FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

JACLYN SANTOMENNO; KAREN 

POLEY; BARBARA POLEY, 

individually and on behalf of 

Employee Retirement Income 

Security Act of 1974, etc.; as an 

investor in the Lommis Sayles 

Investment Grade Bond Ret. Opt. 

and the First American Mid Cap 

Growth Opportunities Inv. Opt., etc.; 

as an investor of Vanguard Target 

Ret.,

Plaintiffs-Appellees,

v.

TRANSAMERICA LIFE INSURANCE 

COMPANY; TRANSAMERICA 

INVESTMENT MANAGEMENT, LLC;

TRANSAMERICA ASSET 

MANAGEMENT, INC.,

Defendants-Appellants.

No. 16-56418

D.C. No.

2:12-cv-02782-

DDP-MAN

OPINION

Appeal from the United States District Court

for the Central District of California

Dean D. Pregerson, District Judge, Presiding

Argued and Submitted November 17, 2017

Pasadena, California
2 SANTOMENNO V. TRANSAMERICA LIC

Filed February 23, 2018

Before: Jacqueline H. Nguyen and Andrew D. Hurwitz, 

Circuit Judges, and Richard Seeborg,* District Judge.

Opinion by Judge Hurwitz

SUMMARY**

Employee Retirement Income Security Act

The panel (1) reversed the district court’s order denying 

defendants’ motion to dismiss an ERISA case alleging 

breach of fiduciary duties in connection with a retirement 

plan, and (2) vacated the district court’s subsequent class 

certification orders.

The district court held that a plan service provider 

breached its fiduciary duties to plan beneficiaries first when 

negotiating with an employer about providing services to the 

plan and later when withdrawing predetermined fees from 

plan funds. 

An employer that forms an ERISA plan is a statutory 

fiduciary, and a plan service provider becomes a functional 

fiduciary under certain circumstances. 

 * The Honorable Richard Seeborg, United States District Judge for 

the Northern District of California, sitting by designation.

** This summary constitutes no part of the opinion of the court. It 

has been prepared by court staff for the convenience of the reader.
SANTOMENNO V. TRANSAMERICA LIC 3

Joining other circuits, the panel held that a plan 

administrator is not an ERISA fiduciary when negotiating its 

compensation with a prospective customer. As to alleged 

breaches after the defendant became a plan service provider, 

the panel held that the defendant was not a fiduciary with 

respect to its receipt of revenue sharing payments from 

investment managers because the payments were fully 

disclosed before the provider agreements were signed and 

did not come from plan assets. Agreeing with other circuits, 

the panel held that defendant also was not a fiduciary with 

respect to its withdrawal of preset fees from plan funds. The 

panel concluded that when a service provider’s definitively 

calculable and nondiscretionary compensation is clearly set 

forth in a contract with the fiduciary-employer, collection of 

fees out of plan funds in strict adherence to that contractual 

term is not a breach of the provider’s fiduciary duty.

The panel remanded with instructions to the district court 

to dismiss the complaint.

COUNSEL

Brian D. Boyle (argued), Shannon Barrett, and Anton 

Metlitsky, O’Melveny & Myers LLP, Washington, D.C.; 

Catalina J. Vergara and Christopher B. Craig, O’Melveny & 

Myers LLP, Los Angeles, California; for DefendantsAppellants.

Arnold C. Lakind (argued) and Stephen Skillman,

Szaferman Lakind Blumstein & Blader P.C., Lawrenceville, 

New Jersey; Lynn Lincoln Sarko, Derek W. Loeser, Michael 

D. Woerner, and Gretchen S. Obrist, Keller Rohrback LLP, 

Seattle, Washington; for Plaintiffs-Appellees.
4 SANTOMENNO V. TRANSAMERICA LIC

Eric S. Mattson and Daniel R. Thies, Sidley Austin LLP, 

Chicago, Illinois; Lisa Tate, Vice President, Litigation & 

Associate General Counsel, American Council of Life 

Insurers, Washington, D.C.; Janet M. Jacobson, American 

Benefits Council, Washington, D.C.; Kate Comerford Todd 

and Janet Galeria, U.S. Chamber Litigation Center, 

Washington, D.C.; for Amici Curiae American Council of 

Life Insurers, American Benefits Council, and Chamber of 

Commerce of the United States of America.

