## F I L E D United States Court of Appeals Tenth Circuit 

### MAY 3 2005 

### PATRICK FISHER Clerk PUBLISH
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

In re: JOYCE B. LUNA, VERNIE S. LUNA, Debtors.

DANIEL NAVARRE, JOHN HUNTER, HARVEY SWIFT, WILLIAM H. NOBLE, JERRY WILSON, ROBERT TROQUILLE, PHIL DOZIER, RICHARD MAPLES, RONNIE PRUDHOMME, HOUSTON LEE, DONALD DENESE, LARRY SAVELL, as Trustees of the Iron Workers’ Mid-South Pension Fund; IRON WORKERS’ MID-SOUTH PENSION FUND,

Appellants, and JOHN HUNTER, HARVEY SWIFT, WILLIAM H. NOBLE, A. J. MORRISON, TOM LAMBERT, IVAN B. WILLIAMS, as Trustees of the Mid-South Iron Workers’ Welfare Plan; THE MID-SOUTH IRON WORKERS’ WELFARE PLAN; WILLIAM H. NOBLE, JOHN HUNTER, HARVEY SWIFT, ALFRED DEAN, TOM LAMBERT, IVAN B. WILLIAMS, as Trustees of the Oklahoma Iron Workers’ Direct Contribution Plan and Trust; OKLAHOMA IRON WORKERS’-2-

DIRECT CONTRIBUTION PLAN AND TRUST; THE OKLAHOMA IRON WORKERS; APPRENTICESHIP AND TRAINING FUND LOCAL 584, Plaintiffs,

v. No. 03-7060 MARK LUNA; JOYCE B. LUNA,

Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF OKLAHOMA

(D.C. NO. CV-02-340-S)

Kelly F. Monaghan, Holloway & Monaghan, Tulsa, Okla homa, for Appellants. Weldon W. Stout, Wright, Stout, Fite & Wilburn, Mus kogee, Oklahoma, for Appellees.

Before LUCERO , McCONNELL , and TYMKOVICH , Circuit Judges.

TYMKOVICH , Circuit Judge.

The question in this case is whether the Earned Ret irement Income Security Act of 1974 (ERISA) makes an employer a fiduciary t o its employees if it agrees to make regular employer contributions to an ERISA- covered employee-benefit-3-

plan. The Plaintiff-Appellants (Trustees) are trus tees of various employee-benefit funds (Funds) who sued the Defendant-Appellees (the Lunas) to recover promised but unpaid monthly employer contributions to the Fu nds. The payments were owed pursuant to a collective bargaining agreement to which the Lunas’ company was a party. The Trustees argue that the Lunas breached their fi duciary duties to the Funds under ERISA, and that therefore the unpaid co ntributions cannot be discharged in bankruptcy. Finding that the Lunas w ere not ERISA fiduciaries, we AFFIRM the district court’s ruling that the debt is dischargeable in bankruptcy. I. Background Luna Steel Erectors, Inc. was an Oklahoma construct ion company that employed workers represented by Local 584 of the In ternational Association of Bridge, Structural & Ornamental Iron Workers, AFL-C IO. The Lunas, whose family had been ironworkers for generations, each o wned 50% of Luna Steel’s stock, and Joyce Luna served as its President, Secr etary, and record-keeper. Her son, Mark Luna, acted as Vice President. The Trustees administer a number of multi-employer employee-benefit plans pursuant to a collective bargaining agreement(CBA) between various local unions, including Local 584, and various local empl oyers and employer groups. In 1997, Joyce Luna signed the CBA as an owner of L una Steel, and thereafter1 The bankruptcy court’s factual findings indicate t hat the Lunas used

company funds to pay for equipment leases, employee wages, insurance, and truck expenses. Furthermore, because Mark Luna did not r eceive a salary during periods of financial difficulty, cash debits and payments were made by the company for his personal expenses. Payments for pe rsonal expenses were also made to Joyce Luna, who also never received a salary. -4- employed workers represented by Local 584. Accordi ng to the CBA, Luna Steel agreed to submit monthly employer contributions to the Funds for the benefit of its Local 584-affiliated employees. Employer contr ibutions under the CBA were “fringe benefits,” and at no point did the Lunas wi thhold any portion of their employees’ wages. In March 1999, the financial condition of Luna Stee l considerably worsened, and from March until December it failed t o make the requisite contributions to the Funds. In an August 1999 lett er to the Trustees, Joyce Luna acknowledged the outstanding contributions and expr essed Luna Steel’s intention to meet its obligations. In the meantime, Luna Ste el continued to make payments for salaries and other business or personal expense s. 1 Conditions became so desperate during this period that Joyce Luna turned over for Luna Steel’s benefit approximately $43,000 from her IRA and $7,000 in savings bonds, none of which Luna Steel ever repaid. Mark Luna also borrowed $3 0,000 in his own name from a local bank and deposited it in Luna Steel’s accou nt. Finally, in December Luna Steel’s directors agreed to dissolve the corporatio n, which ceased operations on2 We have previously held that “an express or techni cal trust must be

