Opinion ID: 165859
Heading Depth: 2
Heading Rank: 1

Heading: ) Flexible Benefits & Mr. Madsen (the accountant defendants)

Text: 13 The plan asserts that the accounting defendants are fiduciaries as defined by ERISA and therefore dismissal of its ERISA claim against them was in error. Further, the plan concedes that if the accountant defendants are ERISA fiduciaries its state-law claims are preempted; however, if the accountant defendants are not deemed fiduciaries, the plan argues its state-law claims are not preempted. Whether a party is an ERISA fiduciary is a mixed question of fact and law. Hamilton v. Carell, 243 F.3d 992, 997 (6th Cir. 2001). However, where the parties essentially agree on the underlying facts, as is the case here, the only issue before us is the district court's legal conclusion, which we review de novo. Id.; see also Allison v. Bank One-Denver, 289 F.3d 1223, 1235 n. 2 (10th Cir.2002); Peckham v. Gem State Mut. of Utah, 964 F.2d 1043, 1047 n. 5 (10th Cir.1992). ERISA defines fiduciary in reference to the functions being performed for the plan. The statute provides: 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 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. 14 29 U.S.C. § 1002(21)(A). Thus, in applying this definition, the court must conduct a functional analysis. See Lockheed Corp. v. Spink, 517 U.S. 882, 890, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996). That is to say, regardless of status or title, parties are only plan fiduciaries to the extent they are performing one of the functions identified in the definition. Varity Corp. v. Howe, 516 U.S. 489, 498, 502-04, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996); 29 C.F.R. § 2509.75-8 at D-2. 15 Plan management or administration confers fiduciary status only to the extent the party exercises discretionary authority or control. Discretion exists where a party has the power of free decision or individual choice. Webster's Ninth New Collegiate Dictionary 362 (1991); Herman v. NationsBank Trust Co., 126 F.3d 1354, 1365 (11th Cir.1997) (defining discretion). On the other hand, non-discretionary or ministerial functions are those that do not require individual decisionmaking. These include tasks which by their nature are inherently ministerial, such as clerical services. See Pohl v. Nat'l Benefits Consultants, Inc., 956 F.2d 126, 129 (7th Cir. 1992) ([Defendant's] function under the plan was clerical, mechanical, ministerial— not discretionary.). They also include those tasks that might otherwise require discretion but which are performed within the confines of plan policies and procedures. IT Corp. v. Gen. Am. Life Ins. Co., 107 F.3d 1415, 1420 (9th Cir.1997) (quoting 29 C.F.R. § 2509.75-8 at D-2); Useden v. Acker, 947 F.2d 1563, 1575 (11th Cir.1991). 16 Discretion is conspicuously omitted from the fiduciary function of controlling plan assets. Indeed, the statute provides that  any authority or control  over the management or disposition of plan assets is sufficient to render fiduciary status. 29 U.S.C. § 1002(21)(A)(I) (emphasis added). As other courts have recognized, this distinction evidences Congress's intent to treat control over assets differently than control over management or administration. Srein v. Frankford Trust Co., 323 F.3d 214, 220-21 (3d Cir.2003); IT Corp., 107 F.3d at 1421; FirsTier Bank, N.A. v. Zeller, 16 F.3d 907, 911 (8th Cir.1994). 1 In Congress's judgment, and consistent with general trust law, parties controlling plan assets are automatically in a position of confidence by virtue of that control, and as such they are obligated to act accordingly. See FirsTier Bank, N.A., 16 F.3d at 911; S.Rep. No. 127, 93rd Cong., 2d Sess. 27, reprinted in 1974 U.S.C.C.A.N. 4838, 4864-65. 2 17 As stated above, Mr. Madsen and Flexible Benefits prepared the plan's financial statements, received plan contributions and subsequently remitted the funds as directed by Mr. Simper, and prepared promissory notes for plan loans to participants and tracked the balances of those loans. Thus, there are two possible grounds for finding that they functioned as plan fiduciaries. First, their involvement in plan administration, and second, their control over plan assets. 18
19 Generally, preparing plan financial documents, including tax forms, is an administrative function; however, it is also ministerial. Anoka Orthopaedic Assocs., P.A. v. Lechner, 910 F.2d 514, 517 (8th Cir.1990); Yeseta v. Baima, 837 F.2d 380, 385 (9th Cir.1988); 29 C.F.R. § 2509.75-8 at D-2 (preparing reports required by government agencies and reports concerning participants' benefits are ministerial tasks). That is, once the preparer has the necessary information, it is, as Dr. Coldesina admitted, pretty much a numbers calculation. Thus, even though the accountant defendants charged administrative fees and said they were involved in plan administration, they did not perform the necessary administrative functions to be considered plan fiduciaries.
