Opinion ID: 1035522
Heading Depth: 3
Heading Rank: 2

Heading: Breach of Fiduciary Duty by a Co-Fiduciary

Text: Plaintiff next asserts claims under ERISA Section 405(a), which holds cofiduciaries liable for the breaches of other fiduciaries if they knowingly participate in that breach or have knowledge of that breach and do not make reasonable efforts under the circumstances to remedy the breach. 29 U.S.C. § 1105(a)(1), (3). Under ERISA, fiduciaries “[may] not avoid liability for . . . mismanagement of the [p]lan by simply doing nothing,” Free v. Briody, 732 F.2d 1331, 1336 (7th Cir. 1984), and therefore Section 405 encourages fiduciaries, “as a means of avoiding personal 2 Notably, the fee was predetermined, and the amount charged was based on how the participant prepared the DRO. 6 liability, to take steps to remedy perceived improprieties in plans operations.” Nicolaou v. Horizon Media, Inc., 402 F.3d 325, 331 (2d Cir. 2005) (Pooler, J., concurring). Here, Plaintiff argues that A&P breached its fiduciary duty to defray costs by agreeing to the $1,200 fee and signing the Trust Agreement, and Fidelity, as another fiduciary of the A&P plan who was aware of A&P’s breach, is liable. Once again, we look to whether Fidelity was a fiduciary when the alleged breach by another fiduciary occurred. In Renfro, we found that the defendant service provider could not be a co-fiduciary under ERISA Section 405 for the plan sponsor’s alleged breach—the decision to include certain mutual funds and their accompanying fees—because the defendant then “owe[d] no fiduciary duty with respect to the negotiation of its fee compensation” as it “was not yet a plan fiduciary at the time it negotiated the fee compensation with [the plan sponsor].” Renfro, 671 F.3d at 324. Similarly, based on Plaintiff’s allegations, at the time that A&P and Fidelity negotiated and signed the Trust Agreement, Fidelity was just an arms-length negotiator who owed no duty to plan participants. Hence, Fidelity was not then a fiduciary and therefore could not be considered a co-fiduciary under Section 405. When Fidelity later became a fiduciary, it was only a fiduciary with respect to its administration of plan services, not with respect to the challenged conduct of A&P approving Fidelity’s collection of a particular fee. Because Fidelity cannot be held liable as a co-fiduciary, Plaintiff’s Section 405(a) claims fail.