Mary Ellen Signorille and William Alvarado Rivera, AARP 

Foundation Litigation, Washington, D.C., for Amici Curiae 

AARP and AARP Foundation.

OPINION

HURWITZ, Circuit Judge:

The Employee Retirement Income Security Act of 1974 

(“ERISA”), Pub. L. 93-406, 88 Stat. 829 (codified at 

29 U.S.C. § 1001 et seq.), imposes fiduciary duties on 

various parties in connection with retirement plans. This 

case turns on when and under what circumstances those 

duties attach. The district court found that a provider 

breached its fiduciary duties to plan beneficiaries first when 

negotiating with an employer about providing services to the 

plan and later when withdrawing predetermined fees from 

plan funds. The court accordingly denied defendants’ 

motion to dismiss and certified three plaintiff classes. We 

disagree and reverse.
SANTOMENNO V. TRANSAMERICA LIC 5

I. Background

A. TLIC’s Relationship with 401(k) Plans

The plaintiffs are members of employer-supported, 

defined-contribution 401(k) plans governed by ERISA. 

29 U.S.C. § 1002(34). Because the daily administration of 

the plans often requires particularized expertise, employers 

commonly contract with third-party administrators to 

operate the plans.

Plaintiffs’ employers contracted with Transamerica Life 

Insurance Company (“TLIC”) to manage and operate their 

retirement plans. Each employer entered into an Application 

and Agreement for Services (“Services Agreement”) and a 

Group Annuity Contract (“GAC”) with TLIC. From a list of 

potential investment options provided by TLIC in the GAC, 

the employers selected those offered to employees. The list 

of potential investments includes several advised and 

managed by TLIC affiliates, Transamerica Asset 

Management (“TAM”) and Transamerica Investment 

Management (“TIM”). Many of the investments offered in 

the GAC have multiple share classes, and TLIC did not 

always offer the lowest-priced share class. If an employer 

selects a “model line-up” of investment options, TLIC 

warrants that the bundle satisfies ERISA’s “[p]rudent man 

standard.” See 29 U.S.C. § 1104(a)(1).

After an employer chooses an investment bundle, TLIC 

structures each selected investment option (typically a 

mutual fund) as a separate account. The contributions of all 

plan members choosing the option are pooled in the separate 

account. Pooling “substantially reduces the mutual funds’ 

administrative, marketing, and service costs” because the 

fund effectively has only one investor—the separate 

account. Leimkuehler v. Am. United Life Ins. Co., 713 F.3d 
6 SANTOMENNO V. TRANSAMERICA LIC

905, 909 (7th Cir. 2013). Under the Service Agreement, 

TLIC tracks the investments of individual employees, 

among other administrative tasks.

TLIC’s compensation is set in the GAC as a fixed 

percentage of the assets in each separate account. The GAC 

contains a specific schedule of fees for each separate 

account. TLIC collects its fees on a daily basis by 

withdrawing them from the separate accounts.

The managers of the investment vehicles underlying the 

pooled accounts also charge fees. And, TLIC receives fees 

separately from these investment managers. See id. at 909 

(describing this practice). TLIC fully disclosed these 

arrangements.

B. Procedural Background

The complaint alleged that TLIC violated ERISA by 

(1) charging fees on the separate accounts in addition to 

those charged by the managers of the underlying 

investments; (2) charging an “Investment Management 

Charge” on the separate accounts; (3) receiving revenue 

sharing payments from managers of the underlying 

investments; (4) “failing to invest in the lowest priced share 

class of the mutual funds that underlie the separate account 

investment options that invest in mutual funds”; and 

(5) “negotiating the traditional lower fees that are associated 

with these investment options but retaining them rather than 

passing the savings along to Plaintiffs.” The complaint also 
SANTOMENNO V. TRANSAMERICA LIC 7

alleged that TIM and TAM “knowingly participat[ed]” in 

TLIC’s statutory violations.1

TLIC moved to dismiss, asserting that it did not violate 

ERISA because it was “not a fiduciary with respect to the 

terms of its own compensation.”2 The district court denied 

the motion, and subsequently certified three classes: (1) a 

“TLIC Prohibited Transaction Class,” which claimed “that 

TLIC’s practice of taking the IM/Admin fee from plan assets 

is [ ] a prohibited transaction” under 29 U.S.C. § 1106(b)(1); 

