Nos. 15-1380 and 15-1574 

__________________ 

IN THE UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

__________________ 

THOMAS E. PEREZ, Secretary of Labor, U.S. Department of Labor, 

 Plaintiff-Appellee, 

v. 

CYNTHIA HOLLOWAY and JAMES DOYLE, 

 Defendants-Appellants. 

__________________ 

On Appeal from the United States District Court 

for the District of New Jersey 

__________________ 

BRIEF FOR THE SECRETARY OF LABOR 

__________________ 

M. PATRICIA SMITH THOMAS TSO 

Solicitor of Labor Counsel for Appellate 

 and Special Litigation 

G. WILLIAM SCOTT MARCIA E. BOVE 

Associate Solicitor DAVID EDELI 

Plan Benefits Security Division Attorneys 

U.S. Department of Labor 

 200 Constitution Ave., N.W., N-4611 

 Washington, D.C. 20210 

(202) 693-5598
TABLE OF CONTENTS 

TABLE OF AUTHORITIES .................................................................................... ii 

STATEMENT REGARDING ORAL ARGUMENT ............................................... 1 

STATEMENT OF RELATED CASES AND PROCEEDINGS .............................. 1 

STATEMENT OF APPELLATE AND SUBJECT MATTER JURISDICTION ..... 1 

STATEMENT OF THE ISSUES............................................................................... 2 

STATEMENT OF THE FACTS ............................................................................... 2 

STANDARD OF REVIEW ..................................................................................... 11 

SUMMARY OF THE ARGUMENT ...................................................................... 12 

ARGUMENT ........................................................................................................... 14 

I. The District Court Correctly Ruled That All of the Amounts 

Employers Paid Were Plan Assets ...................................................... 14 

A. The district court correctly found that the governing plan 

 documents-the Trust Agreement and related enrollment 

 documents-gave the Fund a beneficial ownership interest 

 in participating employers' contributions ................................. 16 

B. The district court correctly considered all the participating 

 employers to be "co-employers" within the meaning of the 

 Trust Agreement ....................................................................... 17 

C. The district court correctly disregarded the "bogus" collective 

 bargaining agreements in considering the definition of plan 

 assets ......................................................................................... 20 

D. It was not clear error for the district court to rely on the 

 enrollment packet in its analysis of plan assets ........................ 23 
ii

TABLE OF CONTENTS-(continued) 

II. The District Court Correctly Ruled that Holloway Breached Her 

Fiduciary Duties as Trustee When She Failed to Prudently Manage 

The Fund and Did Nothing to Prevent the Diversion of its Assets ..... 28 

A. Holloway's Fiduciary Duties ..................................................... 28 

B. Holloway's Knowledge about the Scheme ............................... 30 

C. Holloway Failed to Protect the Fund ........................................ 32 

1. Holloway Failed to Establish Administrative 

Procedures ......................................................34 

2. Holloway Failed to Investigate the "The Scheme's " 

Red Flags.......................................................37 

 3. Holloway Resigned without Protecting the Plan 

 from Known Harm .......................................................... 39 

 4. Holloway is Liable as a Co-Fiduciary ............................ 42 

D. Holloway's Other Legal Arguments Are Without Merit .......... 44 

III. The District Court Correctly Ruled that Doyle Was a Functional 

 Fiduciary and Breached His Fiduciary Duties by Diverting Plan 

 Assets .................................................................................................. 45 

A. Doyle's Fiduciary Status ........................................................... 46 

B. Doyle's Breach of Fiduciary Duty ............................................ 52 

CONCLUSION ....................................................................................................... 54 

CERTIFICATE OF COMPLIANCE 

 CERTIFICATE OF SERVICE 
iii

TABLE OF AUTHORITIES 

Federal Cases: 

Alman v. Danin, 

801 F.2d 1 (1st Cir. 1986) .................................................................................... 19 

Arizona v. California, 

460 U.S. 605 (1983) ............................................................................................. 12 

Barker v. Am. Mobil Power Corp., 

64 F.3d 1397 (9th Cir. 1995) ......................................................................... 37, 39 

Bd. of Trustees of Bricklayers & Allied Craftsmen Local 6 of New Jersey Welfare 

Fund v. Wettlin Assocs., Inc., 

237 F.3d 270 (3d Cir. 2001) .................................................................... 46, 48, 50 

Chao v. Day, 

436 F.3d 234 (D.C. Cir. 2006) ....................................................................... 51, 52 

Chao v. Merino, 

452 F.3d 174 (2d Cir. 2006) .................................................................... 29, 35, 38 

Curtiss-Wright Corp. v. Schoonejongen, 

514 U.S. 73 (1995) ............................................................................................... 27 

David P. Coldesina, D.D.S. v. Estate of Simper, 

407 F.3d 1126 (10th Cir. 2005) ..................................................................... 49, 50 

Donovan v. Bierwirth, 

680 F.2d 263 (2d Cir. 1982) ................................................................................. 29 

Edmonson v. Lincoln Nat'l Life Ins. Co., 

725 F.3d 406 (3d Cir. 2013) ................................................................................. 15 

Einhorn v. M.L. Ruberton Const. Co., 

632 F.3d 89 (3d Cir. 2011) ................................................................................... 14 
iv

Federal Cases-(continued):

Fifth Third Bancorp v. Dudenhoeffer, 

134 S. Ct. 2459 (2014) ......................................................................................... 44 

Free v. Briody, 

732 F.2d 1331 (7th Cir. 1984) .............................................................................. 43 

Galgay v. Gangloff, 

677 F. Supp. 295 (M.D. Pa. 1987), aff'd, 

932 F.2d 959 (3d Cir. 1991) ................................................................................. 15 

Glaziers & Glassworkers Union Local No. 252 Annuity Fund v. Newbridge Secs., 

Inc., 

93 F.3d 1171 (3d Cir. 1996) .......................................................................... 39, 40 

Hawkeye Nat. Life Ins. Co. v. AVIS Indus. Corp., 

122 F.3d 490 (8th Cir. 1997) ................................................................................ 16 

In re Beck Indus., Inc., 

605 F.2d 624 (2d Cir. 1979) ................................................................................. 42 

In re Lemington Home for Aged, 

659 F.3d 282 (3d Cir. 2011) ................................................................................. 35 

In re Mushroom Transp. Co., Inc., 

382 F.3d at 345 ..................................................................................................... 26 

In re Niles, 

106 F.3d 1456 (9th Cir. 1997) ....................................................................... 44, 51 

In re Pittsburgh Rys. Co., 

117 F.2d 1007 (3d Cir. 1941) ............................................................................... 34 

In re Polaroid ERISA Litig., 

362 F. Supp. 2d 461 (S.D.N.Y. 2005) .................................................................. 43 

In re PWS Holding Corp., 

228 F.3d 224 (3d Cir. 2000) ................................................................................. 12 
v

Federal Cases-(continued):

In Re Unisys Savings Plan Litig., 

74 F.3d 420 .................................................................................................... 37, 38 

In re Worldcom, Inc. ERISA Litig., 

354 F. Supp. 2d 423 (S.D.N.Y. 2005) .................................................................. 43 

Kalda v. Sioux Valley Physician Partners, Inc., 

481 F.3d 639 (8th Cir. 2007) ................................................................................ 24 

Katsaros v. Cody, 

744 F.2d 270 (2d Cir. 1984) ................................................................................. 29 

Laborers Health & Welfare Trust Fund For N. California v. Advanced Lightweight 

Concrete Co., 

484 U.S. 539 (1988) ............................................................................................. 23 

Ledbetter v. First State Bank & Trust Co., 

85 F.3d 1537 (11th Cir. 1996) .............................................................................. 41 

Libbey-Owens-Ford Co. v. Blue Cross & Blue Shield Mut. of Ohio, 

982 F.2d 1031 (6th Cir. 1993) .............................................................................. 35 

Lloyd v. HOVENSA, LLC., 

369 F.3d 263 (3d Cir. 2004) ................................................................................. 11 

Luria Bros. & Co. v. Allen, 

672 F.2d 347 (3d Cir. 1982) .......................................................................... 51, 52 

Massachusetts Mut. Life Ins. Co. v. Russell, 

473 U.S. 134 (1985) ............................................................................................. 34 

Mertens v. Hewitt Assocs., 

508 U.S. 248 (1993) ............................................................................................. 46 

Metzler v. Solidarity of Labor Organizations Health & Welfare Fund, 

No. 95-7247, 1998 WL 477964 (S.D.N.Y. Aug. 14, 1998), aff'd, 

224 F.3d 128 (2d Cir. 2000)(per curiam) ...................................................... 15, 17 
vi

Federal Cases-(continued):

Nash v. Trustees of Boston Univ., 

946 F.2d 960 (1st Cir. 1991) ................................................................................ 21 

NYSA-ILA Med. & Clinical Servs. Fund v. Catucci, 

60 F. Supp. 2d 194 (S.D.N.Y. 1999) ............................................................. 16, 17 

Patelco Credit Union v. Sahni, 

262 F.3d 897 (9th Cir. 2001) ......................................................................... 49, 53 

Pell v. E.I. DuPont de Nemours & Co. Inc., 

539 F.3d 292 (3d Cir. 2008) ................................................................................. 25 

Prudential Ins. Co. of Am. v. Doe, 

76 F.3d 206 (8th Cir. 1996) .................................................................................. 52 

Ream v. Frey, 

107 F.3d 147 (3d Cir. 1997) ........................................................ 35, 37, 38, 39, 40 

Residential Reroofers Local 30-B Health & Welfare Fund of Phila. & Vicinity v. 

A & B Metal & Roofing, Inc., 

976 F. Supp. 341 (E.D. Pa. 1997) ......................................................................... 26 

Resolution Trust Corp. v. Fid. & Deposit Co. of Maryland, 

205 F.3d 615 (3d Cir. 2000) ................................................................................. 33 

Resolution Tr. Corp. v. Fin. Institutions Ret. Fund, 

71 F.3d 1553 (10th Cir. 1995) .............................................................................. 52 

Sec'y of Labor v. Doyle, 

675 F.3d 187 (3d Cir. 2012) .................................................................. 1 & passim 

Srein v. Frankford Tr. Co.,

323 F.3d 214 (3d Cir. 2003) .................................................................... 46, 50, 52 

Tr. of the Bricklayers & Allied Craftworkers Local 13 Defined Contribution 

Pension Tr. for S. Nev. v. Granite Works, Inc., 

No. 2:10-CV-00767-HDM, 2011 WL 3159099 (D. Nev. July 26, 2011) ............ 16 
vii

Federal Cases-(continued):

Tr. of the Nat'l Elevator Indus. Pension v. Lutyk, 

140 F. Supp. 2d 407 (E.D. Pa. 2001) .................................................................... 16 

United States v. One 1973 Rolls Royce, 

43 F.3d 794 (3d Cir. 1994) ................................................................................... 26 

United States v. Pelullo, 

399 F.3d 197 (3d Cir. 2005) ................................................................................. 49 

Varity Corp. v. Howe, 

516 U.S. 489 (1996) ............................................................................................. 34 

Yeseta v. Baima, 

837 F.2d 380 (9th Cir. 1988) ......................................................................... 48, 49 

State Cases: 

Estate of Stetson, 

345 A.2d 679 (Pa. 1975) ....................................................................................... 42 

Landis v. Scott, 

32 Pa. (8 Casey) 495 (Pa. 1859) ...........................................................................34 

Federal Statutes: 