present for a fiduciary relationship to exist under§ 523(a)(4).” Fowler Bros. v. Young (In re Young) , 91 F.3d 1367, 1371–72 (B.A.P. 10th Cir. 1996). T here is also authority that ERISA creates a fiduciary duty sufficient to impose a technical (continued...) -5- December 31, 1999. As of a March 2000 audit, over $121,000 was owing to the Funds. Joyce and Mark Luna both filed voluntary Ch apter 7 bankruptcy petitions on August 1, 2000. In November 2000, the Trustees brought an action in United States Bankruptcy Court seeking a determination that the L unas were personally responsible for the unpaid contributions. The Trus tees alleged the debt was nondischargeable under 11 U.S.C. § 523(a)(4) since the Lunas had committed “fraud or defalcation” while acting in a fiduciary capacity. The Trustees based this argument on the fact that the Lunas continued to take some income and personal expenses at a time when they should have b een making contributions to the Funds. To prevail on this claim, the Trustees had to establish that the Lunas acted as fiduciaries under § 523(a)(4) of the Bankr uptcy Code. Antlers Roof-Tuss & Builders Supply v. Storie (In re Storie) , 216 B.R. 283, 286 (B.A.P. 10th Cir. 1997). In an attempt to do so, the Trustees argued the Lunas were fiduciaries under ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), wh ich states, in part, that a fiduciary is one who “exercises any authority or co ntrol respecting management or disposition of [plan] assets.” 22 (...continued)

trust for purposes of the Bankruptcy Code. See, e.g., Eavenson v. Ramey (In re Eavenson) , 243 B.R. 160, 166 (Bankr. N.D. Ga. 1999). Thus, under the Trustees’ theory, establishing ERISA fiduciary status also satisfies the fiduciary requirement under § 523(a)(4). Given our ultimate disposition of this case, we express no opinion regarding whether fiduciary status under ERISA satisfies § 523(a)(4) of the Bankruptcy Code.

-6- The bankruptcy court held that while ERISA imposes fiduciary obligations under § 523(a)(4) of the Bankruptcy Code, because u npaid contributions do not constitute “plan assets,” the Lunas had committed n o defalcation and the debt could be discharged in bankruptcy. The Trustees ap pealed to United States District Court, which agreed with the reasoning of the bankruptcy court. The Trustees then brought this appeal.
II. Discussion To establish ERISA fiduciary status within the mea ning of ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), the Trustees h ad to show (1) that the unpaid contributions were plan assets, and (2) that the Lu nas exercised authority and control over the management or disposition of these assets. The district court’s holding addressed only the first issue, finding that unpaid contributions “do not become plan assets until they have been paid into t he particular funds.” Having concluded that unpaid contributions were not plan a ssets, the district court did not need to decide whether the Lunas exercised fiduciary-like authority or control.-7-

As explained below, although we disagree with the d istrict court’s conclusion that contributions are not plan assets, we nevertheless affirm the lower court’s order because, in our view, the Lunas did not exercise au thority or control respecting the management or disposition of a plan asset. A. The Contractual Right to Unpaid Contributions i s an “Asset” Under ERISA ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), states, in part, that a person may become a fiduciary to an ERISA plan to the exte nt they “exercise[] any authority or control respecting management or dispo sition of its assets .” (emphasis added). Whether unpaid contributions are “assets” of an ERISA plan is a matter of first impression in this circuit, one t hat we review de novo. United States v. Telluride Co. , 146 F.3d 1241, 1244 (10th Cir. 1998) (interpretat ion of federal statutes is a legal question reviewed de no vo). As discussed below, we hold that the contractual right to collect the unpa id contributions is a plan asset. The Trustees argue that “unpaid contributions becom e plan assets at the time they become due and owing.” Aplt. Br. at 10. The Lunas, by contrast, argue that “contributions owed to the Pension Fund did not bec ome plan assets until they [are] paid to it.” Aple. Br. at 12. The Lunas do not dispute that they had an obligation under the CBA to make monthly contributi ons; they argue only that this obligation was contractual in nature rather than fi duciary, much like any other account payable or financial obligation of the comp any. As their brief puts it, “the3 Although there is no statutory guidance, a Depart ment of Labor

regulation defines “plan assets” to include “amount s that a participant or beneficiary pays to an employer, or amounts that a participant has withheld from his wages by an employer, for contribution to the p lan . . . .” 29 C.F.R. § 2510.3- 102. This definition, however, is not applicable h ere as it addresses employee contributions, not employercontributions. -8- contractual obligation[] owed by Luna Steel, Inc. t o Appellants/Funds is simply a contractual obligation . . . .” Id. at 17. The district court accepted this argument and held that the unpaid contributions do not amoun t to plan assets. ERISA itself does not define what constitutes an “a sset” of an ERISA fund. 3 Therefore, as in any case of statutory construction , we begin our analysis by looking to the plain meaning of the words used by C ongress. See Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438 (1999) (in ERISA context, noting that “our analysis begins with the language of the statute. And where the statutory language provides a clear answer, it ends there as well”) (c itations and quotation omitted); Gardner v. Chrysler Corp ., 89 F.3d 729, 736 (10th Cir. 1996) (applying plain meaning rule). We presume Congress intended for the courts to apply the plain language of the statute unless such interpretation would lead t o an absurd result. Resolution Trust Corp. v. Westgate Partners, Ltd., 937 F.2d 526, 529 (10th Cir. 1991). An “asset” is defined as “ 1 . An item that is owned and has value. 2 . The entries on a balance sheet showing the items of pro perty owned, including cash, inventory, equipment, real estate, accounts receiva ble, and goodwill. 3 . All the-9-

