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15-2725-cv 

UNITED STATES COURT OF APPEALS 

FOR THE SECOND CIRCUIT 

SEVERSTAL WHEELING, INC. RETIREMENT COMMITTEE, 

TIMOTHY S. ROGERS, MELVIN BAGGETT, WILLIAM DREW 

LANDON, as named fiduciaries of the Wheeling Corrugating Company 

Retirement Security Plan, THE SALARIED EMPLOYEE'S PENSION 

PLAN OF SEVERSTAL WHEELING, INC., RICHARD CARUSO, THE 

WHEELING CORRUGATING COMPANY RETIREMENT SECURITY 

PLAN, THE SALARIED EMPLOYEES' PENSION PLAN OF 

SEVERSTAL WHEELING, 

Plaintiffs-Appellees, 

(For Continuation of Caption, See Inside Cover) 

On Appeal from the United States District Court 

for the Southern District of New York 

BRIEF FOR THE SECRETARY OF LABOR AS AMICUS 

CURIAE IN SUPPORT OF PLAINTIFFS-APPELLEES 

M. PATRICIA SMITH THOMAS TSO 

Solicitor of Labor Counsel for Appellate and Special Litigation 

G. WILLIAM SCOTT D. MARC SARATA 

Associate Solicitor for Plan Attorney, U.S. Dep't of Labor 

Benefits Security Washington, D.C. 20210 

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

(202) 693-5637 
 

 


 

VINCENT D. ASSETTA, SEVERSTAL WHEELING, INC. as named 

fiduciary of the Severstal Wheeling, Inc. Pension Plan, 

 Plaintiffs, 
 

v. 

WPN CORPORATION, in its own capacity and as named fiduciary of the 

Wheeling Corrugating Company Retirement Security Plan and the Salaried 

Employee's Pension Plan of Severstal Wheeling, Inc., RONALD LABOW, 

in his individual capacity and as named fiduciary of the Wheeling 

Corrugating Company Retirement Security Plan and the Salaried 

Employee's Pension Plan of Severstal Wheeling, Inc., 

Defendants-Appellants. 

 

	 

	 


 

	 

	 

TABLE OF CONTENTS
 

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

QUESTION PRESENTED ........................................................................................1 

THE SECRETARY'S INTEREST .............................................................................1 

STATEMENT OF THE CASE..................................................................................2 

SUMMARY OF THE ARGUMENT ......................................................................11 

ARGUMENT ...........................................................................................................13 

A.	 STANDARD OF REVIEW.......................................................................13 

B. DEFENDANTS PERFORMED FIDUCIARY FUNCTIONS AS THE 

PLANS' INVESTMENT MANAGER .....................................................13 

C. DEFENDANTS BECAME FIDUCIARIES UNDER ERISA SECTION 

3(21)(A)(i) BY EXERCISING AUTHORITY OR CONTROL 

RESPECTING MANAGEMENT OF PLAN ASSETS ............................16 

D.	 DEFENDANTS CHALLENGES TO FACTUAL FINDINGS 

SUPPORTING FIDUCIARY STATUS UNDER ERISA 

SECTION3(21)(A)(ii) DO NOT DEMONSTRATE CLEAR ERROR ...19 

E. DEFENDANTS BECAME FIDUCIARIES UNDER ERISA SECTION 

3(21)(A)(iii) BY RECEIVING DISCRETIONARY AUTHORITY AND 

CONTROL OVER THE MANAGEMENT OF THE PLANS' ASSETS . 20 

CONCLUSION .......................................................................................................31 

CERTIFICATE OF COMPLIANCE 

CERTIFICATE OF SERVICE 

i 

 
 

TABLE OF AUTHORITIES 

Federal Cases: 

Alfaro Motors, Inc. v. Ward, 

 814 F.2d 883 (2d Cir. 1987) ................................................................................ 13 

Anderson v. City of Bessemer City, N.C., 

 470 U.S. 564 (1985) ............................................................................................. 13 

Arizona State Carpenters Pension Trust Fund v. Citibank, (Arizona), 

 125 F.3d 715 (9th Cir. 1997) ............................................................................... 13 

Birmingham v. Sogen-Swiss Int'l Corp. Ret. Plan, 

 718 F.2d 515 (2d Cir.1983) ................................................................................. 28 

Blatt v. Marshall & Lassman, 

 812 F.2d 810 (2d Cir. 1987) ......................................................................... 18, 19 

Bouboulis v. Transp. Workers Union of Am., 

 442 F.3d 55 (2d Cir. 2006) ........................................................................... 14, 27 

Fin. Institutions Ret. Fund v. Office of Thrift Supervision,

 964 F.2d 142 (2d Cir. 1992) ................................................................... 16, 23, 24 

Frank v. U.S., 

 78 F.3d 815 (2d Cir. 1996) ........................................................................... 20 n.5 

Harris Trust & Sav. Bank v. Salomon Smith Barney, Inc., 

 530 U.S. 238 (2000) ............................................................................................. 15 

Healthcare Strategies, Inc. v. ING Life Ins. & Annuity Co., 

 961 F. Supp. 2d 393 (D. Conn. 2013) .................................................................. 23 

ii
 

 
 

Federal Cases-(continued): 

Koch v. Dwyer, No. 98 Civ. 5519, 

 1999 WL 528181 (E.D.N.Y. Jul. 22, 1999) ......................................................... 30 

John Hancock Mut. Life Ins., Co. v. Harris Trust & Sav. Bank, 

 510 U. S. 86 (1993) .............................................................................................. 15 

L.I. Head Start Child Dev. Servs., Inc. v. Econ. Opportunity Comm'n of Nassau 

Cty., Inc., 

 710 F.3d 57 (2d Cir. 2013) .................................................................................. 27 

LaRue v. DeWolff, Boberg & Assocs', Inc., 

 552 U.S. 248 (2008) ............................................................................................. 22 

LaScala v. Scrufari, 

 479 F.3d 213 (2d Cir. 2007) ................................................................................ 30 

LoPresti v. Terwilliger, 

 126 F.3d 34 (2d Cir. 1997) ............................................................................. 2, 13 

Lowen v. Tower Asset Mgmt., Inc., 

 829 F.2d 1209 (2d Cir. 1987) ........................................................... 15, 25, 27, 28 

Mahoney v. J. J. Weiser & Co., Inc., 

 564 F. Supp.2d 248 (S.D.N.Y. 2008) .................................................................. 27 

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

 473 U.S. 134 (1985) ...................................................................................... 22, 23 

Olson v. E.F. Hutton & Co., 

 957 F2d 622 (8th Cir. 1992) ......................................................................... 13, 27 

Pegram v. Herdrich, 

 530 U.S. 211 (2000) ............................................................................................. 22 

iii
 
Federal Cases-(continued): 

Pension Ben. Guar. Corp. ex rel. St. Vincent Catholic Med. Centers Ret. Plan v. 

