were contrary to" 

ERISA. 

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We observe that appellants' cause of action under Count I 

has, since the outset, been predicated on the fact that their ESOP 

account values declined dramatically from 1985 to 1986 and that 

they are entitled under ERISA to recover the value of what their 

plan assets would have been worth, had they been properly and 

prudently invested. Thus, appellants seek, having settled with 

Greb X-Ray, the ESOP, and Curtright, to recover under Count I by 

establishing that UMB's actions were violative of ERISA and caused 

the decline in their ESOP values. Appellants have failed to meet 

this burden. 

Although the appellants established that UMB purchased stock 

in 1983 and 1984 and that the value of their ESOP accounts 

declined dramatically during 1985 and 1986, they have failed to 

establish that UMB's actions were in violation of ERISA. The 

district court properly found that UMB did not violate ERISA by 

following the administrator's directives to purchase the Greb XRay stock and by retaining the stock in the absence of any 

directions by the administrator otherwise. The court also 

properly found that appellants failed to present any credible 

evidence establishing that UMB was aware of Curtright's 

mismanagement. 

Under these circumstances, we agree with the district court 

that the decline in the price of Greb X-Ray stock during 1985 and 

1986---over a year after UMB made its last purchase of Greb X-Ray 

stock---was insufficient to show imprudence on the part of UMB. 

ERISA guarantees only the right to receive vested benefits, not a 

particular amount. Alessi v. Raybestos-Manhattan, Inc. 451 U.S. 

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504, 512 (1981). Under ERISA, private parties, not the 

government, control the level of the benefits, id. at p. 511, and 

the total benefits may vary from plan to plan. Id. at pp. 513-

514. 

II. 

Appellants contend that the district court erred in finding 

that UMB was absolved of liability because its actions were 

allowed by the ESOP and pursuant to the directions of Greb X-Ray 

as the ESOP's administrator. Appellants contend that Eaves v. 

Penn, 587 F.2d 453 (10th Cir. 1978), effectively disposes of any 

argument that UMB was absolved of any responsibility simply 

because its actions were allowed by the plan documents. 

Appellants argue, citing to Eaves, that a fiduciary cannot escape 

liability by acting in accordance with the plan documents "if the 

actions under the documents violate- ERISA." Eaves is clearly 

distinguishable. 

In Eaves, Ralph Penn (Penn) used his position as trustee to 

amend a profit sharing plan to an employee stock ownership plan 

without the prior specific consent of the plan's participants and 

beneficiaries. As amended, the plan provided that plan assets, to 

the extent practicable, would be invested in the employer company 

stock. Penn subsequently utilized all of the plan's funds, loan 

proceeds, and some of the company's funds to acquire 97% of the 

employer company. Penn also personally purchased the remaining 

3% of the employer company. As a result, Penn "personally and as 

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trustee of the New Plan, acquired all the outstanding stock of the 

company." 587 F. 2d at 456. 

We upheld the district court's determination that Penn had 

failed to act solely in the interest of the plan's participants 

and beneficiaries and with the care, skill and prudence required 

under§ 1104(a)(l). In so doing we rejected Penn's contentions 

that inasmuch as he had administered the plan in accordance with 

the plan documents by investing in the company, he had complied 

with the exclusive benefit and prudent man requirements of§ 

1104(a)(l). 

In contrast, whereas Penn utilized his position as the plan's 

trustee to effectuate his personal acquisition of a million dollar 

business to the detriment of the plan's participants in violation 

of ERISA, there is no evidence that UMB ever utilized its position 

as trustee to further its own interests to the detriment of the 

ESOP participants in violation of ERISA. Furthermore, unlike Penn 

who was able to unilaterally orchestrate the use of plan funds to 

purchase a business, UMB was precluded under the ESOP from 

purchasing any Greb X-Ray shares unless directed to do so by the 

ESOP's administrator, and then only at a price determined by an 

independent appraiser not associated with Greb X-Ray. Finally, 

UMB was obligated to follow the investment decisions of the 

administrator, and the ESOP specifically provided that UMB would 

not be liable for any losses resulting therefrom: 

The Trustee(s) shall comply promptly with all such 

directions as long as such directions are not contrary 

to the Trustee's Fiduciary responsibility as provided 

by law or contrary to the terms of the Plan and the 

Trust, and to such extent the Trustee(s) shall not be 

liable or responsible for any loss resulting to the 

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Trust Fund or to any present or future Participant or 

Beneficiary thereof by reason of any sale or investment 

made or other action taken pursuant to and in accordance 

with the direction of the Administrator .... 