property of a person available for paying debts.” B LACK ’ S L AW D ICTIONARY112 (7th ed. 1999). Central to the definition of “asse t,” then, is that the person or entity holding the asset has an ownership interest in a given thing, whether tangible or intangible. In determining ownership i nterests, the obvious starting point is the common law of property. Cf. Nationwide Mut. Ins. Co. v. Darden , 503 U.S. 318 (1992) (relying on common law definition o f “employee” because ERISA does not helpfully define that term). Indeed, the Department of Labor has instructed that “the assets of a plan generally are to be identified on the basis of ordinary notions of property rights under non-ERISAlaw. In general, the assets of a welfare plan would include any property, tangible or intangible, in which the plan has a beneficial ownership interest.” Departm ent of Labor Advisory Opinion No. 93-14A (May 5, 1993), 1993 WL 188473, at *4. Under ordinary notions of property rights, an ERISAplan does not have a present interestin the unpaid contributions until they are actuall y paid to the plan. In other words, the plan cannot use, devise, assign , transfer, or otherwise act upon contributions that it has not yet received. This d oes not mean, however, that the plan has no property interest in the unpaid contrib utions. It does. Pursuant to ordinary notions of property rights, the plan holds a future interestin the collection of the contractually-owed contributions. A future interest in property is “an interest . . . which is not, but may become a p resent interest.” RESTATEMENT4 A chose in action is defined in part as “the rightto bring an action to

recover a debt, money, or thing.” B LACK ’ S L AW D ICTIONARY234 (7th ed. 1999).

5 The Restatement of Trusts supports this conclusion. Itnotes, for example, that “trust property” usually denotes interests in things, not the things themselves. RESTATEMENT (T HIRD ) OF T RUSTS § 2 cmt. c (2001). Thus, trust property “may consist of such diverse rights and undivided intere sts, terms of years, contingent future interests, and choses in action . . . .” Id. § 40 cmt. b. -10- (F IRST ) P ROPERTY § 153(1)(a) (1936). A chose in action, for example , is a future interest, and, like all property interests, it is t ransferrable. 4 See id. § 163 cmt. b. Applying these principles here, although the plan d oes not possess the unpaid contributions themselves, it does possess the contractual rightto collect them. 5
At least one court has followed a similar line of r easoning and held that the contractual obligation to make contributions to a p lan is an “asset” under ERISA.
In United States v. LaBarbara , 129 F.3d 81 (2d Cir. 1997), the defendant was convicted under 18 U.S.C. § 664 of aiding and abett ing theft or embezzlement from an employee-benefit plan. As in our case, the employer in LaBarbarahad entered into a collective bargaining agreement wher eby he agreed to make regular contributions to an employee benefit plan. Id. at 83. The employer, however, fraudulently diverted plan contributions for other uses and then paid large sums of money to the defendant, a principal officer of the union that had negotiated the collective bargaining agreement. Id. On appeal, the defendant argued his conviction was invalid. According to the defendant, the unpaid contributions were not “f und assets” because “moneys-11-

owed to an ERISA plan are not assets until banked.” Id. at 88. The Second Circuit, relying on a “common definition” of what c onstitutes an asset, disagreed. The court held that “[o]nce wages were paid to Loca l 66 members, [the employer] had contractual obligations to the Funds that const ituted ‘assets’ of the Funds by any common definition. Certainly, an audit of the Funds would have to include such fixed obligations as assets.” Id. We agree with the reasoning and outcome in LaBarbara . The plain meaning of the term “asset” includes a chose in action to c ollect contractually-owed contributions. Certainly, as noted by the Second C ircuit, an audit of the Funds would treat such fixed obligations as assets. Id. We therefore hold the district court erred in concluding that the contributions ow ed by the Lunas to the Funds were not plan assets under ERISA. Under ordinary n otions of property rights, although the plan did not own the contributions the mselves, it did own a contractual right to collect them. In reaching this conclusion, we are mindful that so me courts look to the language of the operative documents in deciding whe ther unpaid contributions amount to plan assets. See, e.g., ITPE Pension Fund v. Hall , 334 F.3d 1011, 1013–14 (11th Cir. 2003) (“The proper rule . . . is that unpaid employer contributions are not assets of a fund unless the a greement between the fund and the employer specifically and clearly declares othe rwise.”) (citations omitted).6 The bankruptcy court relied on the following langu age from the trust

documents: (1) the Welfare Plan trust document ref erences “monies paid into the Trust Fund;” (2) the Pension Plan trust document st ates the “trust . . . shall consist of all employer contributions . . . made;” (3) the Joint Contribution Fund trust document refers to money “contributed” and “paid;” and (4) the Joint Apprenticeship Agreement refers to contributions “m ade.” Based on these references, the district court accepted the conclus ion that the trust documents “infer that the monies have to be paid into the fun ds before they become assets of the plan.” -12- Indeed, that is the method followed by the bankrupt cy court and district court in this case. 6 In our view, however, the CBA and other trust doc uments in this case are at best ambiguous regarding the point when unpa id contributions become plan assets. More importantly, although we agree that i n some cases reference to the plan documents will aid in the determination of what constitutes a plan asset, a court’s purpose in cases such as this is to constru e ERISA and give effect to its plain meaning. Having done so, we conclude that th e contractual right to the unpaid contributions is an “asset” under ERISA. B. The Lunas are Not “Fiduciaries” Under ERISA § 3 (21)(A) We turn next to consider whether the Lunas acted as fiduciaries with respect to a plan asset. Based on our de novo review, we c onclude the Lunas were not fiduciaries under ERISA.