Morgan Stanley Inv. Mgmt. Inc., 

 712 F.3d 705 (2d Cir. 2013) ................................................................................ 14 

Railway Labor Execs' Ass'n v. Staten Island R.R., 

792 F.2d 7 (2d Cir. 1986), cert. denied, 

 479 U.S. 1054 (1987) ........................................................................................... 13 

Sec'y of Labor v. Fitzsimmons, 

 805 F.2d 682 (7th Cir. 1986) (en banc) ................................................................. 1 

Severstal Wheeling, Inc. v. WPN Corp., No. 10 CIV. 954 LTS GWG, 

 2014 WL 2959014 (S.D.N.Y. Apr. 11, 2014) ................................................ 8 n.3 

Smith v. Local 819 I.B.T. Pension Plan, 

 291 F.3d 236 (2d Cir. 2002) ................................................................................ 30 

United States v. Restrepo, 

986 F.2d 1462 (2d Cir.1993) cert.denied, 

510 U.S. 843 (1993) ....................................................................................... 20 n.5 

United States v. Catoggio,

 698 F.3d 64 (2d Cir. 2012) .................................................................................. 13 

United States v. Glick, 

 142 F.3d 520 (2d Cir. 1998) ................................................................................ 18 

United States v. McCombs, 

 30 F.3d 310 (2d Cir. 1994) .................................................................................. 13 

Varity Corp. v. Howe, 

 516 U.S. 489 (1996) ...................................................................................... 21, 22 

iv 

 
 

Federal Statutes: 

 Employee Retirement Income Security Act of 1974, (Title I), 

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

 Section 2, 29 U.S.C. 1001 ....................................................................................... 1 

Section 3(21)(A), 29 U.S.C. § 1002(21)(A) ........................ 7, 8, 11, 14, 15, 21, 27 

Section 3(21)(A)(i), 29 U.S.C. § 1002(21)(A)(i) ................ 8, 9, 11, 15, 16, 18, 19 

Section 3(21)(A)(ii), 29 U.S.C. § 1002(21)(A)(ii) ....................................... passim 

Section 3(21)(A)(iii), 29 U.S.C. § 1002(21)(A)(iii) ..................................... passim 

Section 3(38), 29 U.S.C. § 1002(38) ............................................................ passim 

Section 3(38)(C), 29 U.S.C. 1002(38)(C)............................................................. 15 

Section 402(a)(1), 29 U.S.C. § 1102(a)(1) .................................................... 22 n.7 

Section 402(c)(3), 29 U.S.C. § 1102(c)(3) .............................................. 14, 15, 22 

Section 404(a), 29 U.S.C. § 1104(a) ..................................................................... 24 

Section 404(a)(1)(A), 29 U.S.C. § 1104(a)(1)(A) .................................................. 7 

Section 404(a)(1)(C), 29 U.S.C. § 1104(a)(1)(C) ................................................... 7 

Section 405, 29 U.S.C. §1105 ............................................................................... 30 

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

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

v
 
 

Statutes-(continued): 

Section 405(a)(3), 29 U.S.C. § 1105(a)(3) ...........................................................29 

Miscellaneous: 

Hearing before the Sen. Comm. 94th Cong. (1974) 120 Cong. Rec. 29951 (1974) 

Section 405(c)(1)(B), 29 U.S.C. § 1105(c)(1)(B) ............................................ 8, 11 

Section 405(d)(1), 29 U.S.C. § 1105(d)(1) ...........................................................14 

Section 406(b), 29 U.S.C. § 1106(b) ......................................................................7 

29 C.F.R. § 2509.75-8 ..............................................................................................14 

29 C.F.R. § 2509.75-8, D3 .......................................................................................16 

Fed. R. Civ. P. 52(a) .................................................................................................13 

Fed. R. Civ. P. 52(a)(6) ............................................................................................20 

Legislative Hist. of the Employee Retirement Income Security Act of 1974, 

(remarks of Sen. Williams) ..................................................................................23 

vi 

 

QUESTION PRESENTED 

Whether defendants were the pension plans' fiduciaries with respect to the 

investments at issue under ERISA section 3(21)(A), 29 U.S.C. § 1002(21)(A). 

THE SECRETARY'S INTEREST 

The Secretary of Labor has filed a similar lawsuit in another district court 

(the United States District Court for the Western District of Pennsylvania) against 

both WPN Corporation ("WPN") and Ronald LaBow ("LaBow"), the defendantsappellants, as well as the the Severstal Wheeling, Inc. Retirement Committee, a 

plaintiff-appellee in this case. Perez v. WPN Corp., et al., Case No. 2:14-cv-01494 

(W.D. Pa.). The Secretary's ERISA claims against WPN and LaBow are based on 

similar theories of fiduciary status and breach as those asserted by the private 

plaintiffs in this appeal. An adverse decision in this appeal of the parallel private 

action could affect the Secretary's case still pending before the district court. 

The Secretary of Labor bears primary responsibility for interpreting and 

enforcing Title I of the Employee Retirement Income Security Act of 1974 

("ERISA"), 29 U.S.C. § 1001 et seq., Sec'y of Labor v. Fitzsimmons, 805 F.2d 

682, 698 (7th Cir. 1986) (en banc). In this capacity, he also has a strong interest in 

ensuring that courts correctly apply ERISA's "fiduciary" definition. In prior 

decisions concerning fiduciary status under ERISA, this Court has considered the 

1
 
                                                            


 

Secretary's views as expressed in amicus briefs. E.g., LoPresti v. Terwilliger, 126 

F.3d 34, 38 (2d Cir. 1997). 

STATEMENT OF THE CASE 

Plaintiffs-appellees are the Wheeling Corrugating Company Retirement 

Security Plan of Severstal Wheeling, Inc. and the Salaried Employees' Pension 

Plan of Severstal Wheeling, Inc. (the "Plans"), the Severstal Wheeling, Inc. 

Retirement Committee ("Severstal Committee"), which is the Plans' plan 

administrator and fiduciary, and the Severstal Committee's current individual 

members, who are also fiduciaries. 

Until late 2008, the Plans were funded and maintained through a trust 

sponsored by the WHX Corporation ("Combined Trust"), Severstal Wheeling Inc.'s 

former parent company. SPA-18.1

 The Combined Trust pooled the Plans' assets 

with assets from other employee benefit plans sponsored by the WHX Corporation 

("WHX"). SPA-18. "The [Plans] owned a percentage interest in each investment 

held in the Combined Trust." Id. The Plans' holdings constituted approximately 

ten percent (10%) of the Combined Trust assets. SPA-6. The Combined Trust 

"contained a portfolio of twenty-one separate accounts," including one account 

managed by Neuberger Berman, LLC ("NB"). SPA-17. 

1

 SPA refers to the Special Appendix filed by defendants-appellants on December 

8, 2015, with their brief [Dkt. 59]. 

2
 

 

Defendant LaBow founded corporate defendant WPN in 1987. SPA-7. 

LaBow was WPN's President and WPN's sole employee with investment 

management responsibility during the relevant time period. JA-117 at ¶ 20. WHX 

entered into an Investment Consulting Agreement (the "WHX Agreement") with 

WPN in 2004, under which WHX "authoriz[ed] and direct[ed]" WPN to "exercise 

complete, unlimited and unrestricted management authority" over the Combined 

Trust. SPA-7; JA-1196 at ¶ 7. As a practical matter, defendants advised the WHX 

Committee on investment decisions for the Combined Trust, which were then 

implemented by WHX employees. SPA-8. The district court found no evidence of 

any investment decision of the Combined Trust during the relevant period "that 

was not the product of a recommendation by LaBow, WPN, or both." SPA-8, 11. 