(2) a “TIM and TAM Prohibited Transactions” class, which 

claimed “that TLIC committed a prohibited transaction 

when it acted on behalf of or represented TIM and TAM, 

whose interests were adverse to the plans,” in violation of 

29 U.S.C. § 1106(b)(2); and (3) a “TIM and TAM Excessive 

Fees” class, which claimed “that TLIC breached three duties 

under 29 U.S.C. § 1104(a)(1)” by allowing TIM and TAM 

to charge fees higher than those charged to non-401(k) 

clients.

The district court certified its Rule 23 orders and the 

order denying the motion to dismiss for immediate appeal 

under 28 U.S.C. § 1292(b), and we accepted the appeal. We 

review orders granting or denying a motion to dismiss under 

Rule 12(b)(6) de novo, Camacho v. Bridgeport Fin. Inc., 

430 F.3d 1078, 1079 (9th Cir. 2005), and the class 

certification order for abuse of discretion, Pulaski & 

 1 The complaint also asserted other claims that were dismissed and 

are not at issue in this appeal.

2 Defendants attached exhibits to their motion to dismiss. Plaintiffs 

likewise attached exhibits to their opposition to the motion. The 

complaint refers to all documents discussed in this opinion, which were

incorporated in the complaint by reference. See Fed. R. Civ. P. 10(c); 

United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).
8 SANTOMENNO V. TRANSAMERICA LIC

Middleman, LLC v. Google, Inc., 802 F.3d 979, 984 (9th Cir. 

2015).

II. Discussion

A. Statutory Framework

“ERISA is . . . a comprehensive and reticulated statute, 

the product of a decade of congressional study of the 

Nation’s private employee benefit system.” Mertens v. 

Hewitt Assocs., 508 U.S. 248, 251 (1993) (internal quotation 

marks omitted). It seeks “to ensure that employees will not 

be left empty-handed” by imposing fiduciary duties on those 

responsible for management of retirement plans. Lockheed 

Corp. v. Spink, 517 U.S. 882, 887 (1996).

An employer that forms an ERISA plan is a statutory 

fiduciary. See 29 U.S.C. § 1102(a). But, a party not named 

in the plan also becomes a fiduciary if 

(i) he exercises any discretionary authority or 

discretionary control respecting management 

of such plan or exercises any authority or 

control respecting management or 

disposition of its assets, (ii) he renders 

investment advice for a fee or other 

compensation, direct or indirect, with respect 

to any moneys or other property of such plan, 

or has any authority or responsibility to do so, 

or (iii) he has any discretionary authority or 

discretionary responsibility in the 

administration of such plan.

29 U.S.C. § 1002(21)(A). Such non-named fiduciaries are 

sometimes referred to as “functional” fiduciaries, and plan 

service providers, such as TLIC, can under the named 
SANTOMENNO V. TRANSAMERICA LIC 9

circumstances become functional fiduciaries. See, e.g., IT 

Corp. v. Gen. Am. Life Ins. Co., 107 F.3d 1415, 1419–22 (9th 

Cir. 1997); Parker v. Bain, 68 F.3d 1131, 1139–40 (9th Cir. 

1995).

Whether named or functional, an ERISA fiduciary has a 

“duty of care with respect to management of existing [ ] 

funds, along with liability for a breach of that duty.” 

Lockheed Corp., 517 U.S. at 887. The fiduciary must 

“discharge his duties with respect to a plan solely in the 

interest of the participants and beneficiaries and [ ] for the 

exclusive purpose of [ ] providing benefits to participants 

and their beneficiaries.” 29 U.S.C § 1104(a)(1). The 

fiduciary also must conduct business on behalf of the plan 

“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.” 29 U.S.C. § 1104(a)(1)(B). Accordingly, the 

fiduciary cannot “deal with the assets of the plan in his own 

interest or for his own account” or “receive any 

consideration for his own personal account from any party 

dealing with such plan in connection with a transaction 

involving the assets of the plan.” 29 U.S.C. § 1106(b)(1),

(3).