Judiciary and Judicial Procedure: 

28 U.S.C. § 1291 ........................................................................................................ 1 

28 U.S.C. § 1331 ........................................................................................................ 1 

Employee Retirement Income Security Act of 1974, 

 as amended, 29 U.S.C. § 1001 et seq.: 

 Section 3(21)(A)(i), 29 U.S.C. § 1002(21)(A)(i) ....................................... 46, 50 

 Section 3(40), 29 U.S.C. § 1002(40) ............................................................ 2 n.1 
viii

Federal Statutes-(continued): 

 Section 403(a), 29 U.S.C. § 1103(a) .................................................... 29, 34, 36 

 Section 404(a)(1), 29 U.S.C. § 1104(a)(1) ........................................... 29, 34, 43 

 Section 404(a)(1)(A), 29 U.S.C. § 1104(a)(1)(A) ............................................. 45 

 Section 404(a)(1)(B), 29 U.S.C. § 1104(a)(1)(B) ...................................... 28, 36 

 Section 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D) ............................................. 44 

 Section 404(a)(A)(1), 29 U.S.C. § 1104(a)(A)(1) ............................................. 52 

 Section 405, 29 U.S.C. § 1105 ................................................................... 42, 43 

 Section 405(a)(2), 29 U.S.C. § 1105(a)(2) ........................................................ 43 

 Section 409(a), 29 U.S.C. § 1109(a) ................................................................. 33 

 Section 502(a)(2), 29 U.S.C. § 1132(a)(2) .......................................................... 1 

 Section 502 (a)(5), 29 U.S.C. § 1132(a)(5) ......................................................... 1 

 Section 502(e)(2), 29 U.S.C. § 1132(e)(2) .......................................................... 1 

 Section 514(b)(6), 29 U.S.C. § 1144(b)(6)........................................................ 10 

 Section 515, 29 U.S.C. § 1145 .......................................................................... 22 

Miscellaneous:

Restatement of the Law (Second) Trusts § 106 (1959) ........................................... 39 

Restatement (Second) of Trusts § 172 cmt. c (1959) .............................................. 35 

Restatement (Third) of Trusts § 76(2)(b) (2007) ..................................................... 37 

Restatement (Third) of Trusts § 83 cmt. c (2007) ............................................ 27, 37 
ix

DOL Advisory Op. No. 2005-12A, 

2005 WL 1208699 (May 16, 2005) ................................................................... 18 

DOL Advisory Op. No. 94-31A, 

1994 WL 501646 (Sept 9, 1994) ................................................................ 15, 24 

DOL Advisory Op. No. 93-29A, 

1993 WL 433783 (Oct. 22, 1993) ..................................................................... 18 

DOL Advisory Op. No. 93-14A, 

1993 WL 188473 (May 5, 1993) ....................................................................... 15 

Black's Law Dictionary 885 (9th ed. 2009) ............................................................. 15 
STATEMENT REGARDING ORAL ARGUMENT 

The Secretary requests oral argument. The procedural and factual 

background is extensive, this matter having proceeded through trial, a prior appeal, 

and a remand. The Secretary believes that oral discussion of the facts and 

applicable precedent will benefit the Court's consideration of this case. 

STATEMENT OF RELATED CASES AND PROCEEDINGS 

This case has been before this Court previously, Case No. 10-3598. A 

decision to remand the case was issued on March 27, 2012, Sec'y of Labor v. 

Doyle, 675 F.3d 187 (3d Cir. 2012). The Secretary is not aware of any cases or 

proceedings related to this appeal. 

STATEMENT OF APPELLATE AND SUBJECT MATTER 

JURISDICTION 

This is an action brought by the Secretary of Labor under 29 U.S.C. 

§§ 1132(a)(2) and 1132(a)(5). The United States District Court for the District of 

New Jersey had federal question jurisdiction under 28 U.S.C. § 1331, and 

exclusive subject matter jurisdiction under 29 U.S.C. § 1132(e)(2).

The Court of Appeals for the Third Circuit has jurisdiction under 28 U.S.C. 

§ 1291 because this is an appeal from a final judgment in favor of the Secretary of 

Labor and against two defendants (James Doyle and Cynthia Holloway). The 

judgment was entered on December 1, 2014. J.A.10. Holloway and Doyle filed 

their appeals respectively on February 9 and March 6, 2015. Br. of Appellant 
2 

Cynthia Holloway at 1, Sec'y of Labor v. Doyle, No. 15-1380 (3d Cir. July 16, 

2015) (hereinafter Holloway Br.); Br. of Appellant James Doyle at 1, Sec'y of 

Labor v. Doyle, No. 15-1574 (3d Cir. July 17, 2015) (hereinafter Doyle Br.). 

STATEMENT OF THE ISSUES 

 As restated by the Secretary, the issues raised by Cynthia Holloway and 

James Doyle are: 

1. Whether the district court erred in holding that employer contributions 

payable to the ERISA healthcare plan were plan assets. 

2. Whether the district court erred in holding that James Doyle was a functional 

fiduciary with control over plan assets. 

3. Whether the district court erred in holding that Cynthia Holloway and James 

Doyle breached their fiduciary duties by enabling a diversion of plan assets for 

non-plan purposes. 

 STATEMENT OF THE FACTS

 1. On May 1, 2001, Defendant Cynthia Holloway and three other 

individuals created the Professional Industrial Trade Workers Union Fund (Fund), 

a multiple employer welfare arrangement (MEWA),1

 governed by the Employee 

Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. 

 

1 A MEWA is an ERISA plan that provides benefits to the employees of two or 

more employers for, among other things, medical, surgical, or hospital care. 29 

U.S.C. § 1002(40).
3 

J.A.1251-52; 12-13. The Fund was supposed to provide health insurance to 

numerous small employers through supposed collective bargaining agreements 

between a supposed union, the Professional Industrial Trade Workers Union 

(PITWU), created to be the Fund sponsor, and the participating employers. Id. 

When it closed two years later in 2003, however, it left $7.6 million in unpaid 

health claims. J.A.1256, 1264; 23. 

 Defendants Holloway and Michael Garnett were named trustees to the Fund 

during relevant periods in 2001 and 2002. J.A.12 (Holloway), 14 (Garnett). 

During the time that Holloway was a Fund trustee from May 1, 2001 to September 

27, 2002, she had authority to manage the Fund, including the authority to sign 

checks drawn on the Fund's claim and general accounts. J.A.95-97. In addition, 

Garnett and Defendant Mark Maccariella (who are not parties to this appeal) were 

owners of two companies – Privilege Care, Inc. (PCI) and North Point PEO 

Solutions, Inc. (essentially operated as one enterprise, PCI/NP) – that entered into 

contracts with the participating employers, ostensibly to provide human resource 

services and access to health insurance provided by the Fund as Professional 

Employer Organizations (PEOs). 2 J.A.1249; 13 n.3, 14 n.5. Defendant James 

Doyle was the owner of Privilege Care Marketing Group, Inc. (PCMG), an entity 

 

2 Legitimate PEOs would provide administrative and human resource services to 

their clients. J.A.1251 n.2; 12. 
4 

that was created to provide billing services to PCI/NP, and to market the Fund to 

and enroll small employers to purchase health insurance coverage under the Fund. 

J.A.1249; 129-30. 

 To obtain medical benefits from the Fund for its employees, an employer 

was required initially to pay the first month's fee, usually as a single check, from 

which PCMG would deduct a marketing and billing fee. J.A.29-30. Thereafter, 

employers were required to pay monthly fees through two checks. J.A.30. One 

check (Check 1) was payable to PCI/NP (although Doyle's company, PCMG, 

sometimes took a cut). J.A.37. PCI/NP would, in turn, forward a portion to a 

third-party administrator for processing and paying health claims and retain the rest 

for fees denominated "union dues" and for other expenses. Id. The other check 

(Check 2) was made out to and retained by PCMG (and Defendant Doyle) for 

marketing services and administrative expenses. J.A.37-38.3

 

 During 2002 and 2003, seven states took enforcement actions against Doyle, 

PCMG, PCI/NP, Garnett, Maccariella, and Holloway, as trustee, for violating state 

insurance law through this scheme that resulted in cease-and-desist orders. J.A.20-

 

3 Doyle now argues that he "did not market the Fund." Doyle Br. at 19. However, 

he stated below that he marketed "the PEO, its services, and the availability of 

joining the union and participating in the [Fund]." Joint Final Pretrial Order, Part 

IV.A., J.A.666 (emphasis added). Consistent with Doyle's own admission, state 

regulators found that he marketed the Fund. J.A.212 (Texas insurance 

commissioner finding that PCMG marketed the Fund); J.A.224 (Massachusetts 

insurance commissioner made similar finding). 
5 

21. Despite these state enforcement actions, Holloway took no action to end the 

Fund’s relationship or service agreements with Doyle, Garnett, Maccariella, or the 

entities they controlled, PCMG and PCI/NP. Moreover, Doyle was later convicted 

of a felony in Texas for the unauthorized sale of insurance. J.A.24 n16. 

 Although Holloway was not named personally in these orders, she knew of 

the orders; indeed, as the district court noted, the orders were one of the concerns 

she identified as a reason for her resignation as a trustee. J.A.23-24, 40-41. 

Likewise, Doyle was aware of these orders during the relevant time period. 

J.A.22-24. 

 During the two years the Fund operated, it had four claims administrators: 

(1) its original administrator, Union Privilege Care, a company operated by an 

architect of the scheme, David Weinstein; (2) Oak Tree Administrators (Oak Tree) 

(March 2002 through June 2002); (3) Brokerage Concepts, Inc. (July 1, 2002 

through November 2002); and (4) Southern Plan Administrators (December 2002 

through May 2003). J.A.8, 15, 17 n.12. 

 Holloway knew from at least April 23, 2002, that the Fund was plagued by 

systemic administrative deficiencies. Before abandoning the Fund, she attended at 

least three meetings during which two different Fund administrators informed her 

that the Fund could not pay claims and did not have adequate financial or claim 

records. J.A.16-17, 20. On April 23, 2002, Oak Tree informed Holloway that the 
6 

Fund had "many" unpaid claims and that Union Privilege Care might not have paid 

any benefit claims since November 2001. J.A.16-17. After learning that Union 

Privilege Care likely had not paid benefit claims for at least six months, Holloway 

did not initiate any action against Union Privilege Care. J.A.40-41. Instead, on 

May 1, 2002, "Holloway and another trustee appointed David Weinstein (the 

owner/operator of Union Privilege Care) as a trustee of the Fund, although 

Holloway admitted she had general concerns about Weinstein." J.A.16. Holloway 

did not investigate Weinstein's qualifications to be a trustee. Id. 

 Again during a May 30, 2002 meeting, Oak Tree informed Holloway that it 

"still was not able to obtain necessary financial information and documents from 

Union Privilege Care relating to prior claims and expenses; therefore, the 

accountant was unable to provide the trustees with a financial report, and no 

actuary could have performed a study." J.A.16-17. By at least September 20, 

2002, PCI/ NP had stopped making contributions to the Fund (J.A.17), and the 

Fund's third administrator, Brokerage Concepts, informed Holloway of that fact 

during a September 20, 2002 meeting with her.4

 Id. Holloway admitted at trial 

that the Fund's accountant was unable to give her a financial report, could not 

determine the amount of contributions paid into the Fund, could not determine the 

 

4

 Holloway resigned before Southern Plan Administrators, the fourth of the claims 

administrators, took over in December 2002.
7 

amount of claims paid, and probably did not even have a complete list of Fund 

participants. J.A.1005-7, 1016. 