(Addendum to Brief of Appellants, Vol. I, Tab 1, Article X, 

Section 10 at p. 35). 

We hold that the district court did not err in finding that 

UMB was not liable to appellants under ERISA where, as here, its 

actions were allowed by the ESOP and undertaken pursuant to the 

directions of the administrator. Unlike Penn, whose "actions 

under the [plan] documents violate[d] ERISA," UMB's actions did 

not. 

III. 

Appellants contend that once the ESOP became the majority 

shareholder of Greb X-Ray, UMB was acting in violation of its 

fiduciary duties. 

Appellants argue that after the ESOP became the majority Greb 

X-Ray shareholder in 1984, UMB should have taken action to insure 

that Greb X-Ray was being properly managed. While acknowledging 

that the district court specifically found that UMB was unaware of 

the mismanagement or of the decline in Greb X-Ray, appellants 

nevertheless argue that UMB as trustee should have been aware of 

the mismanagement. Appellants argue that had UMB acquired such 

information, it could have acted prudently by changing the 

management of the corporation, changing the level of its ownership 

in the corporation, or even bringing a lawsuit for mismanagement. 

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UMB responds that these arguments were not presented to the 

district court and should not be considered for the first time on 

appeal. UMB also argues that these arguments are contrary to 

established Kansas law in that the "majority stockholder does not 

become a fiduciary for other shareholders by reason of mere 

ownership of stock" and that it is only when "one steps out of the 

role as a stockholder and acts in the corporate management, with 

disregard for the interests and welfare of the corporation and its 

stockholders that he assumes the burden of fiducial 

responsibility." McDaniel v. Painter, 418 F.2d 545, 547 (10th 

Cir. 1969). 

Inasmuch as these arguments were not presented to and 

considered by the district court, we will not consider them for 

the first time on appeal. Burnette v. Dresser Industries, Inc., 

849 F.2d 1277, 1282 (10th Cir. 1988). Moreover, having held, 

supra, that the district court's findings and conclusions that UMB 

had not violated ERISA by investing in Greb X-Ray stock were not 

clearly erroneous, we decline to hold that UMB nonetheless 

violated its fiduciary duties under ERISA once the ESOP became 

Greb X-Ray's majority shareholder. Under McDaniel v. Painter, 

supra, it is clear that, under Kansas law, UMB did not become a 

fiduciary for the other Greb X-Ray shareholders merely because the 

ESOP became the majority shareholder. 

IV. 

Appellants contend that the district court erred in finding 

that the ESOP was bound by the Greb X-Ray stock purchase agreement 

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which restricted the sale of Greb X-Ray. This argument is without 

merit. 

The district court specifically found that: 

Greb X-Ray is a closely held corporation whose stock is 

subject to a Stock Purchase Agreement. The Agreement 

restricts Greb X-Ray stock to the employees of Greb XRay, Greb X-Ray Company, and the ESOP. 

(R., Vol. VII, Tab 164 at p. 4). 

The above finding is in complete accord with the Stock 

Purchase Agreement which provides in part: 

The Stockholders desire to guard against the 

introduction into the ownership of the Company strangers 

who may be unwilling or unable to contribute in like 

manner to the success of the Company. By restricting 

the privilege of ownership of the shares of stock of the 

Company to the Company, Stockholders who are actively 

employed by the Company, former Stockholders .•. any 

Profit Sharing Plan and/or Stock Purchased Plan 

established by the Company .•.. 

(R., Defendant's Exhibit 408). 

v. 

Appellants contend that the district court erred in finding 

that there were no other prospective buyers for Greb X-Ray stock 

during the mid-1980's. 

The district court found: 

There is no credible evidence which would show that 

prospective buyers, other than Greb X-Ray, its employees 

or the ESOP, existed during the mid-1980's. The Bank 

was not informed of any potential buyers nor did it make 

inquiries concerning the existence of potential buyers. 