B. Alleged Pre-Administration Breaches 

Plaintiffs alleged that TLIC violated its fiduciary duties 

by (1) charging administrative and investment fees on the 

separate accounts; (2) receiving revenue sharing payments 

from investment managers and “negotiating the traditional 

lower fees that are associated with [TLIC’s] investment 

options but retaining them rather than passing the savings 

along to Plaintiffs”; and (3) “failing to invest in the lowest 

priced share class of the mutual funds that underlie the 
10 SANTOMENNO V. TRANSAMERICA LIC

separate account investment options.” Because TLIC fully 

disclosed the fee arrangements and proposed investments in 

its negotiations with the employers, all of whom agreed to 

these matters before TLIC became a plan administrator, the 

issue is whether TLIC was a functional fiduciary during 

those negotiations.

Considering virtually identical claims to those raised 

here, three of our sister Circuits have held that a plan 

administrator is not an ERISA fiduciary when negotiating its 

compensation with a prospective customer. See McCaffree 

Fin. Corp. v. Principal Life Ins. Co., 811 F.3d 998, 1003 (8th 

Cir. 2016); Santomenno ex. Rel John Hancock Tr. v. John 

Hancock Life Ins. Co. (U.S.A.), 768 F.3d 284, 293–95, 297 

(3d Cir. 2014); Hecker v. Deere & Co., 556 F.3d 575, 583–

84 (7th Cir. 2009). We agree.

Under two of the prongs of the functional fiduciary 

definition, 29 U.S.C. §§ 1002(21)(A)(i) and (iii), “[o]nly 

discretionary acts of plan . . . management trigger fiduciary 

duties.” Santomenno, 768 F.3d at 293 (second alteration in 

original) (quoting Edmonson v. Lincoln Nat’l Life Ins. Co., 

725 F.3d 406, 421–22 (3d Cir. 2013)). A service provider is 

plainly not involved in plan management when negotiating

its prospective fees or compiling a list of proposed 

investment options. Rather, at that stage “discretionary 

control over plan management lies . . . with the trustee, who 

decides whether to agree to the service provider’s terms.” 

Santomenno, 768 F.3d at 293; accord McCaffree Fin. Corp., 

811 F.3d at 1003 (“Because Principal did not owe plan 

participants a fiduciary duty while negotiating the fee terms 

with McCaffree, Principal could not have breached any such 

duty merely by charging the fees described in the contract 

that resulted from that bargaining process.”); Hecker, 

556 F.3d at 583 (“[A] service provider does not act as a 
SANTOMENNO V. TRANSAMERICA LIC 11

fiduciary with respect to the terms in the service agreement 

if it does not control the named fiduciary’s negotiation and 

approval of those terms.”). And, § 1002(A)(21)(ii) is 

similarly inapplicable, as TLIC was not rendering 

investment advice while negotiating to become the plan 

administrator.

The Supreme Court has stressed that the central inquiry 

is whether the party was acting as an ERISA fiduciary “when 

taking the action subject to complaint.” Pegram v. Herdrich, 

530 U.S. 211, 226 (2000). When negotiating with the 

employers, TLIC plainly did not exercise discretionary 

control over the plan, possess authority over its assets, render 

investment advice, nor have any discretionary authority in 

the administration of the plan. The district court believed 

that failing to assign a fiduciary duty to a service provider 

during negotiations with employers would allow the 

provider to “negotiate for a fee of 99% of each separate 

account and still be considered to be fulfilling its fiduciary 

duty of managing the separate account.” But, as the Third 

Circuit correctly noted, “any plan sponsor who agreed to a 

99% fee arrangement would itself be liable for breaching its 

fiduciary duty.” Santomenno, 768 F.3d at 295 n.6. The 

employer has the express duty under § 1104(a)(1)(A)(ii) of 

“defraying reasonable expenses of administering the plan,” 

and, absent some sort of conduct not alleged in plaintiffs’ 

complaint, claims that fully disclosed fee arrangements are 

unreasonable lie against the employer, not the service 

provider. Santomenno, 768 F.3d at 295 & n.6.3

 3 The district court also found that the negotiations between TLIC 

and the employers were not arm’s length because the real parties in 

interest—the plan beneficiaries—“are absent and vulnerable.” But, 
12 SANTOMENNO V. TRANSAMERICA LIC

Indeed, any other outcome would lead to absurd results. 