 At no time did Holloway instruct the Fund's counsel to initiate legal action 

against Union Privilege Care, PCI/NP, PCMG, or the other trustees. J.A.42. Nor 

did she seek mediation "of her dispute with the other trustees regarding 

administration of the Fund," contact the Department of Labor about the lack of 

funding or the Fund's chaotic condition, or seek removal of any trustee. Id. 

Instead, Holloway simply resigned on September 27, 2002. J.A.43. In her 

resignation letter, she summarized her reasons: "the lack of financial accountability 

for contributions to the Fund and resultant lack of funding to pay claims" and the 

"issuance of cease and desist orders by multiple states." Id. 

 2. On April 28, 2005, the Secretary sued the Fund fiduciaries, alleging 

that they breached their statutory duties of loyalty and prudence by mismanaging 

the Fund, which resulted in the illegal diversion of over 60% of the Fund's plan 

assets by fiduciaries for their own gain, and left over $7.6 million in unpaid health 

claims. J.A.1228-31; 15. As relevant to this appeal, the Secretary argued that 

Doyle, as a functional fiduciary, and Holloway, as a Fund trustee, breached their 

duties as ERISA fiduciaries by diverting or allowing the diversion of $4.7 million 

out of a total of $7.4 million in contributions from participating employers to pay 

improper marketing fees to PCMG, improper service fees to PCI/NP, which 
8 

provided no services, union dues to PITWU, a sham union that did not engage in 

collective bargaining, and other unnecessary expenses. J.A.1250; 10-12. Thus, the 

Secretary argued that the marketing and "union dues" were improper, and that the 

other fees were not legitimate because they were not for any discernible services. 

Id. Moreover, the Secretary argued that Defendant Holloway, despite her 

acknowledgment of serious mismanagement of the Fund, did little or nothing to try 

to ensure that the Fund to which she was a trustee was properly administered. Id. 

 3. After a bench trial in October 2009, the district court entered 

judgment for Defendants Holloway and Doyle on June 30, 2010. Without 

addressing the argument that all amounts submitted by the participating employees 

to Doyle constituted plans assets, the court concluded that the evidence was 

insufficient to prove that either Holloway or Doyle had breached any fiduciary 

duties. J.A.1258. The court had already entered a consent judgment against one of 

the other co-fiduciaries, Maccariella. J.A.12. And the court entered a default 

judgment against Garnett because he failed to appear at trial. Id. 

 4. The Secretary appealed, and this Court issued a decision on March 27, 

2012, concluding that the district court erred by failing to address whether the 

funds Doyle collected were plan assets, as well as a number of other key issues. 

J.A.1276. The Court thus vacated the decision and remanded to the district court 

to further consider three inter-related issues: (1) whether diverted funds from the 
9 

contributions that Doyle collected from participating employers constituted plan 

assets; (2) whether Doyle was a fiduciary to the Plan because he controlled these 

funds; and (3) whether Doyle and Holloway breached their fiduciary duties. J.A. 

1246, 1276, 1280. 

 More specifically, this Court directed the district court to determine if all or 

part of the employer contributions that Doyle collected were plan assets and, if so, 

if he exercised "sufficient control" over them to qualify as a functional fiduciary 

under ERISA. J.A.1276. If the district court answered yes to both these questions, 

this Court also directed the district court to "consider whether Doyle breached his 

fiduciary duties to the Fund." Id. 

 Likewise, if the district court found on remand that any of the diverted funds 

were plan assets, this Court instructed the district court to determine "what 

Holloway knew and could reasonably be expected to know" about the diversion of 

these assets and whether she took "prudent precautions" to protect plan assets when 

she resigned as a trustee, such as by ensuring she would be replaced by a "suitable 

and trustworthy replacement." J.A.1279. 

 If, on the basis of these determinations, the district court found that 

Holloway and/or Doyle breached their fiduciary duties, this Court instructed the 

district court to determine any resulting plan losses. Id. 

 Importantly, this Court noted that the "record shows" that the relationship 
10 

between the Professional Industrial Trade Workers Union (PITWU or Union), the 

union backing the Fund, and PCI/NP was governed by "bogus" collective 

bargaining agreements that "were not the result of bona fide collective bargaining," 

and that the employees PCI/NP enrolled in the Union and the Fund under the 

collective bargaining agreements "were not genuine union members." J.A.1266 

n.23; see also J.A.27–28 (district court confirmed finding). This Court pointed to 

the record evidence that the PCI/NP and PCMG had falsely marketed the Fund as 

exempt from state insurance regulation by relying on PCI/NP's "bogus" 

relationship with the Union. J.A.1266.5

 It also concluded that the record showed 

that "the only service consistently offered by PCI/NP was health benefits through 

the PITWU Fund." J.A.1253 & n.5. This Court also credited the findings of 

numerous insurance commissioners who issued cease-and-desist orders against 

these entities and their false marketing practices. J.A.1264. Noting that "Doyle 

and Holloway were not the principal architects of this scheme," this Court 

 

5 As a MEWA, the Fund was subject both to ERISA standards and to state 

insurance regulation. J.A.20, 23; J.A.1260 and 1263 (citing 29 U.S.C. § 

1144(b)(6)). Despite this, employers were required to sign a disclosure form that 

"falsely represented that the PITWU Fund was 'exempt from state 

regulation'" pursuant to ERISA. Id.; J.A.21; J.A.1261 (quoting "[PITWU] Health 

& Welfare Fund Plan 'B' Disclosure Form" which represented that the Fund was a 

union sponsored, "self-funded and exempt from state regulation, as outlined in 

[ERISA]", "under the jurisdiction of the United States Secretary of Labor," and 

"not regulated by any state department of insurance"). Thus, PCI/NP and PCMG 

used "the Fund's relationship with PITWU to claim that" ERISA exempted it from 

state regulation and the solvency controls designed to protect insureds. Id. 
11 

remanded for the district court to determine "the extent of their awareness of the 

scheme and liability for its consequences," instructing that "it is important to keep 

the nature of the scheme firmly in mind." J.A.1267. 

 4. In its December 1, 2014 decision on remand, the district court agreed 

with the Secretary that the diverted contributions were plan assets, and that both 

Doyle and Holloway were ERISA fiduciaries who breached their statutory duties 

with regard to these assets. J.A.39, 43-44. Because the court determined that 

Doyle was a functional fiduciary who exercised "discretionary control" over these 

plan assets (J.A.38), it concluded that he was liable to restore to the plan over 

$3,882,000 in plan assets that he diverted to himself and others. J.A.4, 45. It also 

ruled that Holloway, as a trustee, failed to protect plan assets from diversion, failed 

to maintain financial records, resigned without prudent precautions, and was thus 

liable to restore to the plan over $4,698,000 in losses, exclusive of costs and 

interest. Id. 6 

 STANDARD OF REVIEW 

 "To the extent that the district court predicated its decision on findings of 

fact," the standard of review is clearly erroneous. Lloyd v. HOVENSA, LLC., 369 

F.3d 263, 273 (3d Cir. 2004). Nearly all of the challenges here fall into this 

 

6

 The court determined that Holloway had greater liability than Doyle because, as 

a trustee, Holloway was liable for amounts diverted by other persons in addition to 

amounts diverted by Doyle. J.A.15.
12 

category. When an appellant challenges a district court's legal conclusions, the 

standard of review is de novo. In re PWS Holding Corp., 228 F.3d 224, 235 (3d 

Cir. 2000). Neither de novo nor clearly erroneous review, however, extend to any 

factual or legal matter expressly or necessarily resolved in the previous appeal in 

this case in Sec'y of Labor v. Doyle, 675 F.3d 187 (3d Cir. 2012), J.A.1246-83; the 

law-of-the-case doctrine governs the same issues of fact or law at all subsequent 

stages of this case. See, e.g., Arizona v. California, 460 U.S. 605, 618 (1983). 

SUMMARY OF THE ARGUMENT 

 This Court correctly recognized in the prior appeal in this case that the 

scheme here bore the hallmarks of "the type of scheme that ERISA's MEWA 

provisions were specifically designed to prevent: an aggressively marketed, but 

inadequately funded health benefit plan masquerading as an ERISA-exempt plan in 

order to evade the solvency controls imposed by state insurance regulation." 

J.A.1266 n.23 (citing legislative history). The detailed and well-supported factual 

findings of the district court corroborate that "the ultimate result" of this 

arrangement "was that which Congress feared: the Fund was ultimately unable to 

pay all employee claims, and thus employees participating in the Fund were not 

provided promised health benefits." J.A.1267. In its decision on remand, the 

district court then properly concluded, based on the extensive record, that the 

contributions from the participating employers were plan assets, that Doyle's 
13 

control over these assets rendered him a fiduciary, that he breached his duties as a 

fiduciary in diverting millions of dollars of these assets, and that Holloway failed 

utterly in her role as trustee to stop this diversion of assets by failing to restore 

order to the plan's opaque and chaotic operations. As the result of these breaches, 

employees who were participants in this ERISA healthcare plan were left with 

millions of dollars in unpaid claims, and the district court correctly concluded that 

Doyle and Holloway were each responsible for millions of dollars in plan losses 

that resulted from their breaches. 

 First, based on the record and this Court's recognition of the governing law, 

the district court correctly determined that because the governing Trust Agreement 

gives the Fund an ownership interest in all contributions paid from the 

participating employers enrolled in the Fund, these contributions were plan assets. 

Second, the court also correctly concluded that Holloway breached her 

fiduciary duties as trustee to the Fund. Holloway did not create any meaningful 

procedures or standards for the Fund's management or administration. Holloway 

failed to hold the plan assets in trust, failed to exercise exclusive control over the 

Fund's plan assets, and failed to maintain basic financial management of plan 

assets. These failures, as well as her failure to investigate red flags concerning the 

operation of the Fund, permitted the diversion of plan assets to happen. While 

acknowledging the numerous problems that put the Fund at risk, she resigned 
14 

without confronting or resolving any of them. This administrative void that 

Holloway created allowed Doyle and others to divert over 60% of the plan assets 

he collected. 

Third, the district court concluded that Doyle had control over these assets 

and therefore was a functional fiduciary with regard to the assets. Moreover, based 

on essentially uncontroverted evidence, the court concluded that Doyle diverted 

over 60% of these plan assets for non-Plan purposes in order to benefit himself and 

his company and to benefit PCI/NP. 

Finally, the district court correctly held Doyle and Holloway liable for the 

losses to the Funds resulting from their fiduciary breaches. 

 ARGUMENT 

I. The District Court Correctly Ruled That All of the Amounts 

Employers Paid Were Plan Assets 

ERISA is a remedial statute and should be construed in favor of protecting 

participants in employee benefit plans. Einhorn v. M.L. Ruberton Const. Co., 632 

F.3d 89, 98 (3d Cir. 2011). 

 This Court identifies plan assets using ordinary notions of property law 

where, as here, no statutory or regulatory definition directly applies. J.A.1282. 

Under this approach, plan assets generally include "any property, tangible or 

intangible, in which the plan has a beneficial ownership interest." Id. (quoting 
15 

Dep't of Labor, Advisory Op. No. 93–14A, 1993 WL 188473, at *4 (May 5, 

1993)). 

