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

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 13, 2013 Decided January 7, 2014

No. 12-7092

DENISE M. CLARK,

APPELLANT

v.

FEDER SEMO AND BARD, P.C., ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:07-cv-00470)

Stephen R. Bruce argued the cause for appellant. With him 

on the brief was Allison C. Pienta.

Jason H. Ehrenberg argued the cause and filed the brief 

for appellees. James C. Bailey entered an appearance.

Before: ROGERS, TATEL, and GRIFFITH, Circuit Judges.

GRIFFITH, Circuit Judge: In 2005, the Washington, D.C.

law firm of Feder Semo closed its doors and terminated its 

retirement plan. Appellant Denise Clark was an attorney at the 

law firm for almost a decade and participated in the plan. 

Unfortunately, when the plan was terminated, there were not 

enough assets to satisfy all of its obligations. Dissatisfied with 

USCA Case #12-7092 Document #1473801 Filed: 01/07/2014 Page 1 of 9
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the amount of money that came her way, Clark sued, alleging

that decisions made by Joseph Semo and Howard Bard (the law 

firm’s directors who administered the retirement plan)

breached their fiduciary duties under the Employee Retirement 

Income Security Act of 1974 (ERISA). The district court 

rejected all of Clark’s claims, and we affirm its judgment and 

reasoning. We think, however, that two issues merit further 

discussion. 

I

There was enough money in the retirement plan at 

termination for Semo and Bard to distribute $229,949 to firm 

founder Gerald Feder. Clark argues this violated § 401(a)(4) of 

the Internal Revenue Code, which prohibits payments that 

favor highly compensated employees. The district court 

properly concluded that there is no cause of action under 

ERISA for a breach of § 401(a)(4), relying upon decisions of 

other circuits.1 But neither the district court nor any of those 

decisions addressed the particular statutory argument advanced 

by Clark. We write to explain its flaws. 

Section 401(a)(4) provides that retirement plans may lose 

their tax-favored status if “the contributions or benefits 

provided under the plan . . . discriminate in favor of highly 

compensated employees.” 26 U.S.C. § 401(a)(4). It may well 

be that the distribution to Feder was discriminatory, but Clark 

doesn’t seek to disqualify the plan; she seeks relief under 

ERISA. And here we must be cautious because the Supreme 

Court has repeatedly warned courts against permitting suits to 

 1 See Reklau v. Merchs. Nat’l Corp., 808 F.2d 628, 631 (7th 

Cir. 1986) (violations of § 401(a)(4) not actionable); Stamper v. 

Total Petroleum, Inc. Ret. Plan, 188 F.3d 1233, 1238-39 (10th Cir. 

1999) (violations of § 401(a)(25) not actionable).

USCA Case #12-7092 Document #1473801 Filed: 01/07/2014 Page 2 of 9
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proceed under ERISA based on novel causes of action not 

expressly authorized by the text of the statute. See Great-West

Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 209 (2002)

(“ERISA is a comprehensive . . . [statute that is] the product of 

a decade of congressional study of the Nation’s private 

employee benefit system,” and courts should avoid “extending 

remedies not specifically authorized by its text.” (internal 

quotation marks omitted)); see also Harris Trust & Sav. Bank

v. Salomon Smith Barney Inc., 530 U.S. 238, 246-47 (2000).

Clark suggests that express authorization for her claim is 

found in 29 U.S.C. § 1344, a provision of ERISA that sets forth 

general rules governing the allocation of the assets of a

retirement plan upon termination. She points to a portion of 

§ 1344 that authorizes the Secretary of the Treasury to step in 

and override an application of those general rules that would 

violate § 401(a)(4).

2 According to Clark, this authority for the 

Secretary to intervene into the workings of a plan also imposes 

upon a fiduciary the duty to avoid the discriminatory 

distributions barred by § 401(a)(4). But Clark never tells us 

how authority for the Secretary to intervene becomes the 

source of a duty for a plan fiduciary. She does not because she 

cannot. Section 1344 authorizes the Secretary of the Treasury 

to take action to prevent a plan from losing tax benefits, but 

says nothing at all about what a fiduciary may or may not do

about distributions at termination. As Clark vaguely suggests, 

general principles of fiduciary law imported into ERISA may 

 2 See 29 U.S.C. § 1344(b)(5) (“If the Secretary of the Treasury 

determines that the allocation made pursuant to this section (without 

regard to this paragraph) results in discrimination prohibited by 

section 401(a)(4) of title 26 then, if required to prevent the 

disqualification of the plan (or any trust under the plan) under section 

401(a) or 403(a) of title 26, the assets allocated under [various 

subsections] shall be reallocated to the extent necessary to avoid such 

discrimination.”). 