If service providers were fiduciaries while negotiating fees, 

they would have to promise that its fees were no higher than 

those of any competitor, rather than negotiate at arm’s length 

with an employer. And, an employer who knowingly agreed 

to a fee structure could nonetheless later sue to lower it, 

invoking the administrator’s fiduciary obligation. We agree 

with the Third Circuit that “a service provider owes no 

fiduciary duty with respect to the negotiation of its fee 

compensation” because “[n]othing prevented the trustees 

from rejecting [the provider’s] product and selecting another 

service provider; the choice was theirs.” Id. at 295 (internal 

quotation marks omitted); see also F.H. Krear & Co. v. 

Nineteen Named Trs., 810 F.2d 1250, 1259 (2d Cir. 1987) 

(holding that although a service provider may “become an 

ERISA fiduciary at some point after entering into the 

[c]ontracts, it plainly held no such status prior to the 

execution of the [c]ontracts”).4

For the same reason, TLIC did not have a fiduciary duty 

to provide plan beneficiaries with the option to invest in the 

lowest priced share class of each of the mutual funds that 

 

fiduciary duties attach to the employer precisely because the plan 

beneficiaries are absent from the negotiation.

4 Plaintiffs cite provisions in the GAC providing that the 

“Investment Management Charge may be withdrawn daily” and 

reserving “the right to change the Investment Management Charge or the 

Administrative Charge upon advance written notice to the 

Contractholder of at least 30 days.” But, TLIC could not withdraw funds 

or alter its fees until negotiations were successfully completed. And, it 

makes no difference to the plaintiffs whether the fees are withdrawn on 

a daily basis or otherwise; the fees accrue daily in any event. Moreover, 

plaintiffs have not alleged that TLIC ever changed its fees; indeed, if it 

did, the employer is free under the GAC to find another provider.
SANTOMENNO V. TRANSAMERICA LIC 13

underlie the separate investment options. See Leimkuehler, 

713 F.3d at 912 (“[S]tanding alone, the act of selecting both 

funds and their share classes for inclusion on a menu of 

investment options offered to 401(k) plan customers does 

not transform a provider of annuities into a functional 

fiduciary . . . .”). And, Plaintiffs’ contention that the revenue 

sharing payments violate TLIC’s fiduciary duty fails for the 

same reason—they were fully disclosed and agreed to by the 

fiduciary-employer before any fiduciary status attached. See

id. at 911–12 (quoting Hecker, 556 F.3d at 583) (noting that 

the employer has “the final say on which investment options 

will be included”).5

C. Alleged Breaches after TLIC Became a Plan Service 

Provider

Plaintiffs also allege that TLIC engaged in prohibited 

self-dealing after becoming a plan administrator by 

(1) receiving revenue sharing payments from investment 

managers; and (2) withdrawing its fees from the separate 

accounts. Because the district court found that TLIC 

breached fiduciary duties before the relevant agreements 

were signed, it did not fully explore these allegations.

The first contention is easily dismissed. TLIC is not a 

fiduciary with respect to the revenue sharing payments, 

 5 Plaintiffs argue that TLIC was a fiduciary when selecting the 

investment options because it retains the right to delete or substitute the 

funds the employer has selected for the Plan. But, there can be no breach 

of that duty absent deletion or substitution, which can only occur after 

the service provider is hired. Leimkuehler, 713 F.3d at 914. And, 

plaintiffs do not allege that TLIC ever exercised its discretion. Indeed, 

TLIC can only alter investment options upon six months’ notice, and the 

GAC allows the employer opportunity to terminate the contract if 

displeased with any change.
14 SANTOMENNO V. TRANSAMERICA LIC

because they were fully disclosed before the provider 

agreements were signed and do not come from plan assets. 

See Leimkuehler, 713 F.3d at 913–14.

The second contention requires more analysis. Plaintiffs 

argue that TLIC was a fiduciary because it “exercises any 

authority or control respecting management or disposition 

of” the pooled accounts. 29 U.S.C. § 1002(21)(A)(i); see IT 

Corp., 107 F.3d at 1421 (internal quotation marks omitted) 

(“‘Any’ control over disposition of plan money makes the 

person who has the control a fiduciary.”). As a fiduciary, 

plaintiffs argue, TLIC “dealt with the assets of the plan in 

[its] own interest” when withdrawing fees, and thus violated 

29 U.S.C. § 1106(b)(1). Plaintiffs rely heavily on Barboza 

v. California Association of Professional Firefighters, which 

held that a plan fiduciary engaged in prohibited self-dealing 

by withdrawing expenses and compensation from plan assets 

pursuant to its agreement with the employer-fiduciary. 