 A plan obtains a beneficial interest in specific property if "the property is 

held in trust for the benefit of the plan or its participants and beneficiaries." Dep't 

of Labor Advisory Op. No. 94-31A, 1994 WL 501646, at *2 (Sept. 9, 1994); see 

also Black's Law Dictionary 885 (9th ed. 2009) ("beneficial interest" means "[a] 

right or expectancy in something (such as a trust or an estate), as opposed to legal 

title to that thing"). Whether a plan has beneficial interests in specific property 

largely turns on the facts and circumstances of a given case. See Edmonson v. 

Lincoln Nat'l Life Ins. Co., 725 F.3d 406, 427 (3d Cir. 2013). This Court has 

stated that documents governing the plan may establish such beneficial interests. 

J.A.1282-83 (citing Metzler v. Solidarity of Labor Organizations Health & Welfare 

Fund, No. 95-7247, 1998 WL 477964, *6 (S.D.N.Y. Aug. 14, 1998), aff'd 224 F.3d 

128 (2d Cir. 2000) (per curiam); Galgay v. Gangloff, 677 F. Supp. 295, 301-02 

(M.D. Pa. 1987), aff'd 932 F.2d 959 (3d Cir. 1991); Dep't. of Labor, Advisory Op. 

No. 94–31A at *7). 

Based on this framework, this Court asked the district court to determine 

whether Check 1 and 2 monies were plan assets. The district court ruled that: 

[T]he relevant documents, when read together, establish the Fund's property 

interest in all of the money which employers forwarded to PCMG (“Check 

1” and “Check 2”). The Declaration of Trust created the Fund. The forms 

which the employer executed established their relationship with the Fund, 
16 

and showed the payments which they were required to make to participate 

in the Fund. As such, the combined amount will be considered plan assets 

under ordinary notions of property rights. 

J.A. 30-31. 

A. The district court correctly found that the governing plan documents – the 

Trust Agreement and related enrollment documents – gave the Fund a 

beneficial ownership interest in the participating employers' contributions 

The governing plan document that formed the Fund is the Trust Agreement, 

which states that: 

There is hereby established a Trust Fund into which shall be paid on or after 

May 1, 2001 any and all contributions payable by EMPLOYERS or any 

other eligible EMPLOYER who agreed, in writing, to be bound by the terms 

of this Agreement. 

J.A.28 (emphasis added). Moreover, the Trust Agreement made clear that the 

"Trustees shall ... consider as assets of the Trust Estate contributions owing from 

any EMPLOYER required to make to the Fund." J.A.98 (emphasis added). 

Similar language in numerous cases created a beneficial interest in unpaid 

employer contributions. See, e.g., Hawkeye Nat. Life Ins. Co. v. AVIS Indus. 

Corp., 122 F.3d 490, 498 (8th Cir. 1997); Trustees of the Bricklayers & Allied 

Craftworkers Local 13 Defined Contribution Pension Trust for S. Nevada v. 

Granite Works, Inc., No. 2:10-CV-00767-HDM, 2011 WL 3159099, at *3 (D. Nev. 

July 26, 2011) (unpublished) (listing authorities); Trustees of the Nat'l Elevator 

Indus. Pension v. Lutyk, 140 F. Supp. 2d 407, 411 (E.D. Pa. 2001); NYSA-ILA 

Med. & Clinical Servs. Fund v. Catucci, 60 F. Supp. 2d 194, 200-01 (S.D.N.Y. 
17 

1999) (listing authorities). Accordingly, all employer contributions actually paid 

by employers are plan assets and, therefore, the employer contributions retained or 

diverted by PCMG and PCI/NP were also all plan assets. Metzler, 1998 WL 

477964, at *7; 224 F.3d at 128 (Second Circuit and the district court finding 

employer contributions paid to an intermediary based on analogous trust language 

constituted plan assets); J.A.35 (citing Metzler). 

 Defendants raise two formalistic arguments to escape the consequences of 

this clear language in the governing plan document. First, defendants argue that 

the "employer" in the Trust Agreement only refers to the handful of employers 

who signed the trust agreement, such as PCI/NP, and not to the many participating 

employers at whom the Fund was aimed. Holloway Br. at 26. Second, defendants 

argue that "contributions" in the Trust Agreement only refers to those contributions 

required under the collective bargaining agreement. Id. 

B. The district court correctly considered all the participating employers to 

be "co-employers" within the meaning of the Trust Agreement 

Defendants contend the Trust Agreement never applied to the employers that 

defendants signed up and enrolled into the Fund because those employers were 

never the "employers contributing to the Fund." Holloway Br. at 25 n.9. This 

sophistry is easily belied by the governing contracts between PCI/NP and PCMG, 

and the participating employers' understanding of their relationship. The contract 

between PCI/NP and PCMG clearly stated that PCMG would enroll "co-
18 

employers" and described the contributions from these employers as "co-employer 

contributions." J.A.130. The enrollment forms that these employers signed 

likewise contemplated the participating employers would be "co-employers" for 

"[c]ompliance with [ERISA]." J.A.132. Thus, the district court correctly found 

that both PCI/NP and the participating employers whom Doyle signed up for 

coverage were "co-employers" within the meaning of the Trust Agreement. J.A.12 

n.1, 13 n.3 (finding that PCI/NP and PCMG clients are "co-employers"). 

 Likewise, the Secretary's long-standing guidance states that such clients or 

co-employers are "employers" under ERISA because they, in fact, exercise control 

over the employee-participants, the actual owners of the Trust and its beneficial 

interests. See Dep't of Labor Advisory Op. No. 2005-12A, 2005 WL 1208699, at 

*2 (May 16, 2005); Dep't of Labor Advisory Op. 93-29A, 1993 WL 433783, at *3 

(Oct. 22, 1993) ("[a]ny Client that in fact exercises employer control and authority 

over employees covered under . . . Program would be an 'employer' with respect to 

such employees for purposes of ERISA section 3(6)"). Because the Trust was 

intended to protect the contributions made on behalf of employees, J.A.93, 

employers making contributions on their employees' behalf should be considered 

the actual "employer" for the purposes of the Trust. J.A.91 (covering members 

who are actually "employed" by "employers"); see also J.A.212 (Texas insurance 
19 

commissioner noting that PEOs "do not exercise any control over its client 

employers or the client employer's employees"). 

Moreover, defendants' reading of "employer" in the Trust Agreement to 

exclude the actual employer-clients because PCI/NP was the "co-employer" only 

serves to perpetuate the fraud and hurt the actual employees and their employers 

who contributed to the Fund. See J.A.1263; 22 (Louisiana insurance commissioner 

noting PCI/NP's fraudulent use of "co-employer" relationship to shield plan from 

state regulation); see generally Alman v. Danin, 801 F.2d 1, 3 (1st Cir. 1986) 

(ruling that "the doctrine of corporate entity . . . will not be regarded when to do so 

would work fraud or injustice" in ERISA). 

Finally, the Trust Agreement also contemplated that "employers" would 

"agree[] in writing" in related documents to be bound by the terms of the Trust 

Agreement, such as the enrollment packet. J.A.1298. The enrollment packet 

included six forms that consistently reflect the co-employer's intent to participate in 

the Fund. Id. By checking specific boxes in the "Client Services Agreement," 

employers agreed in writing to participate in the Fund. J.A.28–29. This form did 

not identify the Fund by name, but another page of the form stated that "[t]his 

health and welfare plan is sponsored by [PITWU]." J.A.29. The enrollment forms 
20 

confirm the enrolled co-employers' intent to abide by the terms of the Trust 

Agreement, which established and governed the PITWU Fund.7

 

C. The district court correctly disregarded the "bogus" collective 

bargaining agreements in considering the definition of plan assets 

Defendants continue to argue that this Court should refer to the collective 

bargaining agreements in determining what assets belonged to the plan. Holloway 

Br. at 11; Doyle Br. at 12. Defendants contend that these agreements, which the 

participating employers never saw, established the amount of employer 

contributions payable, and that contributions paid beyond that amount were not 

plan assets. Holloway Br. at 22. This ignores this Court's determination that the 

collective bargaining agreements were, in fact, "bogus" and that consideration of 

the case on remand should be undertaken with the nature of deceptive scheme 

"firmly in mind." J.A.1267 n.24. On remand, the district court confirmed the 

collective bargaining agreements between PITWU and PCI/NP were bogus and 

designed to further an illegal scheme. J.A.27-28. 

 

7 Defendants' argument that contributions are plan assets only if they are payable to 

the Fund in accordance with language in the Trust Agreement, Holloway Br. at 23-

25, is similarly flawed. Under the fraudulent scheme, defendant Doyle gained the 

discretion and control over the billing system, infra pp. 46-54; he instructed the 

participating employers to send their contributions via checks payable to non-Fund 

entities in contravention of the Trust Agreement requirement. If Holloway and 

Doyle had enforced this requirement, a diversion of assets might have been 

averted. 
21 

Defendants do not dispute this. Instead, they argue that notwithstanding this 

illegality, courts should read the agreements as a limitation on the definition of 

plan assets here so as to relieve defendants of their liability. Reliance on the 

collective bargaining agreements for this purpose is untenable. As the cease-anddesist orders repeatedly state, and the district court agreed, the enrollment of coemployers' employees into the Union was designed to support the fraudulent 

marketing of the scheme to avoid state insurance regulation. See supra pp. 48-53 

(describing the cease-and-desist orders finding fraud in the marketing of the Fund 

such as the assertion that the Fund was not subject to state regulations). The 

participating employers and their employees who were the victims of this 

fraudulent scheme should not be bound by bogus collective bargaining agreements 

that govern a Union they and their employees were fraudulently induced to join, 

particularly considering that participating employers and their employees did not 

even see these agreements before enrolling. See Nash v. Trustees of Boston Univ., 

946 F.2d 960, 967 (1st Cir. 1991) (rendering voidable ERISA-related agreements 

"induced by either a fraudulent or a material misrepresentation by the other party 

upon which the recipient is justified in relying"). Defendants' reading would, 

again, endorse the fraudulent scheme by accepting the collective bargaining 

agreements' contribution rates set by the schemers themselves without any "bona 
22 

fide" collective bargaining, J.A.1266 n.23, or any acknowledgment from the coemployers or their employees. J.A.28. 

Defendants offer no justification for this Court to rely on a "bogus" 

document. Instead, defendants recite the unremarkable proposition that collective 

bargaining agreements may be governing plan documents and may define plan 

assets in some cases. Holloway Br. at 15; Doyle Br. at 12. None of the four 

decisions Holloway cites establish a per se rule, untethered to the facts and 

circumstances of the case, that a collective bargaining agreement is always a 

governing plan document. Holloway Br. at 19-27. The four cases cited by 

defendants are inapposite because none of them involved any question about the 

legality of the collective bargaining agreements at issue, nor was there any 

question about whether the employers had seen the documents. Id. 

Defendants' repeated reference to the language of ERISA section 515, 29 

U.S.C. § 1145, demonstrates the hollowness of their argument. Section 515 states 

that every employer obligated to make payments "under the terms of a collectively 

bargained agreement shall . . . make such contributions in accordance with . . . such 

agreement." 29 U.S.C. § 1145 (emphasis added). This Court specifically found 

that the sham contracts created by PCI/NP and the Fund trustees "were not the 

result of bona fide collective bargaining"—i.e., they were not collectively 

bargained. J.A.1266 n.23. Moreover, section 515's purpose is to empower 
23 

participants to compel employers to pay their "'promised contributions' on a regular 

and timely basis," not to create a shield to protect fiduciaries from liability.

