UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

RAYMOND J. SWEENEY, on behalf of

himself; RISK ENTERPRISE

MANAGEMENT LIMITED, formerly

known as The Home Insurance

Company,

Plaintiffs-Appellants,

v.

ARTHUR R. MOORE; ALAN J.

CHERMAK; ROBERT D. CUSTER;

No. 96-1699

ROBERT J. FANNING; CLINTON O.

GOWAN, JR.; MATTHEW B.

HERNANDEZ; MARC E. LEBLANC;

CARL A. MOORE; RONALD J.

PALMERICK; BRUCE J. STOCKWELL;

SHEET METAL WORKERS NATIONAL

PENSION FUND,

Defendants-Appellees.

SECRETARY OF LABOR,

Amicus Curiae.
RAYMOND J. SWEENEY, on behalf of

himself; RISK ENTERPRISE

MANAGEMENT LIMITED, formerly

known as The Home Insurance

Company,

Plaintiffs-Appellees,

v.

ARTHUR R. MOORE; ALAN J.

CHERMAK; ROBERT D. CUSTER;

No. 96-1732

ROBERT J. FANNING; CLINTON O.

GOWAN, JR.; MATTHEW B.

HERNANDEZ; MARC E. LEBLANC;

CARL A. MOORE; RONALD J.

PALMERICK; BRUCE J. STOCKWELL;

SHEET METAL WORKERS NATIONAL

PENSION FUND,

Defendants-Appellants.

SECRETARY OF LABOR,

Amicus Curiae.

Appeals from the United States District Court

for the Eastern District of Virginia, at Alexandria.

Leonie M. Brinkema, District Judge.

(CA-96-140-A)

Argued: May 6, 1997

Decided: July 18, 1997

Before HAMILTON and MOTZ, Circuit Judges, and

LEGG, United States District Judge for the

District of Maryland, sitting by designation.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

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COUNSEL

ARGUED: James J. McGuire, MAYER, BROWN & PLATT, New

York, New York, for Appellants. William W. Carrier III, TYDINGS

& ROSENBERG, L.L.P., Baltimore, Maryland, for Appellees. Elizabeth Hopkins, UNITED STATES DEPARTMENT OF LABOR,

Washington, D.C., for Amicus Curiae. ON BRIEF: Nicholas W.

Lobenthal, MAYER, BROWN & PLATT, New York, New York, for

Appellants. J. Hardin Marion, Lawrence J. Quinn, Jennifer C.

Holmes, TYDINGS & ROSENBERG, L.L.P., Baltimore, Maryland,

for Appellees. J. Davitt McAteer, Acting Solicitor of Labor, Allen H.

Feldman, Associate Solicitor for Special Appellate and Supreme

Court Litigation, UNITED STATES DEPARTMENT OF LABOR,

Washington, D.C., for Amicus Curiae.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

These appeals were taken from a Final Order issued by the United

States District Court for the Eastern District of Virginia on April 9,

1996, denying Raymond J. Sweeney's motion for summary judgment

and granting defendants' motion to dismiss. The trial court dismissed

Counts I, II, and III of Mr. Sweeney's Complaint without prejudice,

and it dismissed Counts IV, V, and VI with prejudice.

Mr. Sweeney filed an appeal on behalf of himself and his insurer,

Risk Enterprise Management, Ltd. In his appeal, Mr. Sweeney contends that the trial court erred by holding that he is not a fiduciary of

the Sheet Metal Workers' National Pension Fund ("Fund") and, therefore, not entitled to reimbursement of attorney's fees from the Fund.

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Defendants filed a cross-appeal, contending that all claims should

have been dismissed with prejudice.1

I.

This action arose from Mr. Sweeney's representation, in the late

1980s and early 1990s, of the Fund, which is an employee benefit

plan regulated by the Employee Retirement Income Security Act

("ERISA"), 29 U.S.C. § 1001 et seq. During that period, Fund chairman Edward J. Carlough, now deceased, squandered millions of Fund

dollars bankrolling an extravagant personal lifestyle for himself and

his girlfriend. Mr. Sweeney, Carlough's nephew, served as counsel to

the Fund and to the two trustee committees that, inter alia, purchased

a mansion and two private airplanes for Mr. Carlough's use. After Mr.

Carlough's questionable expenditures were exposed, participants and

trustees of the Fund filed lawsuits against several of the Fund's officials and attorneys, including Mr. Sweeney, to recover losses associated with these purchases.2

In the first lawsuit, Loonie v. Carlough et al. , Civil Action No. 93-

1569A (E.D.Va.), a participant -- on behalf of the Fund -- sued Mr.

Sweeney for breaching his alleged fiduciary duties to the Fund. The

district court dismissed the action, finding: (i) that Mr. Sweeney was

not a fiduciary, and (ii) that ERISA imposed no liability on nonfiduciaries. No appeal was taken.

In the second suit, Custer v. Sweeney, et al. , Civil Action No. 94-

910A (E.D.Va.), a trustee -- again on behalf of the Fund -- sued Mr.