LaBow and WHX then executed an amendment to the agreement, effective 

August 1, 2008, that expanded LaBow and WPN's role. SPA-9. WPN's title was 

then changed from Investment Consultant to the Investment Manager of the 

Combined Trust. SPA-9. WPN received increased fees for this new role, which 

included accepting full authority for investment selection without the need to gain 

approval from the WHX Committee. Id. 

Pursuant to an agreement with WHX, Citibank acted as the Combined 

Trust's directed trustee, subject to direction by the "Investment Manager." SPA11. By June 2008, however, Citibank intended to withdraw as custodial trustee of 

3
 

 

the Combined Trust. SPA-11. Consequently, both LaBow and WHX told the 

Severstal Committee in June 2008 that the Plans' assets needed to be separated 

from the Combined Trust by September 30, 2008. Id. In an email dated 

September 15, 2008, WHX informed LaBow of the Severstal Committee's request 

that the Plans' assets be transferred, in cash, from the Combined Trust to a new 

trust for the Severstal Plans. SPA-15. Instead, on September 30, 2008, WHX and 

the Severstal Committee signed an agreement to transfer the Severstal Plan assets 

to a new trust "in the same percentage allocations as existed in the WHX Pension 

Trust . . . on or about September 30, 2008." Id. LaBow was aware of the 

agreement and understood the Severstal Plans had expected a "proportional 

allocation," or "slice" of the Combined Trust portfolio. SPA-16. At the time, 

LaBow advised both the Severstal and WHX Committees that the Combined Trust 

"should transfer assets that had no minimum capital requirements and that could be 

liquidated right away." Id. No transfer was made on September 30, 2008, but 

LaBow promised a transfer by November 3, 2008. SPA-17. 

On October 31, 2008, LaBow, based on his own criteria, selected the NB 

account and instructed WHX to transfer the NB account from the Combined Trust 

to the Plans (also referred to as the "Severstal Trust"). SPA-16, 18, 26, 30. The 

NB account was "composed of thirteen large-capitalization equity securities, 

eleven of which were energy-sector stocks, comprising approximately 97 percent 

4
 

 

of the value of assets in the account." SPA-17. WHX, in turn, instructed Citibank 

to transfer the account and Citibank carried out the instruction on November 3, 

2008. Id. "Although LaBow could have had the NB account liquidated prior to 

the transfer, so that Severstal Trust would receive cash, he did not do so." SPA-19. 

Prior to these events, starting from the summer of 2008, LaBow had initiated 

conversations with the Severstal Committee about continuing to function as the 

Plans' investment manager after the separation of the Plans' assets from the 

Combined Trust. SPA-12. LaBow eventually signed an agreement on behalf of 

WPN to serve as the Plans' investment manager on December 5, 2008 (the 

"December 2008 Agreement"), backdating the agreement to November 1, 2008. 

SPA-13. The December 2008 Agreement contained provisions that provided WPN 

with "unlimited and unrestricted management authority with respect to the 

investment of the [Plans'] Investment Fund." SPA-14. In the December 2008 

Agreement, WPN also acknowledged that it "was a fiduciary acting within the 

scope of section 3(38) of ERISA," 29 U.S.C. § 1002(38), the section defining an 

"investment manager" under ERISA. SPA-14-15. 

From November 3, 2008 (the date of transfer), to March 24, 2009, the only 

investments held by the Plans were the undiversified NB account assets. During 

this period, on January 2, 2009, National City Bank became the new directed 

trustee that held the Plan's assets and was subject to defendants' direction with 

5
 

 

respect to the investment of plan assets. SPA-23. Despite back-and-forth 

discussions with the Severstal Committee, LaBow did not provide any plan for 

reinvesting or diversifying the Plans' assets until February 2009. SPA-30. 

Moreover, LaBow's statements to the Severstal Committee during February 2009, 

concerning the available investment options, were inconsistent. SPA-31. 

On March 24, 2009, without direct instruction from the Severstal 

Committee, LaBow instructed NB to liquidate the NB account and hold the 

proceeds in cash and cash equivalents. SPA-34-36. At trial, LaBow disclaimed 

any responsibility for the Plans' undiversified portfolio. SPA-21 (quoting 

testimony). The trial court, however, discounted LaBow's excuses for failing to 

diversify the Plans' assets held in the NB account before March 24, 2009, because 

the "preponderance of the credible evidence proves that LaBow gave the 

instruction to liquidate the Severstal Plans' Neuberger Berman Account assets on 

March 24, 2009, and that he understood at all relevant times that he had sole 

investment authority and responsibility for the [Plans'] assets." SPA-32-34. 

On May 5, 2009, a Severstal Committee member wrote to LaBow 

expressing concern that the Plans now held only cash and cash equivalents, and 

renewing the request for a proposal to diversify the Plans' assets. SPA-37. LaBow 

replied to the Severstal Committee that he intended to invest the Plans' assets 

entirely in mortgage-backed securities. SPA-37. In response, the Plans terminated 

6
 
                                                            


 

their contract with defendants on May 19, 2009. SPA-38; JA-1450. After another 

investment consultant was hired, the Plans finally implemented a diversified 

investment strategy for its assets on July 16, 2009. SPA-38. 

On May 10, 2013, plaintiffs filed the operative complaint against 

defendants, alleging defendants breached their fiduciary duties "by failing to 

loyally manage plan assets in violation of ERISA sections 404(a)(1)(A) and 

406(b)" and "by failing to adequately diversify plan assets in violation of ERISA 

section 404(a)(1)(C)." 2 JA-40-41, 100, 103. 

After a bench trial, the district court issued a decision on August 10, 2015. 

First, the district court concluded that LaBow and WPN were the Plans' fiduciaries, 

before, during and after the November 3, 2008, asset transfer from the Combined 

Trust. SPA-42. The court found that LaBow and WPN were fiduciaries under 

ERISA section 3(21)(A)(ii), 29 U.S.C. § 1002(21)(A)(ii), because they had 

"provided investment advice for a fee" to the Plans. ERISA's definition of 

"fiduciary" is located at ERISA section 3(21)(A), 29 U.S.C. § 1002 (21)(A), and 

includes three subsections: 

[A] person is a fiduciary with respect to a plan to the 

extent (i) he exercises any discretionary authority or 

discretionary control respecting management of such 

plan or exercises any authority or control respecting 

2 Plaintiffs also sued WHX. Plaintiffs' claims against WHX were dismissed by the 

district court. Plaintiffs separately appeal that dismissal, which is proceeding in 

this Court as case no. 15-2866-cv. The Secretary takes no position in that appeal. 

