Opinion ID: 4707273
Heading Depth: 1
Heading Rank: 4

Heading: Argent Trust Company

Text: The plaintiﬀs’ Count V aiding and abetting claims against Argent Trust Company (Argent) are a diﬀerent matter. These claims are preempted because ERISA does not permit states to dilute the exclusive beneﬁt rule further, beyond its narrow exception for dual-hat directors and oﬃcers. Unlike the directors and oﬃcers, Argent is a “single-hat” ERISA ﬁduciary. It has no state-law duty of loyalty to the corporation. Still, the plaintiﬀs seek to extend corporation-law liability to Argent through an aiding and abetting theory.2 Aiding and abetting a breach of a ﬁduciary duty is a wellestablished tort. See Restatement of Torts (Second) § 874, cmt. c (1979). Yet it is expansive in that it requires any third party working with a corporate ﬁduciary to be alert to the ﬁduciary’s special duties and to avoid knowingly giving aid to a breach. In this respect, aiding and abetting claims use 2 The parties dispute whether Wisconsin or Delaware law applies. We need not resolve that question because both states impose liability on parties who knowingly aid and abet a corporate fiduciary’s breach of duty. See Burbank Grease Servs., LLC v. Sokolowski, 294 Wis. 2d 274, 304, 717 N.W.2d 781, 796 (2006) (“If a duty of loyalty exists, and a third party encourages and profits from a breach of the duty of loyalty, a claim for aiding and abetting the breach will lie.”); Gotham Partners, L.P. v. Hallwood Realty Partners, L.P., 817 A.2d 160, 172 (Del. 2002) (stating elements of a claim for aiding and abetting a breach of fiduciary duty under Delaware law). 26 No. 20-2793 directors and oﬃcers’ corporation-law duties as a foundation for a wider layer of tort liability reaching third parties. States are usually within their rights to impose aiding and abetting liability on third parties. However, ERISA preempts such liability when it comes to third parties like Argent who are subject to exclusive federal duties to act solely in the interest of beneﬁciaries. Unlike with dual-hat directors and oﬃcers, ERISA does not contemplate single-hat ﬁduciaries owing any parallel duties to the corporation—even a limited duty not to aid and abet breaches against the corporation. The prospect of aiding and abetting liability in this case simply creates too great a risk that single-hat ERISA ﬁduciaries like Argent would be forced to worry about whether directors and oﬃcers were complying with separate corporation-law duties. This would interfere with the singleminded focus on the plan and its beneﬁciaries that ERISA’s exclusive beneﬁt rule prescribes for ﬁduciaries like Argent. In particular, the conﬂicts of interest that plague dual-hat directors and oﬃcers would suddenly infect single-hat entities, as well. Imagine, for example, an ERISA ﬁduciary worrying whether it would be aiding a breach of ﬁduciary duty simply by convincing a dual-hat director or oﬃcer to approve a plan decision that favors beneﬁciaries at the expense of company proﬁts. Such conﬂicts of interest are challenging enough when they aﬀect only the directors and oﬃcers. They can paralyze eﬃcient plan administration. “[W]ith the strict common-law standard of not holding conﬂicting oﬃces removed by ERISA, it is very diﬃcult for an ERISA ﬁduciary to be assured of a benign assessment by third parties of the motivational factors underlying the ﬁduciary’s act.” Wohl, 20 U. Dayton L. Rev. at No. 20-2793 27 48–49. As a result, “the ﬁduciary may be reluctant to act” even where no malfeasance is afoot. Id. at 49. These problems are most likely to arise in cases like this one involving failing companies. Langbein & Fischel, 55 U. Chi. L. Rev. at 1132 (In cases involving “plant closings or in corporate reorganizations …, the gains from self-interested action by nonneutral ﬁduciaries may outweigh the usual … costs. It is for this reason, we suspect, that the contested plan administration cases so often arise when the incentives of the long term relationship” between employer and employees “are attenuated”). Such conﬂicts of interest are exactly what ERISA’s exclusive beneﬁt rule is meant to prevent. So while ERISA explicitly tolerates some conﬂicts among directors and oﬃcers, both the text and purpose of ERISA’s exclusive beneﬁt rule make clear that courts should resist