Sweeney alleging breach of fiduciary duty. On September 30, 1994,

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1 The trial court dismissed Counts I, II, and III without prejudice,

allowing Mr. Sweeney to refile only if this Court, in the related case of

Custer v. Sweeney, et al., Civil Action No. 94-910A (E.D.Va.), were to

reverse the trial court and hold that Mr. Sweeney was a de facto fiduciary. Because this Court upheld the trial court's finding that Mr.

Sweeney was not a fiduciary, Custer, 89 F.3d 1156 (4th Cir. 1996), this

contingency can never come to pass. Accordingly, the basis for the

Fund's cross-appeal is extinguished.

2 On October 26, 1995, Mr. Sweeney pled guilty to making false statements in Fund documents in connection with his representation.

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the trial court granted Mr. Sweeney's motion to dismiss, finding that

"just being counsel to an ERISA plan" was not sufficient to establish

fiduciary status. (J.A. 330). The court, however, dismissed the Complaint without prejudice, granting the Fund leave to amend if it could

obtain additional facts to establish that Mr. Sweeney was a fiduciary.

The Fund subsequently filed an amended complaint in Custer

alleging that Mr. Sweeney, based on his control of the questionable

purchases, was a de facto fiduciary. Again, Mr. Sweeney argued that

he was not a fiduciary. The district court dismissed the Fund's

renewed fiduciary claims with prejudice, concluding that the attempt

to plead Mr. Sweeney's fiduciary status was "at best hopeless or at

worst contrived." (J.A. 340-41). The district court's decision was

affirmed by this Court on appeal. Custer v. Sweeney, et al., 89 F.3d

1156, 1163 (4th Cir. 1996).3

In February 1996, Mr. Sweeney filed this action against the Fund

and its trustees, seeking reimbursement for and advancement of attorneys' fees he incurred defending himself against these lawsuits. His

six-count complaint raised two state law contract claims (Counts IV

and VI) and four ERISA claims (Counts I, II, III, and V). In the

ERISA claims, Mr. Sweeney alleges that defendants violated the

Trust Agreement setting up the Fund and that the trustees breached

a fiduciary duty owed to him.

In his motion for summary judgment, Mr. Sweeney relied upon a

clause in the Trust Agreement providing that the Fund must advance

and reimburse attorney's fees to its fiduciaries when they are sued in

their fiduciary capacities. He claimed that, because the Fund had

charged that he was a fiduciary in its prior suits, the Trust Agreement

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3 In yet another action, Moore, et al. v. Sweeney, et al., Civil Action

No. CL941029, currently pending in the Circuit Court of the City of

Alexandria, Mr. Sweeney faces legal malpractice claims previously dismissed for lack of jurisdiction from the two federal cases, Loonie and

Custer. This state court action was stayed pending the outcome of the

Custer appeal, 89 F.3d 1156, and is now proceeding.

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required the Fund to pay his legal bills unless and until a court determined that he had breached his fiduciary duties. 4

In response, the Fund resisted Mr. Sweeney's motion for summary

judgment and also moved to dismiss the complaint pursuant to Fed.

R. Civ. P. 12(b)(6). The Fund argued that Mr. Sweeney was not entitled to attorneys' fees because, in both Loonie and Custer, Mr.

Sweeney had denied that he was a fiduciary, and the courts had

entered judgment in his favor on that basis. The Fund also argued

that, because its suits against Mr. Sweeney had alleged gross wrongdoing, paying his legal bills would violate various provisions of

ERISA.

The district court denied Mr. Sweeney's motion for summary judgment and granted the Fund's motion to dismiss. The court found that

the attorneys' fees provision of the Trust Agreement applied only to

fiduciaries. It held that the central issue was whether Mr. Sweeney

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4 Article IV, § 3p of the Trust Agreement reads:

As permitted by law, when and if a legal proceeding, government investigation or suit of any kind or nature is instituted

against one or more fiduciaries of the Fund, including, but not

limited to, the Trustees or the person designated by the Trustees

as the "Fund Administrator," in their individual capacities, arising out of their actions as fiduciaries or their service to the Fund,

said fiduciary(ies) may hire local counsel approved by the Fund

to represent them. In these circumstances, as permitted by law,

said legal counsel will be compensated by the Fund for such representation until a final court decision or a final government

agency decision if no court appeal is filed, finds that such fiduciary in his individual capacity (1) has breached his fiduciary

obligations under ERISA; (2) by doing so has caused a loss to

the Fund or has gained by use of Fund assets; and (3) is therefore

liable in his individual capacity for damages or to return any

profit occasioned by such breach to the Fund, complaining person, persons, entity, or entities. If the Fund expends money for

counsel pursuant to this paragraph, and the individual liability

described herein is so finally determined against one or more

fiduciaries, each individual found liable shall reimburse the Fund

for amounts expended for his counsel.

(J.A. 13).

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was a fiduciary and, therefore, entitled to invoke the provision.

Because Mr. Sweeney consistently had denied fiduciary status, and

because all courts ruling on the issue uniformly had agreed with him,

the district court concluded that Mr. Sweeney was not a fiduciary and

thus not entitled to payment of his attorneys' fees.