The Bank was aware of the limitations concerning the 

sale of Greb X-Ray stock contained in the Greb X-Ray 

Stock Purchase Agreement. 

(R., Vol. VII, Tab 164 at pp. 5-6). 

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Appellants argue that this finding was erroneous because one 

Terrance Gooding testified via deposition that he had contacted 

Curtright and inquired about the acquisition of Greb X-Ray. 

Although Gooding did testify that he visited with Curtright 

concerning the acquisition of Greb X-Ray by Picker-International, 

he also testified that their discussions "never got beyond the 

fencing and discussions and the romance and good things." (R., 

Supp. Vol. X at p. 24). Furthermore, Gooding testified that: he 

did not have any specific recollection of discussing specific 

purchase terms with Curtright; in order to ascertain the appraised 

value of Greb X-Ray he would have sent his own accountants and 

evaluators to determine Greb X-Ray's book value and fair market 

value but he never sent them; and although he would, in the normal 

course of matters, have asked Curtright for Greb X-Ray's profit 

and loss statements, he did not recall doing so in this case. 

Under these circumstances, we hold that the district court's 

finding that "there is no credible evidence which would show" the 

existence of other prospective buyers for Greb X-Ray in the mid1980's was not clearly erroneous. 

VI. 

Appellants contend that the district erred in granting 

summary judgment in favor of UMB on Count II. In reviewing a 

grant of summary judgment, we apply the same standard applied by 

the district court under Rule 56(c) of the Federal Rules of Civil 

Procedure. Osgood v. State Farm Mutual 

Company, 848 F.2d 141, 143 (10th Cir. 1988). 

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Automobile 

We will 

Insurance 

affirm a 

Appellate Case: 90-3283 Document: 010110096843 Date Filed: 11/04/1991 Page: 20 
grant of summary judgment if it is clear from the record that 

there are no genuine issues of material fact and the defendants 

are entitled to judgment as a matter of law. Willner v. Budig, 

848 F.2d 1032, 1033-34 (10th Cir. 1988), cert. denied, 488 U.S. 

1031 ( 1988). 

In Count II, appellants alleged that Greb X-Ray, Curtright, 

and UMB had violated§ 1106 by participating in a conflict of 

interest. Appellants alleged that UMB "was in a conflict of 

interest situation due to its simultaneous roles as a fiduciary to 

the Plan Beneficiaries . and as a secured lender to Greb X-Ray 

II (R., Vol. I, Tab 4 at p. 5). Appellants also alleged 

that "Greb and Bank knew or should have known of Curtright's 

improper motives in acquiring the Greb stock," that the stock 

should have been "sold as soon as possible and converted to 

liquid assets that could be prudently invested for the benefit of 

the Plan participants." Id. 

In granting summary judgment in favor of UMB, the court 

found: 

Nor did the Bank's purchase as plan trustee of Greb 

stock, while also acting as a secured creditor of Greb, 

constitute a prohibited transaction. Brock v. Citizens 

Bank of Clovis, 841 F.2d 344 (10th Cir. 1988), and 

section 406(a) of ERISA control. The dual role of which 

plaintiffs complain is not enumerated as a prohibited 

transaction under section 406(a)(l). Plaintiffs ask the 

court to imply a violation of ERISA in the Bank's 

alleged 'conflict of interest.' Such action by the 

court would be directly contrary to the Tenth Circuit 

Command in Brock. '[U]nless the act complained of falls 

within the specific list of dealings proscribed by 

section 1106 ... , the transaction does not constitute 

a per se violation of ERISA.' Brock, 841 F.2d at 347. 

The Bank's dual capacity was not a per se violation of 

section 406 of ERISA. 

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Plaintiffs are correct in pointing out that Brock 

holds that absence of a per se violation under section 

406 does not automatically mean that defendant has not 

violated ERISA. Id. at 347. However, plaintiff is able 

to point to no other competent authority which might 

indicate that defendant's dual status, standing alone, 

constitutes a conflict of interest .... The court 

will not create a prohibited transaction and conflict of 

interest where Congress and precedent have not indicated 

one; the court further finds no compelling policy 

reasons for determining a conflict of interest exists in 

this fact situation. 

(R., Vol. V, Tab 119 at pp. 13-14). 