7
 
                                                            


 

management or disposition of its assets, (ii) he renders 

investment advice for a fee or other compensation, direct 

or indirect, with respect to any moneys or other property 

of such plan, or has any authority or responsibility to do 

so, or (iii) he has any discretionary authority or 

discretionary responsibility in the administration of such 

plan. Such term includes any person designated under 

section 1105(c)(1)(B) of this title. 

Id. 

Plaintiffs had raised all three subsections, ERISA sections 3(21)(A)(i)-(iii), 

as bases for defendants' fiduciary status.3 SPA-42. While the court stated that it 

was not necessary to reach fiduciary status under subsections (i) and (iii) of ERISA 

Section 3(21)(A), SPA-42, the court made substantial factual findings to support 

fiduciary status under those subsections. On appeal, defendants concede the court 

held defendants were fiduciaries under ERISA section 3(21)(A), subsection (iii). 

App. Br. 1, 37. 

3 Before the bench trial, plaintiffs had moved for summary judgment on fiduciary 

status arguing that defendants were fiduciaries solely by virtue of their role as 

ERISA section 3(38) investment managers to the Plans. 29 U.S.C. § 1002(38). 

The court rejected this argument, holding that 

Section 3(38) of ERISA does not, by its terms, create a path to fiduciary 

status independent of the functional definitions set forth in section 3(21)(A). 

Rather, to come within section 3(38)’s definition of investment manager, 

one must be a fiduciary and meet the criteria of that provision. 

Severstal Wheeling, Inc. v. WPN Corp., No. 10 CIV. 954 LTS GWG, 2014 WL 

2959014, at *4 (S.D.N.Y. Apr. 11, 2014) (emphasis in original). Plaintiffs did not 

cross-appeal this summary judgment decision, so this issue is not currently before 

this Court and the Secretary does not address it. 

8
 

 

Supporting a finding under subsection (i), the court made factual findings 

that defendants had "exercise[d] [ ] authority or control respecting management or 

disposition of [the Plans'] assets." See, e.g., SPA-46 ("Defendants selected the 

Neuberger Berman Account, rather than a proportional portfolio of Combined 

Trust assets or cash, for transfer to the Severstal Trust and directed that transfer to 

occur"); SPA-34 ("The preponderance of the credible evidence proves that LaBow 

gave the instruction to liquidate the Severstal Plans' Neuberger Berman Account 

assets on March 24, 2009, and that he understood at all relevant times that he had 

sole investment authority and responsibility for the Severstal Trust assets"); id. 

("LaBow instructed Neuberger Berman to sell the assets and the Neuberger 

Berman Account assets were finally converted to cash and cash equivalents."). 

Supporting a finding under subsection (iii), the court also made findings that 

defendants had "discretionary authority or discretionary responsibility in the 

administration of" the Plans. The district court stated that LaBow and WPN "had, 

but did not fulfill investment management authority and responsibilities." SPA-42. 

The court elaborated its finding by stating that "[t]he credible evidence at trial 

demonstrated that Defendants had management authority, as granted by the 

Severstal Trust Agreement, to direct the investments with respect to the Severstal 

Trust." SPA-48. The court further found that defendants “continued to have 

investment management responsibility and liability pursuant to the Severstal Trust 

9
 
 


 

Agreement until they were terminated by the Severstal Committee in May 2009," 

SPA-51, and "retained authority and responsibility for the prudent management of 

a diversified Severstal Trust through May 2009." SPA-52. 

After concluding that defendants were fiduciaries, the court went on to hold 

that defendants breached their fiduciary duties to the Plans in two main respects: 

(1) by advising the Severstal Committee which plan assets to transfer and then 

transferring the Plans' assets from the Combined Trust into an undiversified 

portfolio, and (2) by failing to recommend and implement a strategy to diversify 

the Plans' portfolio before and after the transfer. SPA-45-52. The court found 

defendants liable to the Plans for a total of $15,016,327.74, comprised of the Plans' 

losses, prejudgment interest , and the disgorgement of defendants' fees. SPA-56. 

Defendants appealed raising two contentions: (1) defendants challenge the courts' 

factual findings supporting their breach of duties as ERISA fiduciaries under 

ERISA section 3(21)(ii), App. Br. 1, and (2) defendants challenge the legal 

conclusion that they were fiduciaries under ERISA section 3(21)(iii), id. 

10
 
 

 


 


 
 

SUMMARY OF THE ARGUMENT 

Under ERISA's broad definition of a fiduciary, a person is a fiduciary: 

to the extent (i) he exercises any discretionary authority 

or discretionary control respecting management of such 

plan or exercises any authority or control respecting 

management or disposition of its assets, (ii) he renders 

investment advice for a fee or other compensation, direct 

or indirect, with respect to any moneys or other property 

of such plan, or has any authority or responsibility to do 

so, or (iii) he has any discretionary authority or 

discretionary responsibility in the administration of such 

plan. Such term includes any person designated under 

section 1105(c)(1)(B) of this title. 

ERISA section 3(21)(A), 29 U.S.C. § 1002(21)(A). 

The court explicitly found that defendants were investment managers and 

fiduciaries to the Plans under the second prong of the definition, subsection (ii). 

However, as argued by plaintiffs on appeal, the court's factual findings were also 

sufficient to establish that defendants were fiduciaries to the Plans pursuant to 

subsections (i) and (iii), and these subsections are therefore alternative grounds for 

affirmance. 

1. Defendants were fiduciaries to the Plans under ERISA section 

3(21)(A)(i) because they agreed to be the investment manager for the Plans, 

selected undiversified assets to be transferred to the Plans, delayed their liquidation 

of the undiversified investment, and then failed to diversify the Plans' assets 

despite promising to do so, thereby exercising authority or control respecting 

11
 
 

                                                            


 

management or disposition of the Plans' assets. The district court's factual findings 

support this alternative ground for affirmance. 

2. Defendants do not actually contest their fiduciary status under ERISA 

section 3(21)(A)(ii),4

 but raise several factual disputes that contest their breach of 

fiduciary duties flowing from their fiduciary status under subsection (ii). Because 

defendants only raise factual issues, the district court's factual findings should be 

upheld under a clearly erroneous standard. 

3. Defendants were also fiduciaries under ERISA section 3(21)(A)(iii) 

because the contracts between defendants and the Plans explicitly granted 

defendants "complete, unlimited and unrestricted management authority with 

respect to the investment of [the Plans' assets]," including the "authority to invest 

and reinvest the [Plans' assets]," JA-1194-1203, thereby vesting defendants with 

discretionary authority and discretionary responsibility in the administration of the 

Plans. Accordingly, the district court's holding that defendants were fiduciaries to 

the Plans should be upheld. 

4

 Defendants concede fiduciary status under ERISA section 3(21)(ii) from 

December 5, 2008 through May 19, 2009. App. Br. 38. 

12
 
 


 

ARGUMENT 

A. STANDARD OF REVIEW 

The district court's legal conclusions are reviewed de novo, United States v. 

McCombs, 30 F.3d 310, 316 (2d Cir. 1994), and its findings of fact "shall not be 

set aside unless clearly erroneous." Fed.R.Civ.P. 52(a); see generally Anderson v. 

City of Bessemer City, N.C., 470 U.S. 564 (1985). 