1. Fiduciary Status Under ERISA Under ERISA § 402(a), 29 U.S.C. § 102(a), every emp loyee benefit plan must appoint “one or more named fiduciaries who joi ntly or severally shall have7For example, fiduciary status is imputed to indivi duals that render advice

regarding the value of securities or property, reco mmend the purchase of certain securities, or exercise discretion with respect to purchasing or selling securities or property on behalf of the employee benefit plan. 2 9 C.F.R. § 2510.3-21(1). On the other hand, activities such as the calculation of benefits, preparation of employee communication material, and the maintenanc e of employee records are not sufficient to impute fiduciary status. Id. § 2509.75-8 at D-2. -13- authority to control and manage the operation and a dministration of the plan.” In addition to these so-called “named fiduciaries,” in dividuals may acquire fiduciary status if they exercise the fiduciary functions setforth in ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A). Mertens v. Hewitt Assocs ., 508 U.S. 248, 262 (1993) (“ERISA . . . defines ‘fiduciary’ not in terms of f ormal trusteeship, but in functional terms of control and authority over the plan. . . .”); see 29 C.F.R. §§ 2509.75-8, 2510.3-21 (describing various functio ns that do or do not create fiduciary status). 7 Section 3(21)(A) of ERISA, 29 U.S.C. § 1002(21)(A), defines a person as a fiduciary of an ERISA plan to the extent that he: (i) [E]xercises any discretionary authority or disc retionary 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 compen sation, direct or indirect, with respect to any moneys or other prope rty of such plan, or has any authority or responsibility to do so, or (i ii) he has any discretionary authority or discretionary responsibi lity in the administration of such plan.-14-

(emphasis added). The definition, thus, encompasse s a variety of duties commonly performed by fiduciaries, including the providing o f investment advice, administrative control over a plan, advising on who m to retain as legal or investment advisors to a plan, and, ultimately, how to invest plan assets. Once deemed a fiduciary, either by express designation i n the plan documents or the assumption of fiduciary obligations (the functional or de facto method), the fiduciary becomes subject to ERISA’s statutory duti es. These duties, as summarized by the Supreme Court, “relate to the pro per management, administration, and investment of fund assets, the maintenance of proper records, the disclosure of specified information, and the av oidance of conflicts of interest.” Mass. Mut. Life Ins. Co. v. Russell , 473 U.S. 134, 142–43 (1985). Assessing whether a person is a named fiduciary und er the terms of a plan is, of course, a straightforward inquiry. Deciding whether a person has assumed functional or de facto fiduciary status, however, i s a more difficult exercise. To overcome this difficulty, courts frequently interpr et the statutory language in ERISA § 3(21)(A) by referencing the common law of trusts. See, e.g., Varity Corp. v. Howe , 516 U.S. 489, 502 (1996). This is because “ERISAabounds with the language and terminology of trust law.” Firestone Tire & Rubber Co. v. Bruch , 489 U.S. 101, 110 (1989); see also Central States, Southeast & Southwest Areas Pension Fund v. Central Transp., Inc ., 472 U.S. 559, 570 (1985) (“[R]ather8 This is not to say that the law of trusts provides all the answers. “Beyond

the threshold statement of responsibility . . . , t he analogy between ERISA fiduciary and common law trustee becomes problemati c. This is so because the trustee at common law characteristically wears only his fiduciary hat when he takes action to affect a beneficiary, whereas the t rustee under ERISA may wear different hats.” Pegram v. Herdrich , 530 U.S. 211, 225 (2000). Thus, the traditional trustee at common law could not assume a position that would place his interests contrary to the interests of the trus t’s beneficiaries. Id. Under ERISA, however, an employer can “wear different hat s,” one as employer and one as fiduciary, even though his interests as employermay not always align with his interests as fiduciary. Id. -15- than explicitly enumerating all of the powers and d uties of trustees and other fiduciaries, Congress invoked the common law of tru sts to define the general scope of their authority and responsibility.”). In deed, given the close relationship between the law of trusts and ERISA’s fiduciary res ponsibility provisions, the Supreme Court has instructed the federal courts to consider the law of trusts in “develop[ing] a federal common law of rights and ob ligations under ERISAregulated plans.” 8 Firestone Tire & Rubber Co. , 489 U.S. at 110 (citations and quotation omitted).