Accordingly, the trial court dismissed without prejudice Mr.

Sweeney's ERISA claims (Counts I, II, and III), subject to this

Court's review in Custer, 89 F.3d 1156. The district court dismissed

with prejudice Mr. Sweeney's state law claims (Counts IV and VI) as

preempted by ERISA and his claim for fiduciary breach (Count V) on

the ground that the Fund owed him no fiduciary duty. Mr. Sweeney

filed this appeal to contest the dismissal of Counts I, II, and III.5

II.

In his appeal, Mr. Sweeney contends that the district court erred.

He argues that each suit filed against him was authorized by the Fund,

and that each suit alleged that he served as a fiduciary of the Fund.

Mr. Sweeney argues that, by virtue of the plain Trust language, the

Fund must pay his legal bills unless and until a judicial finding is

made that he was engaged in wrongdoing.6 

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5 A district court's dismissal for failure to state a claim upon which

relief may be granted is reviewed de novo. Randall v. United States, 30

F.3d 518, 522 (4th Cir. 1994) (citing Schatz v. Rosenberg, 943 F.2d 485,

489 (4th Cir. 1991), cert. denied, 112 S. Ct. 1475 (1992)), cert. denied,

115 S.Ct. 1956 (1995).

6 To support his argument, Mr. Sweeney argues by analogy from liability insurance cases. Insurance policies typically include clauses requiring

the insurer to defend any lawsuit against the insured that is within the

scope of the policy. Generally, the insurer's "duty to defend" is triggered

by the facial allegations of the complaint rather than the insurer's assessment of the underlying facts. See Jenkins v. Montgomery Indus., Inc., 77

F.2d 740, 743-44 (4th Cir. 1996); Phoenix Mut. Life Ins. Co. v. Adams,

30 F.3d 554, 560-61 (4th Cir. 1994); Singer v. Black & Decker Corp.,

964 F.2d 1449, 1452-53 (4th Cir. 1992); Provident Life & Accident Ins.

Co. v. Waller, 906 F.2d 985, 992-94 (4th Cir.), cert. denied, 498 U.S. 982

(1990). By analogy, Mr. Sweeney contends that the Fund is obliged to

pay his legal bills because, in each of its prior complaints, the Fund

alleged that he was a fiduciary.

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Mr. Sweeney does not dispute that the Trust Agreement limits

advancement and reimbursement to fiduciaries. As plainly stated in

section 3p of the Agreement, when a suit is instituted "against one or

more fiduciaries of the Fund . . . arising out of their actions as fiduciaries . . . said fiduciary(ies)" may be reimbursed for legal expenses.

(J.A. 13). As a threshold matter, therefore, this Court must determine

whether Mr. Sweeney is a fiduciary.

Mr. Sweeney contends that the Fund should be bound by its

repeated allegations that he is a fiduciary. The Court is unpersuaded

by this argument. First, although in prior cases the Fund alleged that

Mr. Sweeney was a fiduciary, he repeatedly denied this categorization. Second, even here, Mr. Sweeney's own complaint never alleges

that he is a fiduciary. Third, the district and appellate courts considering the issue in Loonie and Custer uniformly concluded that Mr.

Sweeney was not a fiduciary, entering judgment in his favor on that

basis. Mr. Sweeney cannot deny that he is a fiduciary for purposes of

liability yet now contend that he is a fiduciary for purposes of reimbursement. In sum, the Court finds that Mr. Sweeney has not met the

threshold requirement for reimbursement and advancement of attorney's fees under the Trust Agreement.

Moreover, denying advancement does not threaten the underlying

goals of ERISA. The Court disagrees with Mr. Sweeney's contention

that a denial will encourage wasteful litigation and will discourage

qualified individuals from providing professional services to pension

plans. Mr. Sweeney was compensated for the legal services he provided to the Fund. There is no shortage of attorneys willing to perform this kind of legal work. Typically, professionals such as Mr.

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The Court finds this case law inapplicable in the ERISA context. The

relationship between an insurer and insured is strikingly different from

that of a Fund and its fiduciary. In the insurance context, the duty to

defend arises in a private contract between the parties. Mr. Sweeney,

however, was neither a party nor a third-party beneficiary to the Trust

Agreement. Moreover, insurers are not subject to the complex federal

regulations that govern pension funds, such as the duties to conserve plan

assets, to prevent waste, and to limit expenditures to reasonable and prudent activities that are in the best interest of plan participants.

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Sweeney can protect themselves from malpractice-type charges by

purchasing professional liability insurance. Section 3p of the Trust

Agreement was intended to protect fiduciaries such as trustees who

are not compensated for their services.

Accordingly, this Court concludes that the district court did not err

in finding that Mr. Sweeney was not a fiduciary and, therefore, was

not entitled to reimbursement or advancement of attorneys' fees under

the Trust Agreement.

III.

For the foregoing reasons, we affirm the judgment of the district

court.

AFFIRMED

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