any further dilution through statelaw aiding and abetting claims that would eﬀectively force a second hat onto single-hat ERISA ﬁduciaries. Cf. UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 378–79 (1999) (ERISA preempted state-law doctrine deeming employer an agent of insurer; state-law rule would force the employer, “as plan administrator, to assume a role, with attendant legal duties and consequences, that it has not undertaken voluntarily” under ERISA). We recognize that “aiding and abetting” liability against Argent would impose liability only for intentionally fraudulent conduct. It is therefore unlikely that the conduct prohibited by state law—aiding a fraud—would be something that Argent’s corollary ERISA duties require or even allow. In fact, ERISA beneﬁciaries, participants, and ﬁduciaries can sue Argent under ERISA for knowingly aiding the directors and oﬃcers’ alleged breaches of their ERISA 28 No. 20-2793 duties. See 29 U.S.C. § 1105(a)(1) (“a ﬁduciary … shall be liable for a breach of ﬁduciary responsibility of another ﬁduciary … if he participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other ﬁduciary, knowing such act or omission is a breach”). As with the directors and oﬃcers, then, state-law liability against Argent would run parallel to Argent’s ERISA liability. But, again, the key diﬀerence is that the exclusive beneﬁt rule preempts such parallel state-law liability outside the narrow and unavoidable exception for dual-hat directors and oﬃcers. Indeed, the preeminence of ERISA’s exclusive beneﬁt rule is what distinguishes the aiding and abetting claims against Argent from other non-preempted, “run-of-the-mill” tort claims brought against single-hat ERISA ﬁduciaries. See Mackey, 486 U.S. at 833. In Mackey, the Supreme Court recognized that claims for ordinary torts allegedly committed by ERISA ﬁduciaries are often not preempted. Id. (“lawsuits against ERISA plans for run-of-the-mill state-law claims such as unpaid rent, failure to pay creditors, or even torts committed by an ERISA plan—are relatively commonplace…. [T]hese suits, although obviously aﬀecting and involving ERISA plans and their trustees, are not pre-empted by ERISA § 514(a).”). Accordingly, courts have permitted many tort claims against ERISA ﬁduciaries even when the tortious conduct occurred in the context of plan activity. See Mackey, 486 U.S. at 833 n.8 (collecting cases); see also, e.g., Franciscan Skemp, 538 F.3d at 601 (third-party hospital’s negligent misrepresentation claim against ERISA plan insurer was not completely preempted); Dishman v. UNUM Life Ins. Co. of Am., 269 F.3d 974, 979–84 (9th Cir. 2001) (beneﬁciary could pursue invasion No. 20-2793 29 of privacy tort against ERISA plan insurer for actions taken to investigate beneﬁts claim); Lane v. Goren, 743 F.2d 1337, 1340 (9th Cir. 1984) (beneﬁciary could pursue state-law race and age discrimination claims against ERISA ﬁduciaries). In those and other “run-of-the-mill” cases, however, the plaintiﬀs were either (1) beneﬁciaries who suﬀered torts unrelated to their ERISA rights, as in Dishman and Lane, or (2) true third parties, such as the hospital in Franciscan Skemp or the outside creditors in Mackey. State-law liability to the beneﬁciaries in Dishman and Lane thus did not risk distracting ﬁduciaries from their single-minded focus on beneﬁciaries. And in Franciscan Skemp and Mackey, because liability ﬂowed to third parties, there was no risk of dividing single-hat ﬁduciaries’ allegiance between the beneﬁciary and her corporate employer—the foremost entity that ERISA ﬁduciaries are not supposed to serve. Here, however, the injured plaintiﬀ is the corporate employer. Parallel state-law liability would foster just the sort of dual loyalty that the exclusive beneﬁt rule prohibits. The plaintiﬀs in this case are bankruptcy creditors, not the corporation itself, but they are suing on behalf of the corporate employer for alleged breaches of duties owed to the corporation before the bankruptcy. So, unlike in Mackey-type cases, the aiding and abetting claims against Argent here would in fact impose on single-hat ﬁduciaries new state-law duties to the corporate employer. Such liability is fundamentally at odds with the text and purpose of ERISA’s exclusive beneﬁt rule and is therefore preempted. 30 No. 20-2793