2. Authority or Control Respecting Management or D isposition of Plan Assets We now look to the specific language of ERISA § 3(2 1)(A), 29 U.S.C. § 1002(21)(A). It is undisputed that the Lunas did not render investment advice under clause (ii) of the definition. Nor did the L unas exercise discretionary responsibility under clause (iii) in the administration of the plans. Instead, this9 Tellingly, the Trustees’ own brief emphasizes the Lunas’ utter lack of

discretion in deciding how to fulfill their end of the CBA. Aplt. Br. at 11 (“Once wages are earned by plan participants, the employerhas a contractual obligation to pay benefits to the Funds.”); id. at 13 (“It is undisputed that the contributions owed by . . . Luna Steel pursuant to the collective bargaining agreement were due and owing.”); see also id. at 16 (quoting a provision in the collective bargai ning agreement that “[t]he Trustees shall have full and exclusive authority and discretion to determine all questions of coverage and eligibil ity under the Trust, the Plan, and all associated documents. . . .”) (emphasis added). -16- case focuses on clause (i) of the statutory definit ion. Specifically, the issue we face is whether the Lunas “exercise[d] any authority or control respecting management or disposition of [plan] assets.” The question of whether the Lunas exercised authori ty or control over the asset at issue almost answers itself: It is the Tr ustees, not the Lunas, who control the contractual right to collect unpaid contributio ns from the Lunas. Whether to enforce their contractual rights is entirely up to the Trustees; the Lunas, meanwhile, have no say over whether this right will be enforced or not. 9 Nonetheless, our analysis cannot stop here. Emphas izing the “mutual character” of the relationship between an employer and an ERISA plan, at least one court has held that an employer-contributor exe rcises “authority or control” of plan assets solely by virtue of its duty “to reportthe basis on which contributions will be made to an ERISA fund,” i.e., to give an ac curate accounting of how much the employer is contributing each month. Northern Cal. Retail Clerks Unions & Food Employers Joint Pension Trust Fund v. Jumbo Ma rkets, Inc. , 906 F.2d 1371,-17-

1372 (9th Cir. 1990). Under this view, even though an employer agrees only to a contractual duty to make contributions, its discret ion to exercise prudence in upholding this duty—i.e., to pay or not to pay—is e nough to make it an ERISA fiduciary. In other words, an employer automatical ly becomes a fiduciary of an ERISA plan as soon as it breaches its agreement to make employer contributions. We disagree with this logic. In our view, an employer cannot become an ERISA fid uciary merely because it breaches its contractual obligations to a fund. ERISA’s text and purpose, the law of trusts, Department of Labor regulatory prono uncements, and case law all lend support to our conclusion. (a) Statutory Language. We begin by looking at ERISA as a whole to see whatit says about fiduciary status. First, the ERISA definition of “ fiduciary” contrasts with the ERISA definition of a “party in interest,” which in cludes, among other entities, “any fiduciary . . . counsel, or employee of [an] e mployee benefit plan . . . , a person providing services to such plan . . . , an employer any of whose employees are covered by such plan . . . , [and] an employee organization any of whos e members are covered by such plan . . . .” ERISA § 3(14), 29 U.S.C. § 1002(14) (emphasis added). In other words, all “fiduciaries ” are “parties in interest” but not all “parties in interest” are “fiduciaries.” The s tatute thus places employers such-18-

as the Lunas in a category of “party in interest” q uite apart from the category of “fiduciary.” Just from reading the face of the statute, therefore, we would be hardpressed to infer that the Lunas are ERISA fiduciari es simply because as employers they had a contractual obligation to pay contributi ons for the benefit of their employees. Second, ERISA addresses the issue of delinquent contributions to an employee benefit plan wholly separate and apart fro m the statute’s fiduciary obligation sections. Section 515 of ERISA, 29 U.S. C. § 1145, states: Every employer who is obligated to make contributio ns to a multiemployer plan under the terms of the plan or u nder the terms of a collectively bargained agreement shall . . . make such contributions in accordance with the terms and conditions of such plan or such agreement. Thus, ERISA § 515 “creates a federal right of actio n independent of the contract on which the duty to contribute is based and may be enforced by an action brought in the district court.” Bituminous Coal Operators’ Ass’n v. Connors , 867 F.2d 625, 633 (D.C.C. 1989). The fact that Congress so explicitly addressed the issue in § 515 suggests that reliance on ERISA’s fiduciary obligation sections was not intended in delinquent contribution cases such as t his one. More to the point, the language of ERISA § 3(21)(A) does not support a finding that the Lunas acted as fiduciaries. As no ted, the relevant language states that a person assumes fiduciary status to the exten t he or she “exercises any10 “Management” is defined as “the act or art of mana ging, as . . . the

conducting or supervising of something . . . especi ally the executive function of planning, organizing, coordinating, directing, cont rolling, and supervising any . . . activity with responsibility for results.” W EBSTER ’ S T HIRD N EW I NTERNATIONAL D ICTIONARY1372 (2002). “Disposition” is defined as “the actor power of disposing . . . [as in] placing elsewhere, a giving over to the care or possession of another, or a relinquishing.” Id. at 654.-19- authority or control respecting management or dispo sition of its assets.” The plain meaning of the operative words suggests that Congre ss envisioned a greater degree of responsibility than was exercised by the Lunas. The act of failing to make contributions to the Funds cannot reasonably be con strued as taking part in the “management” or “disposition” of a plan asset. 10 The asset in question, it must be remembered, is the Trustees’ contractual right to c ollect the unpaid contributions, and the Lunas exercised no control over how the Tru stees manage or dispose of that asset. Even if, however, the asset were the unpaid contrib utions themselves, it is still not clear that the statutory definition would be met. For one, there were never any earmarked funds or segregated accounts for the contributions. And secondly, courts have noted that the “management or dispositi on” language “refers to the common transactions in dealing with a pool of asset s: selecting investments, exchanging one instrument or asset for another, and so on.” Harris Trust & Sav. Bank v. John Hancock Mut. Life Ins. Co., 302 F.3d 18, 28 (2d Cir. 2002) (quoting Johnson v. Georgia-Pacific Corp., 19 F.3d 1184, 1189 (7th Cir. 1994)). The-20-