Thereafter, the appellants filed a motion to reconsider. In 

affirming its prior order granting summary judgement in favor or 

UMB, the district court found: 

Plaintiffs contended that the Bank participated in a 

prohibited transaction by becoming a secured creditor of 

Greb X-Ray at the same time it acted as trustee for the 

Greb ESOP. The court previously held ... that this 

set of facts presented no apparent conflict of interest 

Plaintiffs argue that the court's previous 

determination was in error; they cite the statutory 

language found at 29 u.s.c. § 1106(b)(2) which states: 

A fiduciary with respect to a plan shall 

not in his individual or in any other 

capacity act in any transaction involving the 

plan on behalf of a party (or represent a 

party) whose interests are adverse to the 

interests of the plan or the interests of its 

participants or beneficiaries. 

Plaintiffs reason that this language prohibits the Bank 

from acting on both sides of a loan transaction. They 

also cite the case of Cutaiar v. Marshall, 590 F.2d 523 

(3rd 1979), in which the third circuit adopted the 

position of the Secretary of Labor that a borrower and 

a lender in the same transaction are always 'adverse' 

within the meaning of Section 406(b)(2) of ... ERISA. 

While section 406 of ERISA may always prohibit the 

trustee from acting on both sides of a loan transaction, 

that simply did not happen here. The Bank acted as a 

lender to Greb X-Ray Company, not to the Greb X-Ray 

ESOP. This is not the sort of self-dealing which the 

Cutaiar case or the language of section 406 addresses. 

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Again the court can find no authority which would hold 

that the Bank's dual position as secured creditor for 

Greb X-Ray Company and trustee for the Greb X-Ray ESOP 

constituted a conflict of interest. Therefore the 

court's previous order as to Count II will remain. 

(R., Vol. VII, Tab 137 at pp. 3-4). 

Appellants contend that the district court's order granting 

summary judgment should be reversed because: the district court 

"failed to consider" Cutaiar v. Marshall; the ruling in Cutaiar 

that § 1106(b)(2) prohibits transactions that are adverse in a 

technical sense irrespective of whether actual fiduciary 

misconduct or harm to the beneficiaries can be demonstrated, is 

appropriate here; and Brock v. Citizens Bank of Clovis does not 

prevent a finding of an ERISA violation in this case. Appellants 

also argue that this court should "announce a rule of law that an 

ESOP trustee cannot be simultaneously a major secured creditor of 

the sponsoring company." (Brief of Appellants at p. 46). 

contentions are individually and collectively without merit. 

These 

Appellants' allegations notwithstanding, the district did 

consider Cutaiar, and properly distinguished it, in disposing of 

appellants' motion for reconsideration. The district court also 

correctly applied our holding in Brock "that unless the act 

complained of falls within the specific list of dealings 

proscribed by§ 1106 ... the transaction does not constitute a 

per se violation of ERISA." 

We will not adopt appellants' suggestion that we announce a 

rule of law that an employee stock ownership plan trustee cannot 

serve simultaneously as major secured creditor of the sponsoring 

company. We agree with the district court's observation that 

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( I I ,,, 

"[t]he court will not create a prohibited transaction and conflict 

of interest where Congress and precedent have not indicated one." 

(R., Vol. V, Tab 119 at p. 14.) 

Inasmuch as appellants have failed to establish any genuine 

issues of material facts or that UMB was not entitled to summary 

judgment as a matter of law, we hold that the court did not err in 

granting summary judgment in favor of UMB on Count II. 

VII. 

Appellants contend that the payment of a portion of UMB's 

attorney fees incurred in the defense of this action, out of ESOP 

assets, was a prohibited transaction. Specifically, appellants 

contend that such payments were not "reasonable expenses of 

administering the plan" under either§§ 1103 or 1104. 

Inasmuch as this allegation of error was not presented to the 

district court, we will not consider it for the first time on 

appeal. Burnette v. Dresser Industries, Inc., supra. Moreover, 

Article X, Section 6 of the ESOP specifically provides that "all 

reasonable costs, charges and expenses incurred by the Trustee(s) 

in connection with its administration of the Trust Fund, including 

fees for legal services rendered to the Trustee(s) . . may be 

paid by the Company, but if not paid by the Company shall be paid 

from the Trust Fund." 

We AFFIRM. 

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