This Court may also affirm a district court decision "on any grounds for 

which there is a record sufficient to permit conclusions of law, even grounds not 

relied upon by the district court." Alfaro Motors, Inc. v. Ward, 814 F.2d 883, 887 

(2d Cir. 1987) (citing Railway Labor Executives' Ass'n v. Staten Island R.R., 792 

F.2d 7, 12 (2d Cir. 1986), cert. denied, 479 U.S. 1054 (1987)); United States v. 

Catoggio, 698 F.3d 64, 69 n.3 (2d Cir. 2012) ("we are free to affirm on any legal 

basis for which there is sufficient support in the record"). 

B. DEFENDANTS PERFORMED FIDUCIARY FUNCTIONS AS 

THE PLANS' INVESTMENT MANAGER 

Congress "intended ERISA's definition of fiduciary 'to be broadly 

construed.'" LoPresti, 126 F.3d at 40 (citation omitted); accord Olson v. E.F. 

Hutton & Co., 957 F.2d 622, 625 (8th Cir. 1992); Arizona State Carpenters 

Pension Trust Fund v. Citibank, (Arizona), 125 F.3d 715, 720 (9th Cir. 1997) 

("Fiduciary status under ERISA is to be construed liberally, consistent with 

ERISA's policies and objectives."). 

13
 

 

The district court found defendants were "investment managers" to the Plans 

under ERISA section 3(38), 29 U.S.C. § 1002(38). SPA-13-15, 23-24, 44. Under 

ERISA section 3(38), an "investment manager" has the "the power to manage, 

acquire, or dispose of any asset of a plan" and must acknowledge responsibility as 

fiduciaries to the plan in writing. See 29 U.S.C. § 1002(38). ERISA also grants 

investment managers the exclusive responsibility for managing plan assets in their 

control. See 29 U.S.C. § 1105(d)(1) (focusing liability on ERISA "investment 

managers" for plan investments in their control); see also Pension Ben. Guar. Corp. 

ex rel. St. Vincent Catholic Med. Centers Ret. Plan v. Morgan Stanley Inv. Mgmt. 

Inc., 712 F.3d 705, 719 n.15 (2d Cir. 2013) ("[u]nder ERISA, a plan administrator 

is generally not 'under an obligation to invest or otherwise manage any asset of the 

plan which is subject to the management' of an 'investment manager' appointed 

under § 1102(c)(3)") (citing 29 U.S.C. § 1105(d)(1)). 

The title of ERISA section 3(38) "investment manager" thus has "special 

significance" under ERISA. Cf. Bouboulis v. Transp. Workers Union of Am., 442 

F.3d 55, 65 (2d Cir. 2006) (plan administrator is a "formal title" with "special 

significance" under ERISA). The Secretary’s regulations observe that certain 

offices or positions of an employee benefit plan "by their very nature require 

persons who hold them to perform one or more of the [fiduciary] functions 

described in section 3(21)(A) of the Act." 29 C.F.R. § 2509.75-8, D-3. Like other 

14
 

 

titles named in the statute, the responsibilities of persons, such as the defendants, 

who hold the title of section 3(38) investment manager, must perform fiduciary 

functions described in section 3(21)(A) by the very nature of their position. As the 

Supreme Court has observed, the management of plan assets is generally 

accompanied by fiduciary status. John Hancock Mut. Life Ins. Co. v. Harris Trust 

& Sav. Bank, 510 U.S. 86, 89 (1993). 

As this Court has stated, "ERISA contemplates that after management 

authority over Plan assets is delegated to an investment manager under Section 

402(c)(3), [29 U.S.C. § 1102(c)(3),] the manager becomes a fiduciary to the plan . . 

. ." Lowen v. Tower Asset Mgmt., Inc., 829 F.2d 1209, 1219 (2d Cir. 1987); see 

also Harris Trust & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 242­

43 (2000) ("an investment manager to which [the plan administrator] had delegated 

investment discretion over a portion of the plan's assets [is thus] a fiduciary") 

(citing 29 U.S.C. § 1002(21)(A)(i)). This conclusion accords with ERISA Section 

3(38), which provides that investment managers to whom the "power to manage, 

acquire, or dispose of any asset of a plan" is delegated must "acknowledge[] in 

writing that he is a fiduciary with respect to the plan." 29 U.S.C. § 1002(38)(C). 

Consistent with these principles, the district court made extensive factual 

findings supporting defendants' "perform[ance of] one or more of the [fiduciary] 

functions described in section 3(21)(A) of the Act" in their role as ERISA section 

15
 
 


 

3(38) investment managers to the Plans. 29 C.F.R. § 2509.75-8, D-3. While the 

district court only explicitly found that defendants were fiduciaries under ERISA 

section 3(21)(A)(ii), 29 U.S.C. § 1002(21)(A)(ii), SPA-43, the court's factual 

findings clearly support a legal conclusion that defendants were also performing 

fiduciary functions and had fiduciary authority under ERISA sections 3(21)(A)(i) 

and (iii), as explained below. Even though subsections (i)-(iii) have different 

requirements, a person can become an ERISA fiduciary under multiple prongs. 

E.g., Fin. Institutions Ret. Fund v. Office of Thrift Supervision, 964 F.2d 142, 148 

(2d Cir. 1992) (recognizing a party could be a fiduciary under both subsections (i) 

and (iii)). 

C. DEFENDANTS BECAME FIDUCIARIES UNDER ERISA 

SECTION 3(21)(A)(i) BY EXERCISING AUTHORITY OR 

CONTROL RESPECTING MANAGEMENT OF PLAN ASSETS 

ERISA section 3(21)(A)(i) confers fiduciary status on those who "exercises 

any discretionary authority or discretionary control respecting management of such 

plan or exercises any authority or control respecting management or disposition of 

its assets." 29 U.S.C. § 1002(21)(A)(i). 

Here, the court made factual findings that defendants undertook their 

statutory responsibilities as the Plans' investment manager and exercised authority 

and control over the management and disposition of the Plans' assets. Specifically, 

defendants set the criteria and timing for how and which assets were to be 

16
 

 

transferred from the Combined Trust to the Severstal Plans. See, e.g., SPA-16 

("LaBow testified that, after Defendants determined that a 'slice' was impossible, 

they advised the [Severstal Committee] and [WHX Committee] that the Combined 

Trust should transfer assets that had no minimum capital requirements and that 

could be liquidated right away"); SPA-16-17 (LaBow e-mailed the WHX 

Committee that he was "working on" identif[ying] assets to move to a separate 

trust for the Plans); SPA-17 (when explaining why defendants did not transfer the 

assets to the Plans on the planned date, Labow "did not explain the true cause of 

the delay"); SPA-17 (Labow stating that "I intend to direct the transfer of most of 

the assets of the plans to the [Severstal] Trust."). Defendants then chose the 

undiversified NB fund as the sole investment to be transferred to the Severstal 

Plans, and "instructed" WHX to make the transfer. SPA-18; SPA-19 ("Although 

LaBow could have had the [NB] account liquidated prior to the transfer, so that the 

Severstal Trust would receive cash, he did not do so"); SPA-25 ("In response, 

LaBow told the [Severstal] Committee that he had transferred only the [NB] 

Account assets because they were stocks that he could watch and liquidate easily"); 

SPA-26 ("LaBow admitted on the January 7, 2009, call that he was the one who 

had chosen which assets to transfer to the Severstal Plans"). 