Lunas exercised no such authority or control here. The statutory language, thus, does not support the Trustees’ contention that the Lunas were fiduciaries under
ERISA. (b) Law of Trusts

. Our interpretation of the statutory language is als o supported by the law of trusts. First, a trustee is almost always given po wers of management over trust property, see George Gleason Bogert, T RUSTS & T RUSTEES § 50 (2d ed. 1984), which, as we have shown, the Lunas do not have. Ad ditionally, at common law, “fiduciary duties characteristically attach to deci sions about managing assets and distributing property to beneficiaries.” Pegram v. Herdrich , 530 U.S. 211, 231 (2000) (citing G. Bogert & G. Bogert, L AW OF T RUSTS AND T RUSTEES §§ 551, 741–747, 751–775, 781–799 (2d. ed. 1980); 2A A. Sco tt & W. Fratcher, T RUSTS §§ 176, 181 (4th ed. 1987)). “Trustees buy, sell, and lease investment property, lend and borrow, and do other things to conserve an d nurture assets. They pay out income, choose beneficiaries, and distribute remain ders at termination.” Id. Making contractually-owed contributions to an ERISAplan bears only a limited resemblance, if any, to these traditional fiduciary responsibilities. In fact, given the context of the CBA whereby the L unas agreed to make regular contributions to the Funds, as we have disc ussed above, the relationship between the Lunas and the Funds is best characteriz ed as contractual, not-21-

fiduciary. This is well-supported by the law of tr usts: A contract to convey property does not give rise to a fiduciary relation ship. See T HE RESTATEMENT (T HIRD ) OF T RUSTS § 5(i) and cmt. i (2001). Furthermore, the relationship of debtor to creditor that results from contract is no t fiduciary in nature. Id. at § 5(k). As explained in the Restatement, “When a trust is c reated there is a fiduciary relationship between the trustee and the beneficiar ies . . . . A debtor does not as such stand in a fiduciary relationship to his or he r creditors. A creditor as such has against the debtor merely a personal claim, whi ch can be enforced by judicial proceedings to reach the debtor’s property.” Id. at cmt. k. Thus, as with the statute’s language, the law of tr usts does not support the Trustees’ contention that the Lunas were fiduciarie s under ERISA—in fact, it compels the opposite conclusion. (c) Regulatory Interpretations. Next, the Department of Labor’s guidance with respe ct to ERISA’s definition of “fiduciary” makes clear that persons who have “no power to make any decisions as to plan policy, interpretations, p ractices or procedures,” but instead who perform only “administrative” or “minis terial functions” related to the plan, are not fiduciaries under ERISA § 3(21)(A). 29 C.F.R. § 2509.75-8 at D-2. The question, then, is whether the Lunas’ obligatio n to make contributions under the CBA is more akin to a plan administrator’s abil ity to make decisions as to plan-22-

policy, practices, or procedures, or whether it is closer to non-fiduciary ministerial functions. In our view it is the latter. Minister ial functions include, among other things, the “[c]ollection of contributions and appl ication of contributions as provided in the plan.” Id. This ministerial function closely resembles the L unas’ obligation to make plan contributions according to the dictates of the CBA. (d) Case Law. Turning to ERISA case law, we begin with the noncon troversial position that the Lunas’ status as employers, standing alone , is not enough to confer fiduciary status. Siskind v. Sperry Retirement Program , 47 F.3d 498, 505 (2d Cir. 1995) (“An employer acts as a fiduciary within the meaning of ERISA . . . only when fulfilling certain defined functions. . . .”); Barnes v. Lacy , 927 F.2d 539, 544 (11th Cir. 1991) (“Generally, employers owe no fidu ciary duty toward plan beneficiaries under the ERISA.”); Gelardi v. Pertec Computer Corp ., 761 F.2d 1323, 1325 (9th Cir. 1985) (“Once [employer] appointed the Plan Administrator and gave him control over the Plan, [employer] was no longer a fiduciary because it retained no discretionary control over the dispo sition of claims.”). Therefore, for the Trustees to prevail, they must point to som ething about the Lunas’ relationship to the Funds that indicates authority or control over the management or disposition of a plan asset. This they cannot d o.11 Our conclusion that the Lunas were debtors to the plan rather than