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set bounds on the distributions Semo and Bard authorized, but 

Clark’s argument is based upon § 401(a)(4), which is not the 

source of any such limits. Section 1344’s reference to

§ 401(a)(4) stands in contrast to other ERISA provisions that 

use unequivocal language to describe the duties of plan 

fiduciaries. See, e.g., 29 U.S.C. § 1106(a)(1) (“A fiduciary 

with respect to a plan shall not cause the plan to engage in a 

transaction . . . [that] constitutes a direct or indirect . . . sale or 

exchange, or leasing, of any property between the plan and a 

party in interest . . . .”); id. § 1106(b) (“A fiduciary with respect 

to a plan shall not . . . deal with the assets of the plan in his own 

interest or for his own account . . . .”); id. § 1104(a)(1)(B) (“[A]

fiduciary shall discharge his duties with respect to a plan . . . by 

diversifying the investments of the plan so as to minimize the 

risk of large losses . . . .”).

Furthermore, the terms of § 1344 operate only “[i]f the 

Secretary of the Treasury determines that” applying its 

allocation rules unfairly favors the highly compensated. 29 

U.S.C. § 1344(b)(5). Clark suggests the Secretary made that 

determination when he mandated in a treasury regulation that 

retirement plans must comply with § 401(a)(4). See Treas. 

Reg. § 1.401(a)(4)-5(b)(2) (retirement plans must include a 

provision limiting distributions upon termination to “a benefit 

that is nondiscriminatory under section 401(a)(4)”). But surely 

this is not the type of particularized determination

contemplated by § 1344. That determination comes only in the 

wake of a finding by the Secretary that the application of the

allocation rules to the distribution of the assets of a specific 

retirement plan will violate the rule against discrimination. 

Nothing like that has happened here.

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II

In calculating Clark’s distribution, Semo and Bard placed 

her in a group of employees whose share was based on the 

firm’s annual contribution to the retirement plan of 10% of 

their salary. Clark objected and asked that she be reassigned to 

the group whose share was based on the firm’s annual 

contribution of 20% of their salary. Relying upon the advice of 

the plan’s lawyer, William Anspach, Semo and Bard denied 

her request. Clark argued before the district court that Bard and 

Semo were not entitled to rely on that advice because it was 

based on a mistake of fact that they would have discovered had 

they undertaken an independent investigation. The district 

court properly concluded that relying on the advice of counsel

was justified under the circumstances, but cited no authority in 

support. We write to clarify when ERISA permits plan 

fiduciaries to act in reliance on the advice of counsel. 

Prior to ERISA’s passage, retirement plans were governed 

in large part by the common law of trusts. See Varity Corp. v. 

Howe, 516 U.S. 489, 496 (1996). A fundamental principle of 

that law holds trustees to the standard of conduct of an 

objectively prudent person. See id.; Fink v. Nat’l Sav. & Trust 

Co., 772 F.2d 951, 955 (D.C. Cir. 1985); RESTATEMENT 

(THIRD) OF TRUSTS § 77 & cmt. a (2005). Over time, a body of 

case law developed that fleshed out the meaning of that 

standard. In ERISA, Congress provided that a plan fiduciary 

must act “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.” 29 

U.S.C. § 1104(a)(1)(B). Doing so, ERISA adopted much of 

what the common law had, over time, come to require of 

fiduciaries. As the Supreme Court described it, “rather than 

explicitly enumerating all of the powers and duties of trustees 

and other fiduciaries, Congress invoked the common law of 

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trusts to define the general scope of their authority and 

responsibility.” Cent. States, Se. & Sw. Areas Pension Fund v. 

Cent. Transp., Inc., 472 U.S. 559, 570 (1985); see also

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110 

(1989) (“ERISA abounds with the language and terminology 

of trust law. ERISA’s legislative history confirms that the 

Act’s fiduciary responsibility provisions codif[y] and mak[e] 

applicable to [ERISA] fiduciaries certain principles developed 

in the evolution of the law of trusts.” (alterations in original) 

(citations omitted) (internal quotation marks omitted)). 

Even so, the Supreme Court has cautioned that although 

trust law principles developed at common law are a good

“starting point” for determining a fiduciary’s duties under 

ERISA, Congress may not have adopted them all. See Varity 

Corp., 516 U.S. at 497; see also Harris Trust & Sav. Bank, 530 

U.S. at 250. Courts must therefore be on the lookout for 

instances in which ERISA departs from the common law, 

sometimes requiring more, other times requiring less, of 

fiduciaries. See Varity Corp., 516 U.S. at 497. 

In determining the “starting point,” the Supreme Court has 

relied on sources such as the Restatement of Trusts, see, e.g., 

Cent. States, 472 U.S. at 570 n.11; see also Eddy v. Colonial 

Life Ins. Co. of Am., 919 F.2d 747, 750 (D.C. Cir. 1990), and 

well-known treatises on the law of trusts, including that of 

Professor Bogert, see, e.g., Varity Corp., 516 U.S. at 498. 