After the transfer, Labow attempted to open accounts for the assets. SPA22. Furthermore, the district court found that it was LaBow who eventually 

17
 

 

instructed that the Plans' holdings in the NB fund finally be liquidated in March 

2009, after LaBow had delayed any action on the Plans' assets. SPA-34 ("The 

preponderance of the credible evidence proves that LaBow gave the instruction to 

liquidate the Severstal Plans' Neuberger Berman Account assets on March 24, 

2009, and that he understood at all relevant times that he had sole investment 

authority and responsibility for the Severstal Trust assets"); see also SPA-24-34 

(describing LaBow's failures and delays in providing a plan to liquidate and 

diversify the Plans' assets). 

Here, defendants instructed the Severstal Plans to receive the NB account 

and controlled the Plans' assets, including choosing to finally liquidate the NB 

account after several months of internal discussions and delay. Defendants clearly 

"exercise[d]" "any authority or control respecting management or disposition" of 

the Severstal Plans' assets. This Court's decision in Blatt v. Marshall & Lassman, 

812 F.2d 810, 813 (2d Cir. 1987) is analogous. In Blatt, the Court found that the 

defendants were fiduciaries under ERISA section 3(21)(A)(i), because they 

"exercised actual control over fund assets" when they ignored and delayed a 

participant's request for returning his vested contributions "by failing to deliver a 

notice of change form reflecting the fact that [he] had left the firm's employ." Id.; 

United States v. Glick, 142 F.3d 520, 527 (2d Cir. 1998) (citing Blatt, 812 F.2d at 

813). Likewise, defendants here received and accepted exclusive control over the 

18
 

 

Severstal Plans' assets in the form of the NB account, promised the Severstal 

Committee they would liquidate and reinvest those assets, but then continued to 

delay its eventual liquidation and reinvestment. As in Blatt, defendants exercised 

control over plan assets by postponing action despite their duty to act; their failure 

to act was an exercise of control and discretion within the meaning of Section 

3(21)(A)(i). E.g., SPA-36 ("While WPN remained investment manager, 

Defendants were responsible for the protection and diversified investment of the 

Severstal Plans' assets. The governing documents did not give Defendants the 

option of abdicating responsibility to the [Severstal Committee]"). Defendants are 

fiduciaries under ERISA section 3(21)(A)(i). The Court may affirm on this 

alternate ground. 

D. DEFENDANTS' CHALLENGES TO FACTUAL FINDINGS 

SUPPORTING FIDUCIARY STATUS UNDER ERISA SECTION 

3(21)(A)(ii) DO NOT DEMONSTRATE CLEAR ERROR 

Defendants' first issue on appeal, App. Br. 1, 37-51, confuses the inquiry 

into their fiduciary status under ERISA section 3(21)(A)(ii), 29 U.S.C. § 

1102(21)(A)(ii), with factual disputes about whether defendants had breached 

duties once defendants became ERISA section 3(21)(A)(ii) fiduciaries. App. Br. 

39. Defendants raise only three, purely factual, arguments concerning their breach 

as ERISA section 3(21)(A)(ii) fiduciaries: (1) they could not have breached their 

fiduciary duties because the Severstal Committee actually ignored defendants' 

19
 
                                                            


 

investment advice, (2) there is no evidence that their investment advice was 

"improper," and (3) there is no evidence of a causal connection between the 

defendants' investment advice and the Plans' losses. App. Br. 37. As purely 

factual disputes, defendants incorrectly assert that the district court's ruling on 

subsection (ii) is subject to de novo review. Id. It is axiomatic that the factual 

findings of a trial court must not be set aside unless "clearly erroneous, and the 

reviewing court must give due regard to the trial court's opportunity to judge the 

witnesses' credibility." Fed. R. Civ. Pro. 52(a)(6).5 

The appellants' brief establishes the factual findings challenged by 

defendants are supported by the record, not in clear error, and therefore should not 

be disturbed by this Court. 

E. DEFENDANTS BECAME FIDUCIARIES UNDER ERISA 

SECTION 3(21)(A)(iii) BY RECEIVING DISCRETIONARY 

AUTHORITY AND CONTROL OVER THE MANAGEMENT OF 

THE PLANS' ASSETS 

While there is some ambiguity as to whether the district court explicitly held 

that defendants were also fiduciaries under ERISA section 3(21)(A)(iii), SPA-43­

5

 Because defendants fail to raise and address any legal issues subject to plenary 

review with respect to subsection (ii) in their opening brief, these issues are 

ordinarily precluded from consideration on appeal, see, e.g., Frank v. U.S., 78 F.3d 

815, 833 (2d Cir. 1996); United States v. Restrepo, 986 F.2d 1462 (2d Cir.1993), 

cert. denied, 510 U.S. 843 (1993). 

20
 
 

                                                            

 


 

45, 48, 51, defendants concede it did, App. Br. 37, 52-57. The court's factual 

findings overwhelmingly support that conclusion.6 

Subsection (iii) states that a person is a fiduciary to an ERISA plan if that 

person "has any discretionary authority or discretionary responsibility in the 

administration of such plan." ERISA § 3(21)(A)(iii). While ERISA does not 

define "plan administration" in relation to subsection (iii), the Supreme Court 

considered the definition of "plan administration" for ERISA section 3(21)(A) in 

Varity Corp. v. Howe, 516 U.S. 489, 502 (1996). Looking to trust law, the Court 

concluded that the "[t]he ordinary trust law understanding of fiduciary 

'administration' of a trust is that to act as an administrator is to perform the duties 

imposed, or exercise the powers conferred, by the trust documents." Id. The Court 

further explained that a trust document implicitly confers powers that "are 

necessary and appropriate for carrying out the purposes" of the trust. Id. 

As the Varity Court went on to observe, the basic purpose of ERISA 

generally is "to protect . . . the interests of participants ... and ... beneficiaries ... by 

establishing standards of conduct, responsibility, and obligation for fiduciaries ... 

and ... providing for appropriate remedies ... and ready access to the Federal 

6 If this Court accepts defendants' concession that the district court found fiduciary 

status under subsection (iii), the Court can affirm the district court's holding. The 

Court may also affirm on the alternative basis that the district court's factual 

findings clearly demonstrate that defendants were fiduciaries under ERISA section 

3(21)(A)(iii). 

21
 
                                                            


 

courts." Id. at 513. ERISA's fiduciary obligations relate to "the plan's financial 

integrity" and reflect "special congressional concern about plan asset 

management." Id. at 511-12. The management of plan assets is thus both 

necessary and appropriate to carry out the purpose of a plan: to provide benefits to 

participants and beneficiaries. "The principal statutory duties imposed on 

fiduciaries by [ERISA Title I] 'relate to the proper management, administration, 

and investment of fund assets,' with an eye toward ensuring that 'the benefits 

authorized by the plan' are ultimately paid to participants and beneficiaries." 