799 F.3d 1257, 1270 n.5 (9th Cir. 2015).

But, in Barboza the parties did not dispute that the 

service provider was an ERISA fiduciary and the panel so 

assumed without deciding. Id. at 1269. Thus, the critical, 

but narrow, question is whether TLIC was acting as a 

fiduciary when withdrawing precise, preset fees from the 

pooled accounts. We have never directly confronted that 

issue, but the Third Circuit has, finding the provider is not 

exercising fiduciary duties under precisely these facts. 

Danza v. Fidelity Mgmt. Tr. Co., 533 F. App’x 120, 126 (3d 

Cir. 2013). In Danza, the plaintiffs argued that Fidelity, the 

plan administrator, violated 29 U.S.C. § 1106(b) by “causing 

the plan to disburse $1,200 of plan assets to itself as 

compensation.” Id. The Third Circuit found no statutory 

violation because the plan administrator acted as “a fiduciary 

only for purposes of administering the plan, not for purposes 
SANTOMENNO V. TRANSAMERICA LIC 15

of negotiating or collecting its compensation.” Id. Thus, the 

court held that “[a] service provider cannot be held liable for 

merely accepting previously bargained-for fixed 

compensation that was not prohibited at the time of the 

bargain.” Id. The Sixth Circuit has reached an identical 

conclusion, finding no breach of fiduciary duty when a 

service provider simply withdraws “routine contractual 

fees” from ERISA plan accounts. McLemore v. Regions 

Bank, 682 F.3d 414, 424 (6th Cir. 2012).6

We agree. Notwithstanding the broad language of 

§ 1002(21)(A)(i), we suggested in IT Corp. that a depository 

of plan assets, whose ability to withdraw funds was governed 

by contract, might not be acting in a fiduciary capacity in all 

respects while holding plan assets. 107 F.3d at 1421–22. 

We later held that a depository was not a fiduciary because 

it performed “only ministerial services or administrative 

functions within a framework of policies, rules, and 

 6 See also Chi. Dist. Council of Carpenters Welfare Fund v. 

Caremark, Inc., 474 F.3d 463, 473 (7th Cir. 2007) (“Given that this 

scheme was the very deal for which Carpenters bargained at arms’

length, Caremark owed no fiduciary duty in this regard.”); Seaway Food 

Town, Inc. v. Med. Mut. of Ohio, 347 F.3d 610, 619 (6th Cir. 2003) 

(“[W]here parties enter into a contract terms at arm’s length and where 

the term confers on one party the unilateral right to retain funds as 

compensation for services rendered with respect to an ERISA plan, that 

party's adherence to the term does not give rise to ERISA fiduciary status 

unless the term authorizes the party to exercise discretion with respect to 

that right.”); Ed Miniat, Inc. v. Globe Life Ins. Grp., Inc., 805 F.2d 732, 

737 (7th Cir. 1986) (“[I]f a specific [contract] term . . . is bargained for 

at arm’s length, adherence to that term is not a breach of fiduciary 

duty.”); Schulist v. Blue Cross of Iowa, 717 F.2d 1127, 1132 (7th Cir. 

1983) (holding a plan service provider “was not a fiduciary under ERISA 

with respect to . . . its compensation as a provider of Plan benefits”). 

Although these cases arguably sweep more broadly than our holding 

today, they support our conclusion that no breach of fiduciary duty 

occurred in TLIC’s withdrawal of preset fees.
16 SANTOMENNO V. TRANSAMERICA LIC

procedures established by others.” Ariz. State Carpenters 

Pension Tr. Fund v. Citibank (Ariz.), 125 F.3d 715, 721–22 

(9th Cir. 1997). Similarly, at least with respect to 

withdrawing its formula-driven fee from the pooled 

accounts, TLIC’s actions were purely ministerial. See

McLemore, 682 F.3d at 424 (noting that plaintiffs did not 

allege “that Regions did anything other than collect 

contractually owed fees”).