Following the Supreme Court’s example, our review of those 

sources shows that it is a principle firmly rooted and founded in 

the common law of trusts that a fiduciary may rely on the 

advice of counsel when reasonably justified under the 

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circumstances.

3 The propriety of that reliance must be judged 

based on the circumstances at the time of the challenged 

decision. 4 The fundamental question is always whether a 

prudent trustee in those particular circumstances would have 

acted in reliance on counsel’s advice. Of course, reliance 

would be improper if there were significant reasons to doubt 

the course counsel suggested.

5

Because nothing in ERISA suggests that Congress 

displaced this common law principle, we conclude that 

ERISA’s adoption of the common law’s standard of fiduciary 

care in § 1104(a)(1)(B) permits prudent fiduciaries making 

important decisions to rely on the advice of counsel in 

appropriate circumstances. We join the other circuits that have 

indicated that ERISA permits such reliance.

6

Following a six-day bench trial, the district court 

concluded that Semo and Bard had rightfully relied upon the 

view of Anspach that Clark had been properly placed in the 

10% group. Our review of such a fact-intensive, case-specific

determination is necessarily deferential. See Salve Regina Coll. 

v. Russell, 499 U.S. 225, 233 (1991) (explaining that “probing 

appellate scrutiny” of a case-specific determination is unlikely

 3 See RESTATEMENT (THIRD) OF TRUSTS § 77 cmt. b (2005); 

id. cmt. b(2); BOGERT ET AL., THE LAW OF TRUSTS AND TRUSTEES

§ 541 (2013).

4 See RESTATEMENT (THIRD) OF TRUSTS § 77 cmt. a; BOGERT

ET AL., supra note 3, § 541. 

5 See RESTATEMENT (THIRD) OF TRUSTS § 77 cmt. b(2); 

BOGERT ET AL., supra note 3, § 541 & n.57.

6 See Howard v. Shay, 100 F.3d 1484, 1489 (9th Cir. 1996); 

Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915, 918 (8th Cir. 

1994); cf. Bussian v. RJR Nabisco, Inc., 223 F.3d 286, 300-01 (5th 

Cir. 2000); Gregg v. Transp. Workers of Am. Int’l, 343 F.3d 833, 841 

(6th Cir. 2003).

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to add “to the clarity of legal doctrine”). Ample evidence 

supported the district court’s conclusion. 

Prior to advising Semo and Bard about Clark’s request, 

Anspach consulted what he believed to be the relevant 

documents. Based on his review, he concluded that Clark and 

Bard should be assigned to the same group. Both had started 

work at the firm around the same time, and both made partner 

in the same year. And Bard, Anspach concluded, had always 

been in the 10% group, proof sufficient that Clark belonged 

there too. In recommending to Semo and Bard that Clark be 

placed in that group, Anspach forwarded to them a memo 

written three months after Clark made partner that showed that 

she and Bard were in the 10% group. Bard had always thought 

that he and Clark had been in the 10% group during all the 

years they had worked together at the firm. In Bard’s mind, the 

memo confirmed this view. The memo also reinforced the 

shared belief of Semo and Bard that the 20% group was 

reserved for Semo, who was more senior than Clark and Bard.

As it turns out, Anspach was mostly right but partly 

wrong. He was right that Clark and Bard had both been in the 

10% group for most of their time at the firm. But he was wrong 

in reporting that Clark and Bard had been in the 10% group for 

all of their years at the firm. For some reason not offered by 

any of the parties, Bard was placed in the 20% group for a 

single year in 2001, though neither Bard nor Semo had 

requested, approved, or even known of the assignment. 

Clark argues that the district court erred in concluding that 

Semo and Bard were entitled to rely on Anspach’s

recommendation. Although she never makes clear why, she 

seems to assume that Semo and Bard had an absolute duty to 

look behind Anspach’s advice and conduct their own 

investigation to see if it was grounded in fact. But, as we have 

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already established, Clark is wrong to the extent she suggests

fiduciaries have such an unyielding obligation. Clark’s 

argument turns on the fact that Anspach’s advice was based, in 

part, on a mistake about who was grouped where in 2001. Even 

so, Semo and Bard were justified in relying on Anspach’s 

advice. At the time it was given, they had no reason to know or 

even suspect Anspach’s mistake. He had been the plan’s 

counsel since the early 1990s. There was no reason to think he 

was unfamiliar with its details. His recommendation appeared 

to be based on a reasonable investigation, was accompanied by

supporting documentation, and was consistent with the 

understanding that Semo and Bard had about the way the

plan’s groups were structured. Nothing about Anspach’s

advice would have suggested to Semo and Bard the need to 

investigate further. 

III

For the reasons stated above, and for the reasons stated in 

the district court’s opinions, we affirm. 

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