LaRue v. DeWolff, Boberg & Associates, Inc., 552 U.S. 248, 253 (2008) (quoting 

Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142 (1985)). Moreover, 

the management of plan assets is a duty that would have typically fallen within the 

administrative duties of a plan trustee under common law. See Pegram v. 

Herdrich, 530 U.S. 211, 231 (2000) ("At common law, fiduciary duties 

characteristically attach to decisions about managing assets."). 

In furtherance of these aims, ERISA contemplates that the management of 

plan assets is a function that can be explicitly delegated by a plan's named 

fiduciary, as part of a plan's features, and is considered a critical part of plan 

administration.7 See 29 U.S.C. § 1102(c)(3) (as part of a plan's "features," "a 

person who is a named fiduciary with respect to control or management of the 

7

 A "named fiduciary" has the "authority to control and manage the operation and 

administration of the plan." 29 U.S.C. § 1102(a)(1). 

22
 

 

assets of the plan may appoint an investment manager or managers to manage 

(including the power to acquire and dispose of) any assets of a plan"); Russell, 473 

U.S. at 140 n.8 ("the crucible of congressional concern was misuse and 

mismanagement of plan assets by plan administrators and that ERISA was 

designed to prevent these abuses in the future") (emphasis added). As ERISA's 

legislative history indicates, "'the legislation imposes strict fiduciary obligations on 

those who have discretion or responsibility respecting the management, handling, 

or disposition of pension or welfare plan assets.'" Russell, 473 U.S. at 140 n.8 

(quoting remarks of Sen. Williams, reprinted in 3 Leg. Hist. 4743; 120 Cong. Rec. 

29951 (1974)) (emphasis added). ERISA section 3(38) investment managers, like 

defendants, clearly have the "responsibility respecting the management, handling, 

or disposition of pension or welfare plan assets," and, therefore, must undertake 

fiduciary obligations by virtue of accepting such "discretionary responsibility" for 

the plan. Id.; 29 U.S.C. § 1002(38). 

This discretionary responsibility over plan assets, including the 

responsibility conferred on ERISA section 3(38) investment managers, is thus part 

of the "administration of the plan" under subsection (iii). Healthcare Strategies, 

Inc. v. ING Life Ins. & Annuity Co., 961 F. Supp. 2d 393, 399-401 (D. Conn. 

2013); cf. Fin. Institutions Ret. Fund, 964 F.2d at 148 (including within the 

23
 

 

"administration of the plan" under section (iii), the decision to dispose an 

investment surplus in the plan accounts). 

In this case, defendants were the Plans' section 3(38) investment manager. 

SPA-13-15, 23-24, 44. Their agreement with the Plans clearly grants defendants 

discretionary authority and responsibility to invest the Plans' assets. JA-1218 at § 

2. The December 2008 Agreement explicitly grants WPN "unlimited and 

unrestricted" authority to manage the Plans' assets as the investment manager: 

Subject to the investment policies established by the 

[Plans] with respect to the Investment Fund and timely 

communicated to [WPN] and the standards set forth in 

Section 404(a) of ERISA, the [Plans] hereby authorizes 

and directs the [WPN] to exercise complete, unlimited 

and unrestricted management authority with respect to 

the investment of the Investment Fund, including the 

authority: 

(a) To invest and reinvest the Investment Fund at such 

time in such manner as the [WPN] in the complete and 

unlimited exercise of its discretion shall determine; 

(b) To purchase and sell securities for the Investment 

Fund in the name of the [Plans], for the account of the 

[Plans] . . . 

(d) In effecting any such investments, reinvestments, 

purchases and sales, to use and obtain the assistance and 

services of such brokers, dealers, investment bankers, 

underwriters and other firms, enterprises and services as 

the [WPN] in its discretion shall designate or select . . . 

24
 

 

JA-1218 at § 7. The December 2008 Agreement also clearly grants LaBow 

responsibility as the individual with primary authority to discharge WPN's duties 

as an "investment manager" on the Plans' behalf: 

Ron LaBow has the primary responsibility for 

performing the services of [WPN] with respect to the 

Investment Fund and [WPN] shall notify the Committee 

if there is any change with respect to LaBow's 

responsibilities with respect to the Investment Fund or 

[WPN], or if there is any change with respect to the 

[WPN]'s directors, officers or employees with 

responsibility for decisions regarding the Investment 

Fund or a material change in the control of [WPN]. 

JA-1218 at § 2(l). 

The Plans paid defendants to assume broad unlimited authority over the 

Plans' investments and assets. SPA-15, 44. Like the December 2008 Agreement 

with defendants here, the agreements in Lowen explicitly stated that the investment 

manager was a fiduciary and an investment manager for the plan under ERISA. 

Lowen, 829 F.2d at 1218. This Court found the status of the investment manager 

as a fiduciary "simply beyond doubt" based on the delegation of investment 

authority in the contract. Id. at 1218 ("[t]hat [the investment manager] held a 

position as an ERISA fiduciary is simply beyond doubt"). Likewise, defendants' 

contractual responsibility to manage plan assets is exactly the type of grant of 

discretionary authority or responsibility over the administration of the plan that 

creates fiduciary status under subsection (iii). 

25
 

 

Defendants nevertheless argue against fiduciary status under subsection (iii) 

by alleging that they could not exercise control or authority over the Plans' 

investments and thus could not exercise any investment management 

responsibilities. App. Br. 1, 52-57 ("Appellants had no authority to make any 

investments themselves, they made no investments . . ."); App. Br. 15-18 (noting 

that the inability to provide investment direction meant defendants could not 

"exercise" their investment authority). Specifically, defendants contend that the 

Plans' directed trustees and NB would not take investment directions from 

defendants because they did not consider defendants authorized to provide such 

directions. App. Br. 52-57. Defendants also allege the Severstal Committee failed 

to notify these entities that defendants had investment management 

responsibilities. App. Br. 12-13, 15-18. In short, they could only act as advisors 

but not investment managers. Id. at 54 ("[NB] considered Appellants investment 

consultants rather than control persons"). 

To the contrary, the district court made detailed factual findings that nothing 

prevented defendants from exercising investment authority over the Plans' assets. 

SPA-33-35. Even assuming defendants correctly identify some impediments to 

exercising their investment authority, App. Br. 53-57, defendants fail to challenge 

the district court's extensive factual findings that defendants did nothing to remove 

those impediments or undertake their contracted fiduciary responsibilities. SPA26
 

 

32-36. This Court is clear that "'[s]ubsection three [of 29 U.S.C. § 1002(21)(A)] 

describes those individuals who have actually been granted discretionary authority, 

regardless of whether such authority is ever exercised.'" Bouboulis, 442 F.3d at 

63) (quoting E.F. Hutton & Co., Inc., 957 F.2d at 625); accord L.I. Head Start 

Child Dev. Servs., Inc. v. Econ. Opportunity Comm'n of Nassau Cty., Inc., 710 

F.3d 57, 69 (2d Cir. 2013); App. Br. 52 (citing Mahoney v. J. J. Weiser & Co., 

Inc., 564 F. Supp.2d 248 (S.D.N.Y. 2008)). In Bouboulis, 442 F.3d at 63, and L.I. 