fiduciaries is further supported by the context of this case. It must be remembered that the ultimate question facing this c ourt is whether the Lunas’ debt to the Funds is nondischargeable under bankrup tcy law, 11 U.S.C. § 523(a)(4). Because this case arises under the Ba nkruptcy Code, not ERISA, it reinforces the notion that the Lunas’ relationship to the plan is debtor/creditor, rather than fiduciary. See Hunter , 373 F.3d at 876. The RESTATEMENT (T HIRD ) OF T RUSTS § 5 cmt. k also supports this conclusion. It states, in the context of agreement s between employers and employees to deduct certain amounts from the employ ee’s wages, (continued...) -23- A number of cases support the proposition, which w e discussed above, that the true nature of the relationship between the Lun as and the Funds was contractual, and not fiduciary, in nature. See Hunter v. Philpott , 373 F.3d 873, 877 (8th Cir. 2004) (in a bankruptcy case involving the same plaintiffs and same CBA at issue here, holding that “the substance of t he relationship between [defendant] individually and the Funds was basicall y contractual, not fiduciary, in nature”); ITPE Pension Fund v. Hall , 334 F.3d 1011, 1016 (11th Cir. 2003) (Barkett, J., concurring) (“An employee pension pla n that identifies receivables as a type of asset does not thereby create fiduciary o bligations on the part of persons with control over the actual funds out of which obl igors might satisfy these outstanding claims.”). Following from this proposition is the conclusion that a delinquent employer-contributor is merely a debtor, not a fidu ciary. 11 Meanwhile, the benefit11 (...continued)

“[A] trust arises as to the amounts deducted as soo n as they are either set aside by the employer for the employees’ purpos es or paid over to another person for those purposes. Until then, the employer’s obligation is merely a debt , with the “obligee” (the employer or other person) holding a chose in action (the claim against the employer) in trust. The claim that is held in the trust estate is like the claims of the other general creditors of the employer except to t he extent of any preference that may be conferred by statute or othe r rules of law or equity, preferences that are not peculiar to the tr ust law.” (emphasis added). Thus, according to the Restatement, a trust arises only when an employer actually deducts and sets aside amounts from an emp loyee’s salary. In this case, however, the Lunas never deducted amounts fro m their employees’ wages.

12 The CBA, in fact, specifically contemplates that t he Lunas’ failure to make contributions would give rise to a contractual claim. It provides that the Lunas, in the event of breach, are responsible for liquidated damages, costs of collection, attorney’s fees, and audit fees. CBA § XXI(C). -24- plan does not own the actual unpaid contributions, but only a contractual claim for damages. 12 It is the Trustees, not the Lunas, that exercise control over the contractual right to unpaid contributions. Under t he CBA, the Lunas had no duty other than to make monthly contributions, and no di scretion other than to fail to make those required contributions. The mere discre tion whether to pay debts owed to an employee benefit plan, however, does not suff ice to confer fiduciary status under ERISA. See Bd. of Trustees of Teamsters Local 863 Pension Fund v. Foodtown, Inc ., 296 F.3d 164, 174 (3d Cir. 2002) (where employerowed money to multi-employer pension fund, holding that employer was not a fiduciary because it13 Our holding that employers who fail to pay contrac tually-owed

contributions to a plan are not, by virtue of that fact alone, fiduciaries, must be distinguished from the situation where an employer has control over funds that were withheld from employees’ pay checks. Where th e issue is not employer contributions (as here), but rather employee contributions held by the employer, courts will recognize that the employer meets ERISA ’s statutory definition of a fiduciary. See, e.g., Phelps v. C.T. Enters., Inc. , 394 F.3d 213, 219 (4th Cir. 2005) (“Where . . . an employer is entrusted with e mployee funds for remittance to a claims administrator . . . the employer is act ing in a fiduciary capacity under ERISA.”). -25- played no role in the management or investment of a ssets); Kopilas v. Disipigna , 1992 WL 96360, No. 90-DIV. 5075 (JFK), at *3 (S.D.N .Y. 1993) (holding that employer was not a fiduciary because “[w]hile the c ollective bargaining agreement required [employer] to make periodic contributions to the plan, there is no indication and no allegation that [employer] exerci sed authority and control of any kind with respect to the Pension Plan”); Laborers’ Pension Fund v. Litgen Concrete Cutting & Coring Co. , 709 F. Supp. 140, 145 (N.D. Ill. 1989) (in case based on allegations that employer failed to make c ontributions as required by a collective bargaining agreement, noting that “this court would be surprised to learn that [employer] holds any authority, discretionary control, or responsibility with respect to management or administration of the plai ntiffs’ funds or assets”). 13 Admittedly, there is contrary authority suggesting the discretion whether to pay contractually-owed monies to an employee benefi t plan is sufficient to establish fiduciary status. See Jumbo Markets, Inc. , 906 F.2d at 1372; Bd. of14 In Solmsen , for example, in addition to failing to pay contri butions to the

plan, the defendant was named as “Trustee” in plan documents, admitted that he acted as “plan administrator,” exercised authority to transfer plan assets between funds, and made decisions regarding payments to pla n participants. -26- Trustees v. J.R.D. Mech. Servs. Inc., 99 F. Supp. 2d 1115, 1122 (C.D. Cal. 1999) (citing cases). Such cases, however, are either ea sily distinguished on the facts,