Laborers Health & Welfare Trust Fund For N. California v. Advanced Lightweight 

Concrete Co., 484 U.S. 539, 546 (1988). 

D. It was not clear error for the district court to rely on the enrollment 

packet in its analysis of plan assets 

The Trust Agreement clearly states that "any and all" contributions payable 

by employers must be held in trust. J.A.92. It further provides "[t]hat the Trustees 

shall jointly have custody of all monies and other property belonging the Trust 

Estate. . ." J.A.98. 

The enrollment forms, which include the "New Business Turn-in Form," 

plainly define the monthly contributions per employee as a "total" and a lump sum. 

J.A.29-30. The district court thus concluded that, "[f]rom the employers' point of 

view, this combined amount [was] the cost of the insurance for each employee." 

J.A.30. Relying on the Trust Agreement, as well as the enrollment forms, the 

district court found that "a clear reading of the [enrollment packet] is that the total 

amount of the employer's contribution is the property of the Fund." Id. This 

includes both "Check 1" and "Check 2." Id.8 

 

8

 Holloway argues the district court had improperly relied on the "hypothetical 

example of an internal document" that she alleges the Department of Labor had 

"created solely for demonstration at trial" using Disney names as applicants. 

Holloway Br. at 19 n.7; see also J.A.152–57. That document, however, was not 
24 

Defendants argue against using the enrollment forms in an analysis of plan 

assets because the forms do not constitute the actions and representations of "the 

plan sponsor." Advisory Op. No. 94-31A, 1994 WL 501646, at *3; accord Kalda 

v. Sioux Valley Physician Partners, Inc., 481 F.3d 639, 647 (8th Cir. 2007). 

Defendants contend the enrollment forms were not "created or controlled by the 

PITWU Fund in any way," and, are, therefore, irrelevant to plan asset 

analysis. Doyle Br. at 19. The record, however, supports the district court's 

decision to rely on the enrollment forms. 

 Given the clear language of the governing documents, it is unnecessary to 

find that the enrollment forms are attributable to the Fund. The Trust Agreement 

plainly states "any and all" contributions by employers must be held in trust; if the 

employers, after reading the enrollment forms, intended to submit a certain total 

amount of employer contribution as payment for their employees' participation in 

the Fund, then that total contribution amount becomes a plan asset. J.A.92. 

Regardless, it was not clear error for the district court to infer, as state 

regulators did, that PCMG and PCI/NP's enrollment forms and related 

representations were attributable to the Fund. J.A.179-80 (insurance commissioner 

found that PCI/NP and PCMG were acting as an insurance agent for the Fund); 

 

created by the Secretary. It was created jointly by Doyle and PCI/NP to train sales 

consultants, J.A.763–64; 1173–74, and Doyle testified that this hypothetical 

accurately represented sign up forms. See J.A.765, 768.
25 

J.A.212 (Texas insurance commissioner finding that PCMG marketed the Fund); 

J.A.224 (Massachusetts insurance commissioner made a similar finding). 

The enrollment forms referred to the Fund and the co-employers viewed 

these forms as "applications" to the Fund. J.A.793-94. Though PCMG may not 

have been a formally authorized agent of the Fund, PCMG operated for over a year 

with the Fund's apparent authority. See Pell v. E.I. DuPont de Nemours & Co. 

Inc., 539 F.3d 292, 301 (3d Cir. 2008) (applying apparent authority in the ERISA 

context). PCMG and Doyle conducted the billing, the receipt, and remittance for 

employer contributions to the Fund. PCMG served as the conduit to enroll 

employees into the Fund and changed coverage for existing participants. J.A.763-

65; 800; see also J.A.133 (PCMG processed forms related to changes to the 

existing client's coverage, such as a dependent add-on). PCMG communicated to 

employers about their employees' entitlement to benefits. Id. (PCMG 

representatives are responsible to ensure the employer understands its membership 

in the Union and his employees' entitlement to the Health Benefit Plan). Because 

the enrollment packet was the only method to secure health benefits from the Fund, 

it was more than reasonable for the target small businesses to believe that the 
26 

statements in the enrollment packet were authorized by the PITWU Fund. See 

J.A.29.9 

Moreover, these enrollment forms were also sent to the plan administrator 

who reviewed and accepted them. J.A.162. Accordingly, key Fund actors knew 

about Doyle's and PCMG's representations and permitted him to keep making them 

for over a year. In re Mushroom Transp. Co., Inc., 382 F.3d 325, 345 (3d Cir. 

2004) (noting apparent authority may be the "authority which, although not 

actually granted, the principal knowingly permits the agent to exercise") (emphasis 

added). All of the Fund trustees (Holloway included) unquestionably acquiesced 

or ratified Doyle's representations by continuing to accept millions of dollars 

accruing from Doyle's enrollment activities, even after being made aware of his 

role in the scheme through the various cease-and-desist orders. "[T]he concept of 

ratification in agency law binds a principal to an unauthorized agent's acts if the 

principal knows of the acts but fails to take affirmative steps to disavow them." 

Residential Reroofers Local 30-B Health & Welfare Fund of Philadelphia & 

Vicinity v. A & B Metal & Roofing, Inc., 976 F. Supp. 341, 346 (E.D. Pa. 1997) 

(citing United States v. One 1973 Rolls Royce, 43 F.3d 794, 818 n.26 (3d Cir. 

 

9

 Defendants' statement that the district court "acknowledged that no PCI or NP 

client signed any document that specifically named the PITWU Fund" is correct 

only insofar as the term "PITWU Fund" was not used. The district court, however, 

found that employers "executed" a page of the form stating that "[t]his health and 

welfare plan is sponsored by [PITWU]." J.A.29. 
27 

1994)); see also Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 85 (1995) 

(acknowledging the plan sponsor's possible ratification of an unauthorized act). 

Finally, the agreement between Doyle and PCI/NP makes clear that he and 

others acting under the agreement were collecting employer "contributions." 

J.A.129 ("PCMG shall be responsible for all contributions received"); id. ("All fees 

due to PCMG shall be payable monthly following receipt of applicable 

contributions from co-employers by [PCI/NP]."). Indeed, Doyle stipulated that he 

received "[t]he employer contributions to the PITWU Fund" which "were 

deposited in the PCI operating checking account from which normal business 

expenses were paid . . .". J.A.640. 

This is not a situation where Doyle made a single representation and there is 

a question whether that representation was later affirmed by the Fund. Doyle, for 

more than a year, made this representation thousands of times, resulting in millions 

of dollars in contributions being collected in the Fund's name. J.A.23; 1265. 

Under these circumstances, it is not clear error to infer that Doyle's statements 

were attributable to the Fund. See Restatement of Law of Agency § 83 comment c. 

(2007) (noting ratification through conduct is appropriate where the principal 

"receives or retains property to which he is entitled only if the earlier transaction is 
28 

validated").10 The district court did not err in examining these enrollment forms to 

determine plan assets. 

II. The District Court Correctly Ruled that Holloway Breached Her 

Fiduciary Duties as Trustee When She Failed to Prudently Manage 

The Fund and Did Nothing to Prevent the Diversion of its Assets 

This Court asked the district court to determine whether Holloway breached 

her duties. The district court found that she failed to protect plan assets from 

diversion by her co-fiduciaries, failed to maintain financial records, resigned 

without prudent precautions, and was thus liable to restore to Fund the diverted 

monies. J.A.45. 

A. Holloway's Fiduciary Duties 

Holloway acknowledges "[she] was a named fiduciary, and thus was 

obligated to discharge her duties to the Fund '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.'" Holloway Br. at 28 (quoting 

J.A.1277 (citing 29 U.S.C. § 1104(a)(1)(B))). As a fiduciary, Holloway also had to 

discharge her duties "solely in the interest of the [ERISA plan] participants and 

 

10 Defendants' footnote argument, Holloway Br. at 26 n.10, about the Fund's 

inability to sue PCI or PCMG for unpaid employer contributions is irrelevant 

because the claims here do not concern liability for employer contributions but 

rather the illegal diversion of employer contributions already paid and collected by 

a fiduciary.
29 

beneficiaries." 29 U.S.C. § 1104(a)(1). ERISA requires a plan trustee to hold plan 

assets in trust and maintain them in the trustee's exclusive control. See ERISA § 

403(a), 29 U.S.C. § 1103(a). "The fiduciary obligations of the trustees to the 

participants and beneficiaries of [an ERISA] plan are those of trustees of an 

express trust—the highest known to the law." Donovan v. Bierwirth, 680 F.2d 

263, 272 n.8 (2d Cir. 1982). 

Holloway suggests that the district court's ruling judged her performance by 

hindsight. Holloway Br. at 29. As in Chao v. Merino, 452 F.3d 174, 183 (2d Cir. 

2006), this contention is "belied by the record," which supports the district court's 

finding that Holloway had failed to protect the fund from the risk of harm – a 

potential diversion of plan assets – apparent to her at the time of the events in 

question. "If a fiduciary was aware of a risk to the fund, he may be held liable for 

failing to investigate fully the means of protecting the fund from that risk." 

Merino, 452 F.3d at 182 (finding fiduciary imprudent for failing to take 

"precautionary steps" before hiring a firm to collect contributions when the 

fiduciary knew it had previously misappropriated contributions); see also Katsaros 

v. Cody, 744 F.2d 270, 279 (2d Cir. 1984) (finding fiduciary failed to conduct a 

reasonable investigation for an investment that was "a loser from its inception"). 

 
30 

B. Holloway's Knowledge about the Scheme 

The record provides substantial evidence that Holloway knew or should 

have known about the "scheme" and the attendant risks to the Fund, including the 

diversion of plan assets. The district court had found that Holloway's knowledge or 

risks to the Fund began virtually at the inception of the Fund. J.A.41. 

From nearly the inception of her trusteeship, Holloway was aware that: there 

were 'boxes' of claims that had not been processed; that there were large 

numbers of unpaid health claims; financial reports could not be prepared 

because of the lack of financial data; the TPA reported insufficient funding 

to pay adjudicated and valid claims; and a number of states had issued ceaseand-desist orders forbidding the PITWU Fund from operating within their 

borders, three of which named her as a party. 

 

J.A.41 (emphasis added). 

Specifically, Holloway's brief ignores the cease-and-desist orders as putting 

Holloway clearly on notice about the scheme. Starting in January 2002, state 

insurance commissioners issued cease-and-desist orders against members of this 

scheme. J.A.21. In June 2002, Louisiana issued an order to the PITWU Fund, for 

which Holloway was the named trustee, noting clearly that employees "do not 

directly join the union, and receive no representation or benefit from PITWU other 

than access to the union sponsored health plan" and that "[o]ne 'employer' from 

Louisiana who contracted with PCI and enrolled in the health and welfare fund did 

not include any employees or activate any PEO services other than the health 

benefits." J.A.180. 
31 

This order also put her on notice that, despite the lack of PEO services, 

"[m]onthly premiums for insurance, PEO charges and other fees [were] collected 

by PCMG [and] PCMG also pays compensation to its marketing force on a multilevel basis that includes levels for consultant, sales manager, district manager, 

regional manager, area manager and national manager." J.A.181. These additional 

fees should have alarmed a fiduciary, as Holloway testified that she "knew that the 

Union performed no representation or collective bargaining function apart from 

collecting dues." J.A.40. 