The Supreme Court has instructed us to focus on the 

“threshold question” of whether a party “was performing a 

fiduciary function when taking the action subject to 

complaint.” Pegram, 530 U.S. at 226 (parentheses omitted). 

And, as we noted in Parker, “ERISA’s definition of 

‘fiduciary’ is functional rather than formal.” 68 F.3d at 1139. 

Here, the challenged action is the withdrawal of 

predetermined fees, not TLIC’s management of the pooled 

accounts. We agree with the Sixth Circuit that “[s]uch 

transactions amount to ‘control respecting management or 

disposition of [plan] assets,’ in only the hollowest sense of 

‘control.’” McLemore, 682 F.3d at 424 (second alteration in 

original) (quoting 29 U.S.C. § 1002(21)(A)).7

 We therefore 

hold that TLIC’s actions do not give rise to fiduciary liability 

under ERISA.

Our conclusion is buttressed by general trust law 

principles, which inform ERISA interpretation. See Varity 

Corp. v. Howe, 516 U.S. 489, 497 (1996). “The strict 

prohibitions against transactions by trustees involving 

conflicts between their fiduciary duties and personal 

 7 See also 29 C.F.R. § 2509.75-8 (Department of Labor regulation 

noting that a service provider is not a fiduciary when it operates “within 

a framework of policies, interpretations, rules, practices and procedures 

made by other persons”).
SANTOMENNO V. TRANSAMERICA LIC 17

interests do not apply to the trustee’s taking of reasonable 

compensation for services rendered as trustee.” Restatement 

(Third) of Trusts § 78, cmt. c(4). Similarly, the Uniform 

Trust Code excludes the “payment of reasonable 

compensation to the trustee” from the trustee’s duty of 

loyalty. Unif. Trust Code § 802(h)(2) (Unif. Law Comm’n 

2000); see also John H. Langbein, Questioning the Trust 

Law Duty of Loyalty: Sole Interest or Best Interest?, 

114 Yale L. J. 929, 939–41 (2005) (recognizing trustee 

compensation as an exception to the sole interest rule); 

Equitable Tr. Co. v. Gallagher, 102 A.2d 538, 545 (Del. 

1954) (“A trustee is permitted to acquire from his 

beneficiary a conveyance or release of interests in the corpus 

of the trust, provided that the beneficiary is sui juris . . . .”).

Our holding today is narrow. We simply conclude that 

when a service provider’s definitively calculable and 

nondiscretionary compensation is clearly set forth in a 

contract with the fiduciary-employer, collection of fees out 

of plan funds in strict adherence to that contractual term is 

not a breach of the provider’s fiduciary duty.8

 If plaintiffs 

had alleged that TLIC withdrew more than it was entitled to, 

or if TLIC’s fee were based on self-reported hours worked, 

or even if TLIC’s withdrawals involved expenses, this might 

well be a different case. Cf. IT Corp., 107 F.3d at 1417–18 

(finding that a service provider who “had checkwriting 

authority” to “pay all claims which it has determined to be 

 8 Plaintiffs assert that TLIC’s ability to change its fees creates 

discretion and, thus, fiduciary status. But plaintiffs did not allege that 

TLIC ever changed its fees. See Flanigan v. Gen. Elec. Co., 242 F.3d 

78, 87 (2d Cir. 2001) ([A] person . . . has [fiduciary] status only to the 

extent that he has or exercises the described authority or responsibility.”) 

(second and third alterations in original) (internal quotation marks 

omitted) (quoting F.H. Krear & Co., 810 at 1259).
18 SANTOMENNO V. TRANSAMERICA LIC

payable under the agreement” was an ERISA fiduciary). 

But, the complaint in this case makes no such claims, and 

therefore does not state a claim upon which relief can be 

granted.9

III. Conclusion

The district court’s order denying TLIC’s motion to 

dismiss is REVERSED, and we remand with instructions to 

the district court to dismiss the complaint. Because the 

district court should have dismissed the complaint, it is 

unnecessary for us to address its subsequent class 

certification orders, which we VACATE.

 9 Plaintiffs’ claims that TAM and TIM knowingly participated in a 

breach of fiduciary duty necessarily also fail.