see, e.g. , Pension Ben. Guar. Corp. v. Solmsen , 671 F. Supp. 938 (E.D.N.Y. 1987), 14 or otherwise identify the plan asset as the actual unpaid contributions—i.e., the pool of funds—rather than, as we have held, a contractual right belonging to the fund trustees. When the ass et in question is properly identified as a contractual right to unpaid contrib utions, the issue of control over that asset is straightforward. See Witt v. Allstate Ins. Co. , 50 F.3d 536, 537 (8th Cir. 1995) (holding that an insurer of a third-party tortfeasor was not an ERISA fiduciary merely because it owed money to the emplo yee benefit plan); Chapman v. Klemick, 3 F.3d 1508, 1508 (11th Cir. 1993) (rejecting the view that a person “breached his fiduciary duty to the trust fund by d isposing of [monies]” contrary to an agreement with an employee benefit fund). Another essential ingredient in this case is the fa ct that the Lunas, as owners of a closely-held corporation, were required to mak e business decisions with respect to general corporate funds. Such business decisions must not be confused with fiduciary actions. It is well-established that an ERISA fiduciary can “wear-27-

two hats,” meaning an individual can be both an emp loyer and a fiduciary. See, e.g., Amato v. Western Union Int’l, Inc. , 773 F.2d 1402, 1417 (2d Cir. 1985). Therefore, as the Supreme Court has noted, the “thr eshold question” in an action for breach of fiduciary duty is whether the alleged fiduciary “was acting as a fiduciary (that is, was performing a fiduciary func tion) when taking the action subject to complaint.” Pegram v. Herdrich , 530 U.S. 211, 226 (2000). Because virtually every business decision an employ er makes can have an adverse impact on an employee benefit plan, Varity Corp. v. Howe , 516 U.S. 489, 527 (1996) (Thomas, J., dissenting), courts must “e xamine the conduct at issue to determine whether it constitutes management or admi nistration of the plan, giving rise to fiduciary concerns, or merely a business de cision that has an effect on an ERISA plan not subject to fiduciary duties.” COB Clearinghouse Corp. v. Aetna U.S. Healthcare, Inc ., 362 F.3d 877, 881 (6th Cir. 2004) (citation and quotation omitted). This is so even where some of the decisions persona lly benefitted the employer, such as some of the payments made by the Lunas to t hemselves for personal

expenses. Cf. Izzarelli v. Rexene Prods. Co. , 24 F.3d 1506, 1523–25 (5th Cir. 1994) (holding that even though employer was motivated by self-interest in amending an employee stock bonus plan, employer was not acting in a fiduciary capacity, but rather making a “business decision” n ot regulated by ERISA).-28-

Under the circumstances of this case, the Lunas’ de cision to use their limited funds to pay other business expenses ratherthan to make contributions to the Funds was a business decision, not a breach of fiduciary duty. See Local Union 2134, United Mine Workers v. Powhatan Fuel, I nc ., 828 F.2d 710, 714 (11th Cir. 1987) (corporate president’s decision to pay business expenses rather than insurance premiums was a business decision notregulated by ERISA). In an attempt to keep the company afloat in the face of d eteriorating finances, the Lunas opted to pay expenses such as employee wages, insur ance, and equipment leases. The company’s financial condition was so severe, in fact, that Joyce Luna withdrew funds from her IRA to help cover expenses and Mark Luna borrowed money from a local bank for company use. Although the decision to pay expenses rather than make plan contributions had an adverse impact on the Funds, we decline to impute fiduciary status to the Lunas bas ed on this fact alone. (e) Statutory Purpose. Finally, we are confident that our decision honors the statutory balance struck by Congress. As one court has stated, If ERISA did not limit the definition of fiduciarie s to those with knowledge of their authority and discretion, then p ersons or entities could become subject to fiduciary liability withoutnotice. Such a result would not only be unfair, but it would also disserve a core purpose of ERISA, which is to create a system where by accountable fiduciaries are motivated by their accountability t o protect the interests of participants in ERISA plans.-29-

Herman v. NationsBank Trust Co. , 126 F.3d 1354, 1366 (11th Cir. 1997). Indeed, at the time the Lunas signed the CBA, nobody would have suggested by virtue of the agreement that they became bound automatically by the fiduciary obligations spelled out in 29 U.S.C. §§ 1102, 1103, 1104, 1105, 1106, 1108, 1110, 1111, and 1112 (various statutory obligations of ERISA fiduci aries). ERISA’s definition of “fiduciary” is broad but not all-encompassing. Every employer in some sense has discretion in meeting it s obligations. But discretion alone does not confer fiduciary status under ERISA. If it did, any obligor to an employee benefit plan could become an ERISA fiducia ry. One can imagine, for example, a business that rents space in an investme nt property owned by a pension fund. Under the Trustees’ logic, the tenant’s fail ure to pay its rent obligation might create a de facto fiduciary relationship nondischargeable in bankruptcy. Plainly, Congress did not intend such a rule, for it would, among other things, undermine the very purpose of ERISA by creating an enormous disincentive to offer an employee-benefit fund or c ontract with one. We recognize, of course, that Congress enacted ERISA b ecause it found that prior law did not sufficiently protect the rights of plan ben eficiaries. This does not mean, however, that Congress meant to impose fiduciary ob ligations on all employercontributors. In the absence of Congressional dire ction, therefore, we are not inclined to expand ERISA beyond its plain meaning a nd hold that the officers of a-30-

company who contract with an ERISA-covered fund aut omatically become fiduciaries under the Bankruptcy Code.
III. Conclusion For the foregoing reasons, the judgment of the dis trict court is AFFIRMED.