Not surprisingly, by October 2002, a month after Holloway resigned, the 

Fund had incurred over $7.6 million in unpaid claims. J.A.23; 1265. In her 

resignation letter, she listed the Fund's structural problems as one of several 

reasons for her resignation, including: "[n]o financial accountability for 

contributions to the [Fund] by other membership," and the "[v]ulnerability of the 

fund due to actions taken by membership that has created insolvency of the fund." 

J.A.19; 196-97. Holloway recognized the "chaotic state of affairs of the Fund." 

J.A.196. 

 Holloway's arrangements with Oak Tree, the Fund's claims administrator 

during March to June 2002, reinforce the district court's finding that she knew 

about these risks to the Fund well before her resignation. J.A.15-16. To protect 

her own company, EDI, another purported PEO in this scheme, she used her 
32 

authority as the Fund trustee to direct that any contributions forwarded by EDI 

would only pay the claims of participants enrolled through her company but not the 

claims of participants enrolled through PCI/NP. J.A.1046; Holloway Br. at 22. 

Accordingly, the record confirms that Holloway knew well before she resigned 

that: (1) there was no "financial accountability" for the Fund's collection of 

contributions; (2) significant fees were taken out of the contributions; and (3) 

contributions could not cover the claims for benefits, leading to inevitable 

insolvency. Holloway's arguments that she did not know about PCI/NP and 

PCMG's fees or their enrollment practices, Holloway Br. at 24, are particularly 

incredible given that she was the head of a PEO also marketing the Fund to clients 

and she had discussed the PCI/NP enrollment forms in trustee meetings with the 

plan administrator. See Holloway Br. at 22; J.A.162 (Enrollments), 164. The 

district court did not clearly err in concluding that Holloway knew of significant 

risks to the Fund well before her resignation. 

C. Holloway Failed to Protect the Fund 

As the district court recognized, many red flags should have alerted 

Holloway to protect the Fund and, particularly, its flawed collection of employer 

contributions. The district court rightfully concluded that Holloway failed to 

prudently manage plan assets and investigate signs of a diversion of plan assets, 

two duties paramount to ERISA fiduciaries. See J.A.39-41. Consequently, the 
33 

district court correctly held Holloway liable for any diversion of the employer 

contributions. J.A.44-45. "Any person who is a fiduciary with respect to a plan 

who breaches any of the responsibilities, obligations, or duties imposed upon 

fiduciaries by this subchapter shall be personally liable to make good to such plan 

any losses to the plan resulting from each such breach." 29 U.S.C. § 1109(a) 

(emphasis added). 

As an initial matter, Holloway contests the judgment because these failures, 

even if they did occur, did not actually cause the monetary loss imposed in the 

judgment, i.e., the diverted amounts from Checks 1 and 2. Holloway Br. at 31; 45-

48. Holloway argues that her failures could not cause the monetary loss because 

she "had no knowledge," id. at 47, of the diversion of contributions, and, therefore, 

could not have stopped it. This is an improper and unduly narrow reading of 29 

U.S.C. § 1109(a)'s "resulting from" language. This Court has read "resulting 

directly from" as "proximate causation." Resolution Trust Corp. v. Fid. & Deposit 

Co. of Maryland, 205 F.3d 615, 655-656 (3d Cir. 2000). Under this causation 

standard, a violation need "not be the sole cause of harm. It suffices if it is a 

substantial contributing factor to the harm suffered." Id. at 656 (internal quotation 

marks and citation omitted). The district court correctly concluded, as described in 

the following sections, that Holloway's failures, at the very least, were a 

"substantial contributing factor" to the diversion of plan assets. 
34 

1. Holloway Failed to Establish Administrative Procedures 

Holloway's failure to establish the basic administrative procedures and 

financial controls not only violated her statutory obligations to the Fund but 

enabled the scheme. Both ERISA and the Trust Agreement required Holloway, as 

the Fund's trustee, to hold the Fund's assets in trust and maintain them in the 

trustee's exclusive control. See ERISA §§ 403(a), 404(a)(1), 29 U.S.C. §§ 1103(a), 

1104(a)(4); Trust Agreement (requiring "[b]oth the principal and the income of the 

Trust Fund shall be held in trust"), J.A.93. In addition, creating financial control 

mechanisms is one of the "principal statutory duties imposed on trustees" like 

Holloway. See Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142-43 

(1985); Varity Corp. v. Howe, 516 U.S. 489, 511-12 (1996); Trust Agreement, 

J.A.98-99 (requiring Trustees to "keep separate books of account of their financial 

transactions"). 

As this Court has long recognized, "[t]here is no more fundamental duty 

imposed on those who hold property for others than that of rendering an account of 

its management." In re Pittsburgh Rys. Co., 117 F.2d 1007, 1008 (3d Cir. 1941) 

(debtor in possession); see also Landis v. Scott, 32 Pa. (8 Casey) 495, 502-03 (Pa. 

1859) ("The duty of a trustee . . . to keep regular and correct accounts, is 

imperative. If he does not, every presumption of fact is against him. He cannot 

impose upon his principal . . . the obligation to prove [w]hat he has actually 
35 

received. . . . By failing to keep and submit accounts, he assumes the burden of 

repelling the presumption and disproving negligence and faithlessness."). "A 

trustee has a duty to account to beneficiaries of the trust." Libbey-Owens-Ford Co. 

v. Blue Cross & Blue Shield Mut. of Ohio, 982 F.2d 1031, 1036 (6th Cir. 1993) 

(quoting Restatement (Second) of Trusts § 172 comment c (1959)); cf. In re 

Lemington Home for Aged, 659 F.3d 282, 291 (3d Cir. 2011) (recognizing a 

breach of fiduciary duty of care because of poor financial record-keeping and 

management). The prudence in the financial management and reporting of the plan 

is the necessary foundation for the fiduciary's required monitoring of the plan and 

its fiduciaries. Cf. Merino, 452 F.3d at 182; Ream v. Frey, 107 F.3d 147, 156 (3d 

Cir.1997) (finding fiduciary liable for failing to prudently monitor service 

providers). 

Holloway and her co-trustees created the Fund without establishing adequate 

financial management and financial record-keeping, thus violating these 

fundamental duties as ERISA trustees. E.g., J.A.16 (describing Oak Tree's report 

of deficiencies in the Fund's financial management); J.A.170 (minutes of trustee 

meeting noting lack of financial reporting); J.A.1016 (testifying that the accountant 

did not have the necessary information). To perform these most basic duties as a 

trustee, Holloway should have established financial controls and records that 

would have deterred Doyle and others from diverting plan assets. As the record 
36 

shows, the Fund had no mechanism for the trustees or anyone else administering it 

to know whom Doyle or others had enrolled in the Fund or what monies they 

collected from employers they enrolled. See Holloway Br. at 40 (admitting a lack 

of knowledge). Holloway in her resignation letter emphasized the "chaotic" nature 

of the operation, a "lack of structure, accountability, and communication," "no 

financial accountability for contributions," and lack of "financial records" required 

by the accountants and actuary. J.A.196-97. Had Holloway, for example, 

established even a rudimentary financial control mechanism, such as a spreadsheet, 

the diversion would have been immediately apparent when the amounts collected 

did not match the amounts deposited. The employer contributions also should 

have been collected under a trustee's supervision and immediately deposited into a 

trust account exclusively controlled by a Fund trustee, as required by ERISA §§ 

403(a), 404(a)(1)(B), and the Trust Agreement itself, J.A.93. This requirement 

would have deterred any diversion, let alone 60% of contributions paid, along the 

way. The scheme was able to continue precisely because Holloway and the other 

trustees could not discern the diversion of money from the contributions. E.g., 

J.A.212 (insurance commissioner noting that the lack of proper records hid the 

fraud associated with the contributions). Her admitted lack of awareness of PCMG 

and the various amounts it took in fees is merely a symptom of her overall failure 
37 

to institute proper financial management. Holloway Br. at 40. This failure is a 

substantial contributing factor to the diversion of plan assets. 

The district court's findings establish that Holloway violated her most basic 

duties as a trustee by failing to establish basic administrative procedures and 

financial controls that could have deterred the diversion of plan assets; Holloway 

has not demonstrated the district court's findings are clearly erroneous. J.A.39-41

(citing Restatement (Third) of Trusts §§ 76(2)(b)), 83; Ream, 107 F.3d at 156. 

2. Holloway Failed to Investigate the "Scheme's" Red Flags 

This Court has recognized that a basic ERISA fiduciary duty is the duty to 

conduct an independent investigation. In Re Unisys Savings Plan Litig., 74 F.3d 

420, 435 (3d Cir. 2005). "Not to investigate suspicions that one has with respect to 

the funding and maintenance of the plan constitutes a breach of that duty." Barker 

v. Am. Mobil Power Corp., 64 F.3d 1397, 1403 (9th Cir. 1995). Consistent with 

this settled precedent, the district court found that Holloway breached her duty of 

prudence by ignoring evidence that the Fund was being mismanaged "[f]rom 

nearly the inception of her trusteeship." J.A.41. In light of these findings, the 

district court concluded that Holloway breached her duty to "more fully" 

investigate, which "would have revealed the Fund's potential insolvency and/or the 

diversion of assets." J.A.41 (emphasis added). It is not, as Holloway suggests, the 

discovery of actual misconduct that triggers liability, Holloway Br. at 36-41, but 
38 

rather the risk that plan assets could be diverted, a risk she could have guarded the 

Fund against. Merino, 452 F.3d at 182; Ream, 107 F.3d at 156 ("[W]e think that 

ordinary common sense should have warned [the fiduciary] of this possibility"). 

"[T]he thoroughness of a fiduciary's investigation is measured not only by 

the actions it took in performing it, but by the facts that an adequate evaluation 

would have uncovered." In re Unisys Sav. Plan Litig., 74 F.3d at 436. According 

to the court, the evidence of mismanagement and inexplicable lack of financial 

data from her co-fiduciaries should have prompted Holloway to ask for the 

financial records of PCI/NP and PCMG, which would have shown "how much of 

the employer contributions PCMG was keeping as sales commissions, how much 

the [Union] was taking in dues, or how much PCI/NP was paying to itself as 

salaries and business expenses." J.A.41. A review of "PCMG's and PCI/NP's bank 

records for the months of January through August 2002," for example, "would 

have [revealed] that PCMG received a total of $4.48 million from participating 

employers during that time period, and that only $1.3 million of that money was 

paid" to the Fund's administrators or to pay benefit claims. J.A.41. Holloway 

could have also investigated the reasons ECI, one of the two original PEOs, left the 

Fund before it sued her for fiduciary breach. Holloway would have obtained 

evidence about the diversion of plan assets. She would have had an opportunity to 

secure protection to the Fund by stopping the diversion, cooperating with 
39 

regulators, or alerting beneficiaries. See Ream, 107 F.3d at 156; see also Barker, 

64 F.3d at 1404 ("Had [the fiduciary] investigated his suspicions and notified the 

participants of his concerns about the Plan's mismanagement, the participants could 

have taken steps to have the Plan suitably perform its obligations."). But she did 

not investigate. And her now admitted lack of awareness that PCMG diverted 60% 

of the contributions is another sign of her failure to do so. Holloway Br. at 40. 

 The district court ruled that Holloway violated her duty to investigate based 

on detailed findings of fact, and Holloway has not addressed these findings much 

less shown that they are clearly erroneous. J.A.41-42. 