Head Start Child Dev. Servs., Inc., 710 F.3d at 69, this Court rejected the argument 

that plan administrators could not be considered ERISA fiduciaries because their 

role was "'limited to purely ministerial functions.'" Such a limitation does not 

excuse plan administrators from their failure to exercise the plan administration 

responsibilities they had assumed. Bouboulis, 442 F.3d at 63; L.I. Head Start 

Child Dev. Servs., Inc., 710 F.3d at 69. Likewise, even accepting the defendants' 

alleged facts, they did not attempt to exercise their investment management role 

until March 24, 2009, defendants had assumed fiduciary responsibilities as the 

Plans' investment manager prior to that date "regardless of whether such authority 

is ever exercised." Bouboulis, 442 F.3d at 63; L.I. Head Start Child Dev. Servs., 

Inc., 710 F.3d at 69. 

This Court also previously rejected a similar argument by an investment 

manager in Lowen. In Lowen, one of the defendants was hired by a plan trustee as 

27
 

 

 

an investment manager. 829 F.2d at 1212. The Lowen investment manager 

argued that it was not an ERISA fiduciary, despite the clear language of the written 

contracts, because the contracts had been orally modified to remove its 

discretionary authority for the prohibited transactions at issue. Id. The Lowen 

investment manager argued that it could not exercise any discretionary authority 

because the plan trustee had orally ordered the manager to carry out the trustee's 

instructions for those transactions without discretion. Id. at 1219. 

This Court flatly rejected the argument, stating that "[e]ven if true, this 

argument is without legal merit." Id. at 1218. This Court observed that ERISA 

was "deliberately structured so that legal responsibility for management of ERISA 

plans would be clearly located." Id. This Court further observed that plans are 

required to designate a named fiduciary, with power to control and manage the 

plan, "'so that responsibility for managing and operating the Plan -- and liability for 

mismanagement -- are focused with a degree of certainty.'" Id. at 1218-19 (quoting 

Birmingham v. Sogen-Swiss Int'l Corp. Retirement Plan, 718 F.2d 515, 522 (2d 

Cir. 1983)). Applying this rule to ERISA section (38) investment managers 

appointed by the named fiduciaries, the Court went on to observe that "ERISA's 

purpose of clearly locating legal obligations will be vitiated if plaintiffs are 

required to engage in an after-the-fact sorting-out of actions, statements and states 

28
 

 

of minds among possible fiduciaries to determine which is legally responsible." Id. 

at 1219. 

Defendants' arguments rely on trial testimony from employees of the 

directed trustee and NB purporting to establish that the trustees and NB would not 

have accepted defendants' investment directions if defendants had attempted to 

direct them. App. Br. 4 (citing A. 117, 559-60). In fact, defendants never 

attempted to direct them until March 24, 2009, at which time the district court 

found that defendants successfully directed the liquidation of the NB account. 

SPA-34. However, even if true, defendants' argument is utterly without merit and 

is exactly the type of "engag[ing] in an after-the-fact sorting-out of actions, 

statements and states of minds" rejected in Lowen, 829 F.2d at 1219. The clear 

contractual grant of discretionary investment authority and fiduciary responsibility 

to defendants would likewise "be vitiated." Id. 

Furthermore, defendants ignore that any improper action by a co-fiduciary 

does not remove their own fiduciary duties. ERISA Section 405(a) provides that a 

fiduciary is liable for a breach of duty by a co-fiduciary if his failure to carry out 

his own fiduciary duties enabled the breach by the co-fiduciary or if he has 

knowledge of the breach of duty and does not make reasonable efforts to remedy 

the breach. ERISA § 405(a)(2), (3), 29 U.S.C. § 1105(a)(2), (3). While the 

directed trustees and other co-fiduciaries, like the Severstal Committee, may be 

29
 
 


 

jointly and severally liable for defendants' breaches if defendants' allegations are 

true, the district court correctly observed that "any fault on [the Severstal 

Committee’s] part does not relieve Defendants of legal responsibility for losses 

caused by their own breaches of duties imposed by ERISA. . . . Ensuring the 

prudent management of a properly diversified portfolio was Defendants' 

responsibility, regardless of the [Severstal Committee's] actions in this case." 

SPA-50 (citing Koch v. Dwyer, No. 98 Civ. 5519, 1999 WL 528181, at *10 

(E.D.N.Y. Jul. 22, 1999)). As defendants recognize, they "cannot avoid liability by 

virtue of" their co-fiduciaries' "improper acts." App. Br. 57 (noting that they 

"never made such an argument" to contest this "principle"); see 29 U.S.C. §1105; 

see also Smith v. Local 819 I.B.T. Pension Plan, 291 F.3d 236, 241 (2d Cir. 2002); 

LaScala v. Scrufari, 479 F.3d 213, 220 (2d Cir. 2007). 

In this matter, defendants were clearly fiduciaries. Even if it were true that 

co-fiduciaries made it more difficult for defendants to exercise the authority 

explicitly granted to them, that fact alone does not obviate their own fiduciary 

duties to protect the Plans' assets, to diversify the Plans' investments, and to take 

steps to remedy any impediments to their ability to exercise their investment 

authority in service of protecting the Plans' assets. 

30
 
 

 


 

CONCLUSION 

For the reasons set forth above, the Secretary respectfully requests that this 

Court affirm the district court's ruling that defendants are liable to the Plans for 

breaches of defendants’ fiduciary duties under ERISA. 

Respectfully submitted, 

M. PATRICIA SMITH 

Solicitor of Labor 

G. WILLIAM SCOTT 

Associate Solicitor 

THOMAS TSO 

Counsel for Appellate Litigation 

/s/ D. Marc Sarata 

D.Marc Sarata 

Attorney 

U.S. Department of Labor 

Office of the Solicitor 

Plans Benefits Security Division 

P.O. Box 1914 

Washington, DC 20013 

(202) 693-5682 

31
 
 

 


 

CERTIFICATE OF COMPLIANCE 

Pursuant to Fed. R. App. P. 29(d) and 32(a)(7)(B)-(C), I certify that this amicus 

contains 6,874 words. 

Dated: March 15, 2015 

/s/ D. Marc Sarata 

D. Marc Sarata 

Attorney 

United States Department of Labor 

Plan Benefits Security Division 

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

Washington, D.C. 20210 

CERTIFICATE OF SERVICE 

I hereby certify that on this day, March 15, 2016, I electronically filed the 

foregoing Brief of The Secretary, United States Department of Labor, as Amicus 

Curiae, in Support of Plaintiffs-Appellees, with the Clerk of the Court for the 

United States Court of Appeals for the Second Circuit by using the CM/ECF 

system. I certify that all participants in this case are registered CM/ECF users and 

that service will be accomplished by the CM/ECF system. 

/s/ D. Marc Sarata 

D. Marc Sarata 

Attorney 

United States Department of Labor 

Plan Benefits Security Division 

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

Washington, D.C. 20210 

32