20 As stated above, any authority or control over plan assets is sufficient to render fiduciary status. As such, acting as a signatory on behalf of a plan can indicate fiduciary control. See IT Corp., 107 F.3d at 1421-22 (The right to write checks on plan funds is `authority or control respecting management or disposition of [ ] assets.'); LoPresti v. Terwilliger, 126 F.3d 34, 40 (2d Cir.1997) (noting signatory authority in discussing fiduciary status). However, performing this function in name only is likely insufficient. See LoPresti, 126 F.3d at 40 (finding signatory who wrote checks on plan funds was a fiduciary while signatory who never wrote checks and was not involved in finances was not a fiduciary). 21 Here, the accountant defendants were signatories in practice as well as name. Mr. Madsen received plan contribution funds from the plan, which he deposited into his business account, and then wrote checks on behalf of the plan for the amount of the contribution. This arrangement was initially set up to facilitate better recordkeeping; however, the practical reality is that Mr. Madsen had total control over the plan's money while it was in his account. By way of example only, though not authorized to do so, he could have withdrawn the plan's money to pay his business expenses or go on vacation, and certainly if he had done either it would have been appropriate to treat his actions as a breach of fiduciary duty. See Olson v. E.F. Hutton & Co., Inc., 957 F.2d 622, 626 (8th Cir.1992) (A person who usurps authority over a plan's assets and makes decisions about the use or disposition of those assets should know they are acting as a fiduciary.). 22 Indeed, this practical reality is precisely why control over assets is treated differently than control over management. See Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142-43, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985) (A fair contextual reading of [ERISA] makes it abundantly clear that its draftsmen were primarily concerned with the possible misuse of plan assets. . . .). As a general matter, a relationship of trust is established when one acquires possession of another's property with the understanding that it is to be used for the owner's benefit, and in these circumstances an obligation arises on the part of the one in possession to act in the owner's bests interests rather than his own. As such, assigning fiduciary obligations serves the purposes of ERISA. Indeed, [t]he words of the ERISA statute, and its purpose of assuring that people who have practical control over an ERISA plan's money have fiduciary responsibility to the plan's beneficiaries, require that a person with the authority to direct payment of a plan's money be deemed a fiduciary. IT Corp., 107 F.3d at 1421 (emphasis added). 23 The facts here are even more compelling because the account at issue belonged to the accountant defendants and not to the plan itself. In IT Corp., the court assigned fiduciary status where the party acted as a signatory on an account established and maintained by the plan, 107 F.3d at 1421, and under such circumstances, the signatory and the plan likely shared control over the assets. But here, where the plan was not affiliated with the account and had no authority to oversee its activities, it depended upon Mr. Madsen to ensure the funds were handled properly. Indeed, to say that the accountant defendants did not control the money while it was in their account is to say that no one had control during that time. 24 In opposition, the accountant defendants argue they were not in control of the plan's assets because they were simply performing a ministerial, check-writing service. First, the dichotomy between discretionary and ministerial authority is not determinative regarding control over assets. Second, this characterization is not entirely accurate. While it is true Mr. Madsen did not have any involvement in how the plan chose to invest its assets, see Baker v. Kingsley, 387 F.3d 649, 663-64 (7th Cir. 2004), or which claims were properly payable under the plan, IT Corp., 107 F.3d at 1420, or even which of various competing creditors would be paid, LoPresti, 126 F.3d at 40, he did exercise judgment in naming the payee on the checks he wrote on behalf of the plan. 25 The original understanding when Mr. Madsen agreed to accept plan contributions into his business account was that he would write the plan checks payable to KCL. However, at Mr. Simper's direction, Mr. Madsen subsequently began making the checks payable to Greystone Marketing. There were never any express plan policies directing Mr. Madsen's check-writing activities, and Dr. Coldesina was unaware Mr. Madsen was writing the checks to Greystone Marketing. As such, Mr. Madsen assumed control over disposition of the funds by exercising his own judgment rather than acting at the plan's direction. 26 On this point, LoPresti and IT Corp. are analogous. In LoPresti, the court held a plan administrator was a fiduciary based on his signatory status and authority to decide which creditors to pay out of the plan's assets. 126 F.3d at 40. Likewise, in IT Corp., the court held that an outside company serving as signatory and having the authority to pay claims it deemed proper under the plan was a fiduciary because it had the ability to direct the plan's assets. 107 F.3d at 1421-22. Certainly, Mr. Madsen had fewer choices in naming a payee than in these prior cases and thus exercised a lesser degree of control over disposition of the assets, but the point is he had this authority. [A] person is a fiduciary with respect to a plan to the extent ... [he] exercises any authority or control respecting management or disposition of its assets,  29 U.S.C. § 1002(21)(A) (emphasis added), and Mr. Madsen's actions, just like the fiduciaries in LoPresti and IT Corp., demonstrate that as a practical matter, [he had] a substantial amount of money ... under [his] control ... in the form of a bank account which [he] could deplete by writing checks. IT Corp., 107 F.3d at 1421. 27 Mr. Madsen also argues he was not a fiduciary because he simply followed Mr. Simper's instruction in writing checks for the plan. This argument has some appeal given the close relationship the accountant defendants had with Mr. Simper concerning plan activities and their virtually nonexistent interaction with the plan itself; however, it fails to recognize the realities of this case. Regardless of who the accountant defendants dealt with, they were hired by the plan, not Mr. Simper, and were entrusted with the plan's money, not Mr. Simper's. They simply cannot avoid this fact by asserting that the devil made them do it. FirsTier Bank, N.A., 16 F.3d at 911. Besides, the reason Mr. Simper gave for requesting that the checks be made to Greystone Marketing rather than KCL focused on his own business interests and not the plan's interests, suggesting the instruction may not have been coming from the plan. See id. (explaining person in control of assets only entitled to comply with direction from fiduciary if it complies with duties owed to plan). This cannot be equated to obeying an established plan policy or procedure and it does not erase the fact that Mr. Madsen, not Mr. Simper, held the plan's assets in his business account of which he was the only signatory. 28 Flexible Benefits' involvement with plan loans is more complicated. Whereas this activity is more akin to controlling the disposition of assets than simply preparing financial documents, the current record fails to establish the accountant defendants did much more than draft loan agreements and create a paper trail. Therefore, because we conclude the accountant defendants were fiduciaries by virtue of the parties' banking arrangement, we need not decide whether these activities result in fiduciary status. 29 Thus, we reverse the district court regarding its dismissal of the plan's ERISA claim against the accountant defendants and affirm as to the state-law claims.