3. Holloway Resigned without Protecting the Plan from Known Harm 

A resigning ERISA plan trustee must "satisfy ERISA's fiduciary standard of 

care, in addition to whatever contractual duties may be set forth in the plan 

documentation." Ream, 107 F.3d at 154; Restatement of the Law (Second) Trusts 

§ 106. "Courts that have considered the issue have held that an ERISA fiduciary's 

obligations to a plan are extinguished only when adequate provision has been made 

for the continued prudent management of plan assets." Glaziers & Glassworkers 

Union Local No. 252 Annuity Fund v. Newbridge Secs., Inc., 93 F.3d 1171, 1183 

(3d Cir. 1996). A resigning fiduciary must, therefore, make an effort "to ensure the 

continued viability of the plan after its resignation." Ream, 107 F.3d at 156. 
40 

 Holloway cannot deny she knew the dire straits the Fund was in before she 

resigned. As her own brief admits, Holloway "learned the extent of problems 

related to the lack of funding claims at a meeting on September 20, 2002, shortly 

before she resigned (but continued to remain actively involved)." Holloway Br., 

at 33. "When the extent of the underfunding became apparent, combined with 

cease-and-desist orders being issued due to PCI/NP and PCMG's questionable 

actions, she resigned." Id. at 34. Ream and Glaziers reiterate the undisputed 

principle that a trustee cannot escape her responsibilities and liabilities just by 

resigning; she must ensure the plan is prudently managed after her resignation. As 

Ream suggests, the Secretary as plaintiff need not "rerun the course" and 

hypothesize what she should have done to do so. 107 F.3d at 156. Holloway had 

many options, but pursued none. 

Holloway clearly knew the Fund was systematically flawed and believed the 

remaining trustees and professionals had put the Fund in peril.11 J.A.196-97. At a 

minimum, Holloway could have urged the appointment of an independent, 

"suitable[,] and trustworthy" successor. J.A.34. Trustees are authorized to and 

 

11 Extensive concerns Holloway detailed in her resignation letter directly 

contradict her current argument that she left the Fund with "adequate and qualified 

trustees." Holloway Br. at 42. Holloway complained specifically about the other 

trustees. J.A.197. 
41 

have selected their successors when they resign. J.A.16, 379-80.12 Alternatively, 

she could have given notice of the Fund's risks to its beneficiaries or hired a 

competent auditor. Holloway has presented no evidence that she attempted any 

meaningful action to protect the Fund before or after resigning. See Holloway Br. 

at 44. The burden to establish a prudent resignation lies with the fiduciary. See 

Ledbetter v. First State Bank & Trust Co., 85 F.3d 1537, 1546 (11th Cir. 1996). 

Holloway's references to specific actions are inapposite. Holloway refers to her 

request to Fund counsel Goldstein a week before her resignation to "bring some 

accountability" to the Fund. J.A.18. Holloway does not mention that Goldstein 

told her to "talk to the trustees about that." Id. Rather than replace Goldstein or 

take meaningful action herself, Holloway resigned days later. Id. 

Holloway also highlights another specific action: her "cross-claims [filed] 

against Mr. Weinstein and one of the Fund's [claims administrators], on behalf of 

the Fund, in an action brought in Illinois." Holloway's Br. at 44 (citing J.A.1080). 

Holloway neglects to mention that her cross-claims were filed only after she was 

 

12 Contrary to Holloway’s claim, the Trust Agreement did not prevent her from 

appointing her replacement (Holloway Br. 45). In fact, it authorized employers, 

like EDI, to "designat[e] a successor" trustee. JA 92-93. Thus, as EDI's owner, 

Holloway could have appointed a replacement trustee. In relevant part, the Trust 

Agreement provided that "[t]he Trustee representing the EMPLOYER and the 

other EMPLOYERS governed by this Agreement shall be appointed by [ECI] and 

[EDI]...and a written certification by the Secretary of each appointing Employer 

shall be satisfactory evidence of such appointment." Id.
42 

sued by a co-employer, ECI, for fiduciary breach for failing to pay ECI employees' 

health claims. J.A.1043-44, 1046. If such an action would protect the Fund, as 

Holloway suggests, this raises the question of why Holloway did not sue the other 

trustees on her own initiative for fiduciary breaches before or after her resignation. 

Indeed, the district court correctly concluded that Holloway could have asked for 

an accounting of the Fund. J.A. 41-42. 

Holloway has not shown any error in the district court's conclusions or 

satisfied her burden to identify any action she took to ensure that the Fund's 

admittedly systemic problems would be addressed. Plainly, she chose to escape 

liability by resigning and then excused her failure to prudently resign by 

suggesting that she could not have prevented the eventual damage to the Fund. See 

Holloway Br. at 46-47. "Courts do not take kindly to arguments by fiduciaries 

who have breached their obligations that, if they had not done this, everything 

would have been the same." In re Beck Indus., Inc., 605 F.2d 624, 636 (2d Cir. 

1979). "'[A]s between innocent beneficiaries and a defaulting fiduciary, the latter 

should bear the risk of uncertainty as to the consequences of its breach of duty." 

Id. (quoting Estate of Stetson, 345 A.2d 679, 690 (Pa. 1975)). 

4. Holloway is Liable as a Co-fiduciary 

In addition to her breach of her own duties, "fiduciaries may be liable under 

§ 1105(a) even if their co-fiduciary breach is beyond the scope of their own 
43 

discretionary authority." In re Polaroid ERISA Litig., 362 F. Supp. 2d 461, 481 

(S.D.N.Y. 2005); see also In re Worldcom, Inc. ERISA Litig., 354 F. Supp. 2d 423, 

445 (S.D.N.Y. 2005) ("[E]very ERISA fiduciary, regardless of the parameters of 

its duties, is subject to the co-fiduciary liability provision[.]"). 

The district court ruled that Holloway was liable under section 405 of 

ERISA, 29 U.S.C. § 1105. J.A.43-44. Holloway argues that she cannot be liable 

for the breaches of any other fiduciary because she did not know what they were 

doing. Holloway Br. at 45-47. This argument ignores the terms of section 

405(a)(2), which provide that a co-fiduciary can be held liable when "by his failure 

to comply with section 1104(a)(1) of this title in the administration of his specific 

responsibilities which give rise to his status as a fiduciary, a fiduciary has enabled 

such other fiduciary to commit a breach." 29 U.S.C. §1105(a)(2). 

Holloway not only breached her own duties as trustee by failing to establish 

and enforce a basic administrative structure to account for and hold the Fund's 

assets in trust, her failures in this regard enabled Doyle and other plan fiduciaries 

and providers to divert plan assets. Her breaches created an administrative noman's land in which Doyle and PCI/NP were able to exercise control over the 

Fund's assets, and do with them what they chose with little or no accountability. 

See Free v. Briody, 732 F.2d 1331, 1335-36 (7th Cir. 1984) (finding trustee's 
44 

failure to take any action to identify or control plan assets or ensure they would be 

protected from loss contributed to plan losses caused by co-fiduciary's breach). 

D. Holloway's Other Legal Arguments Are Without Merit 

In light of these findings, Holloway's other arguments are inapposite. 

Holloway points to her adherence to the plan documents, including a "bogus" 

CBA. Holloway Brief at 35-36. Following plan documents, even assuming their 

legitimacy, however, is no defense to breaches of fiduciary duty. See 29 U.S.C. 

§ 1104(a)(1)(D); Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459, 2468 

(2014) ("This provision makes clear that the duty of prudence trumps the 

instructions of a plan document[.]”). 

Holloway also argues that because the fees were not "excessive," Holloway 

had no obligation to prevent the diversion of employee contributions to non-plan 

entities. Holloway Br. at 34-35. The "[b]asic principles of the law of fiduciaries . . 

. place the burden to render an accounting on the fiduciary once the principal has 

shown that funds have been entrusted to the fiduciary and not paid over or 

otherwise accounted for." In re Niles, 106 F.3d 1456, 1462 (9th Cir. 1997). The 

district court correctly ruled that the plan assets diverted from both Checks 1 and 2 

were paid for services that were unnecessary, non-existent, in violation of state 

law, and did not serve Fund purposes. J.A.37-38. Diversion of plan assets for 

these reasons necessarily violates ERISA's prudence and loyalty requirements, as 
45 

well as its requirement that plan assets be used solely to pay benefits and to defray 

reasonable expenses. See 29 U.S.C. § 1104(a)(1)(A). Holloway's brief has failed 

to identify why or how the diversion of contributions served the Fund's interest; the 

only purpose was to compensate entities Holloway describes as "not providing 

service to the Fund," Holloway Br. at 35. Holloway has not shown the district 

court's findings to be clearly erroneous. 

Ultimately, Holloway's first and most critical fiduciary breach was her 

failure to perform a trustee's duty to establish administrative procedures adequate 

to protect plan assets, including the creation and maintenance of claims and 

financial records. This threshold breach allowed the diversion of plan assets and 

set the stage for the Fund's chaotic collapse. Every administrator and professional 

that served the Fund after Union Privilege Care told Holloway that they could not 

do their jobs, including an assessment of the Fund's financial condition, due to the 

lack of records. Having set the Fund on a certain course for failure, which she 

recognized, Holloway cannot now simply allege that the clearly foreseeable results 

of her initial breach are only obvious in hindsight. 

III. The District Court Correctly Ruled that Doyle Was a Functional 

Fiduciary and Breached His Fiduciary Duties by Diverting Plan 

Assets 

This Court asked the district court to determine whether Doyle was a 

functional fiduciary because he exercised control over plan assets. The district 
46 

court found that he exercised discretionary control over Check 1 and 2 monies and 

breached his fiduciary duties by diverting those funds. J.A.45. 

A. Doyle's Fiduciary Status

ERISA defines a fiduciary "in functional terms of control and authority." 

Srein v. Frankford Trust Co., 323 F.3d 214, 220 (3d Cir. 2003) (quoting Mertens v. 

Hewitt Assocs., 508 U.S. 248, 262 (1993)). "[A] person is a fiduciary with respect 

to a plan to the extent he [ (a) ] exercises any discretionary authority or 

discretionary control respecting management of such plan or [ (b) ] exercises any 

authority or control respecting management or disposition of its assets." 29 U.S.C. 

§ 1002(21)(A)(i). This Court emphasized the "significant difference between the 

two clauses" because "discretion is specified as a prerequisite to fiduciary status for 

a person managing an ERISA plan, but the word 'discretionary' is conspicuously 

absent when the text refers to assets." Bd. of Trustees of Bricklayers & Allied 

Craftsmen Local 6 of New Jersey Welfare Fund v. Wettlin Assocs., Inc., 237 F.3d 

270, 272-74 (3d Cir. 2001). "This distinction is not accidental – it reflects the high 

standard of care trust law imposes upon those who handle money or other assets on 

behalf of another." Id. at 273 (citation omitted). Accordingly, "Congress 

established a lower threshold for fiduciary status where control of assets is at 

stake." Id. at 274. 
47 

 Although Doyle focuses on the difference between Checks 1 and 2, Doyle 

Br. at 19-24, the district court found, with ample support from the record, the 

employer's enrollment packages contemplated a lump sum, a single amount 

payable for the Fund's health coverage. J.A.29-31. "The forms signed by the 

employer to adopt the Fund as a health plan for his employees did not parcel the 

premium into Fund assets and other monies." Id. Doyle provides no basis to 

suggest that these findings were clearly erroneous. And he admitted at trial that he 

deposited lump sum enrollment checks in PCMG's account and then "abstracted" 

funds from that account to forward to PCI/NP for the Fund. J.A.765-67. 

 This single lump sum contribution constitutes the employer contribution 

paid and a plan asset. Doyle argues that he did not have discretion over plan assets 

because neither check was payable to the Fund and he executed the checks 

accordingly. Doyle Br. at 14. The district court rejected this argument. J.A.30 

(finding that "[f]rom the employer's point of view, the combined amount was the 

cost of the insurance for each of his employees"). "That the cost ... was later 

broken apart by invoice into two checks does not defeat the conclusion that the 

employer payments constituted Fund assets within the meaning of ERISA." Id. 

Consistent with the district court's conclusion, Doyle clearly exercised 

control over plan assets by both managing the billing system on behalf of PCI/NP 

and the Fund and then by collecting plan assets based on his invoices. See J.A.15, 
48 

36, 195, 198-99, 345, 645, 780-81, 1178. Doyle, who was neither a trustee nor a 

named fiduciary, instituted the two-check arrangement after enrollment even 

though this procedure was not contemplated in the enrollment forms or any other 

plan document. See J.A.29, 1116, 1176-77. He instructed the employers of the 

recipient and the amounts for these checks. J.A.30, 1120, 1168, 1188-90; 1199. 

Doyle's diversion of employer contributions by invoicing and billing the 

employers for fees that he set in concert with PCI/NP through his two-check 

system (see J.A.30; 1168) demonstrated his control over plan assets (paid employer 

contributions) and is analogous to control over check-writing from plan accounts, 

which is a well-established basis for fiduciary status under ERISA. See Bd. of 

Trustees of Bricklayers, 237 F.3d at 274 (citing numerous cases, including Yeseta 

v. Baima, 837 F.2d 380, 386 (9th Cir. 1988)). Whether Doyle had authorization 

from the trustees or PCI/NP (a non-trustee) is of no relevance as Doyle had 

sufficient "control" over these employer contributions. See Yeseta, 837 F.2d at 

386. 

 Moreover, should this Court focus on Doyle's post-collection control over 

the separate Check 1 and Check 2 funds, Doyle still exercised fiduciary control 

over these two funds. It is undisputed that Doyle exercised sufficient control over 

the Check 2 funds to make him a fiduciary as to those funds. Doyle argues only as 

to Check 2 that those funds were not plan assets. Doyle Br. at 18–20. He does not 
49 

argue that he lacked the requisite control. See United States v. Pelullo, 399 F.3d 

197, 222 (3d Cir. 2005) (noting that "an appellant's failure to identify or argue an 

issue in his opening brief constitutes waiver of that issue on appeal"). Regardless, 

Doyle's control is clear for Check 2 funds as Check 2 was payable directly to 

Doyle's company in amounts he dictated. See J.A.771; 36 (noting that "Doyle 

conceded at trial that he set the commissions and billing fees for PCMG and its 

marketing agents, virtually unilaterally."). 

Doyle also exercised sufficient control over the Check 1 funds. He 

effectively concedes Check 1 funds are plan assets because they contain employer 

contributions paid to the Fund. Doyle Br. at 15. Doyle's billing, collection, 

possession, remittance, and accounting for these employer contributions constitute 

sufficient control over plan assets. See Yeseta, 837 F.2d at 386; David P. 

Coldesina, D.D.S. v. Estate of Simper, 407 F.3d 1126, 1133 (10th Cir. 2005); 

Patelco Credit Union v. Sahni, 262 F.3d 897, 909 (9th Cir. 2001). 

Doyle was also compensated for performing these multiple roles and took 

"responsib[ility] for all contributions received," J.A.129; Doyle was no mere 

custodian. Compare Srien, 323 F.3d at 220 (finding fiduciary status for defendant 

who controlled assets, charged a fee for responsibility over the assets, and 

indicated a willingness to undertake control of the assets). 
50 

Despite this evidence of control, Doyle argues that he did not have any real 

control over these funds because all he did was follow instructions from PCI/NP 

based on the collective bargaining agreements. Doyle Br. at 15. Doyle's argument 

first conflates "authority" with "control." Doyle claims he had "no input into, let 

alone authority over, the total amounts required of PCI/NP clients through Check 

1." Doyle Br. at 15 (emphasis added). But ERISA defines "fiduciary" 

disjunctively to include a person who "exercises any authority or control respecting 

management or disposition of its assets[.]" 29 U.S.C. § 1002(21)(A)(i) (emphasis 

added). As this Court has held, an entity may be a fiduciary where it exercises 

sufficient actual control of plan assets—regardless of whether it has the authority 

to do so. See Srein, 323 F.3d at 220; Bd. of Trustees of Bricklayers, 237 F.3d at 

274. 

Doyle also ignores this Court's distinction between fiduciary status triggered 

by discretionary control over plan management versus control, whether 

discretionary or not, over plan assets. Bd. of Trustees of Bricklayers, 237 F.3d at 

273. Control over plan assets is sufficient; whether he had discretion and whether 

that discretion was limited by instructions or governing plan documents is 

inconsequential. See Coldesina, 407 F.3d at 1133 (citing Srein, 323 F.3d at 220–

21) ("In Congress's judgment, and consistent with general trust law, parties 

controlling plan assets are automatically in a position of confidence by virtue of 
51 

that control, and as such they are obligated to act accordingly"); Chao v. Day, 436 

F.3d 234, 238 & n.1 (D.C. Cir. 2006). 

In any event, the record also undermines Doyle's contention that he lacked 

discretion. The district court found that $755,000 in Check 1 funds Doyle received 

was never forwarded on to PCI/NP or the Fund administrators. JA1274–75. Doyle 

made no effort on remand to explain the $755,000 in Check 1 funds that this Court 

found to be unaccounted for. J.A.1274. 

In the briefing on remand, the Secretary drew the only reasonable inference, 

i.e., that Doyle retained those funds for his own use. J.A.1344. Despite being told 

by this Court that he needed to account for those funds, Doyle wholly ignored the 

question and failed to account for the funds in his proposed findings of fact and 

conclusions of law. See J.A.1381-89. Doyle now foists his responsibility on the 

district court, arguing that it failed to reconcile the $755,000 discrepancy. But 

once the Secretary showed that the discrepancy existed, it was Doyle's 

responsibility to explain what happened to those funds, and he did not. See In re 

Niles, 106 F.3d at 1462. Given Doyle's failure to provide any explanation, the 

district court did not clearly err in concluding that the money had been retained by 

Doyle or otherwise not used for the purpose of providing benefits or necessary 

services. J.A.37 (finding $755,000 "unaccounted for"). This Court should not now 

consider unsupported factual arguments that Doyle did not raise below. See Luria 
52 

Bros. & Co. v. Allen, 672 F.2d 347, 355 (3d Cir. 1982) ("Our recognition of the 

division of competencies between trial and appellate courts compels us to forego 

consideration of a theory on which the trial court was not given a meaningful 

opportunity to develop a factual record."). 

The diversion of these assets conclusively establishes functional fiduciary 

status. Srein, 323 F. 3d at 221; Day, 436 F.3d at 237–38. 

B. Doyle's Breach of Fiduciary Duties 

Doyle's appeal focuses on the issues of plan assets and his fiduciary status. 

Because, as we have shown, the district court correctly concluded that Doyle was a 

functional fiduciary based on his control over plan assets, a conclusion that Doyle 

breached his fiduciary duties is unavoidable. 

 As a fiduciary, Doyle was subject to the stringent standards ERISA imposes 

upon fiduciaries. By diverting plan assets, Doyle violated the "exclusive benefit" 

rule of 29 U.S.C. § 1104(a)(A)(1). Misappropriation of plan assets for purposes 

other than the Fund's benefit violates ERISA. See, e.g., Prudential Ins. Co. of Am. 

v. Doe, 76 F.3d 206, 208 (8th Cir. 1996) (noting that ERISA's trust and fiduciary 

requirements intend to prevent "misappropriation of plan funds") (citation 

omitted); Resolution Trust Corp. v. Fin. Institutions Ret. Fund, 71 F.3d 1553, 1557 

(10th Cir. 1995) (finding the removal of plan assets a fiduciary violation because 
53 

"employees themselves do not benefit directly" from the removal and it reduces the 

corpus of the Fund); Patelco, 262 F.3d at 911. 

Doyle's repeated reliance on the collective bargaining agreements as a 

defense is undermined by several facts: (1) this agreement was never presented to 

the employers, J.A.28 ("employers that participated in the Fund were not given 

copies of the [collective bargaining agreements]"); (2) Doyle was aware of 

numerous cease-and-desist orders that concluded that the collective bargaining 

agreements were not genuine, J.A.21–22; and (3) Doyle admittedly agreed to 

follow instructions directly from PCI/NP, which was not a trustee, in directing plan 

assets and conducting his other plan-related activities. Doyle Br. at 6. Moreover, 

Doyle never had formal arrangements with the trust or trustees concerning his 

billing practices or specific fee arrangements as directed under the Trust 

Agreement, Doyle Br. at 19; J.A.93-95. And, he had every reason to suspect 

PCI/NP's instructions to bill for costs for services after receiving the cease-anddesist orders. Yet, he continued to divert plan funds to benefit PCI/NP and his own 

company, PCMG, without any established benefit to the Fund and its participants. 

The district court's conclusion that this behavior by a plan fiduciary with control 

over plan assets violated ERISA's strict duties of prudence and loyalty is 

unassailable. 
54 

CONCLUSION 

For the foregoing reasons, the district court's decision should be affirmed. 

Respectfully submitted, 

M. PATRICIA SMITH 

Solicitor of Labor 

G. WILLIAM SCOTT 

Associate Solicitor 

Plan Benefits Security Division 

THOMAS TSO 

Counsel for Appellate and Special 

Litigation 

/s/ Marcia E. Bove 

MARCIA E. BOVE 

DAVID EDELI 

Attorneys 

U.S. Department of Labor 

Room N-4611 

200 Constitution Ave., N.W. 

Washington, D.C. 20210 

(202) 693-5598 
CERTIFICATE OF COMPLIANCE 

1. This brief complies with the type-volume limitation of Fed. R. App. P. 

32(a)(7)(B) and 29(d) because it contains 12,584 words, excluding the parts of the 

brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). 

2. This brief complies with the typeface requirements of Fed. R. App. P. 

32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because it has 

been prepared in 14-point Times New Roman font, a proportionally spaced 

typeface, using Microsoft Word 2003. 

Dated: September 3, 2015 

/s/ Marcia E. Bove 

MARCIA E. BOVE 
CERTIFICATE OF IDENTICAL COMPLIANCE OF BRIEFS & VIRUS CHECK 

 I certify that the digital version and hard copies of the Secretary's Brief are 

identical. I further certify that a virus scan was performed on the Brief using 

McAfee, and that no viruses were detected. 

 Dated: September 3, 2015 

/s/ Marcia E. Bove 

 MARCIA E. BOVE 
CERTIFICATE OF SERVICE 

I hereby certify that on September 3, 2015, a copy of the foregoing was filed 

electronically using the CM/ECF system, which will send notification of such 

filing to the following: 

Rachel Gallagher 

Steven K. Ludwig 

Fox Rothschild LLP 

2000 Market Street 

20th Floor 

Philadelphia, PA 19103-3222 

215-299-2719 

Jill A. Guldin 

Lauletta Birnbaum, LLC 

235 South 17th Street 

Philadelphia, PA 19103 

(215) 599.7162 

/s/ Marcia E. Bove 

MARCIA E. BOVE