Opinion ID: 693407
Heading Depth: 3
Heading Rank: 2

Heading: Fiduciary Status of Hurwitz and Leone as a Matter of Law

Text: 47 PLC argues that the district court erred in finding that, as a matter of law, Hurwitz and Leone were fiduciaries of the Plan. This court reviews the grant of summary judgment de novo, viewing all evidence in the light most favorable to PLC, the nonmoving party. See Wang Laboratories, Inc. v. Kagan, 990 F.2d 1126, 1128 (9th Cir.1993). The facts are not in question here; it is purely a question of law that we must determine. 48 PLC asserts that Hurwitz and Leone were not fiduciaries because they acted solely on behalf of PLC, who was the named fiduciary in the Plan. Under ERISA Sec. 402(a)(1), 29 U.S.C. Sec. 1102(a)(1), every plan must have a named fiduciary with authority to administer the plan. ERISA permits corporations to be fiduciaries. See ERISA Sec. 3(9), 29 U.S.C. Sec. 1002(9) (definition of person includes corporation, and ERISA Sec. 3(21)(A), 29 U.S.C. Sec. 1002(21)(A) defines fiduciary in terms of a person); Confer v. Custom Eng'g Co., 952 F.2d 34, 36 (3d Cir.1991). 49 The Plan at issue named the corporation PLC as the Plan fiduciary. Pacific Lumber Company Retirement Plan, Sec. 11(b). It further went on to provide that the Company could delegate fiduciary responsibilities, but that [t]he Company's duties and responsibilities under the Plan not delegated to other fiduciaries ... shall be carried out by the Company's directors, officers and employees, acting on behalf of and in the name of the Company ... and not as individual fiduciaries. Id., Sec. 11(e). 50 PLC's proffered ground for error rests on the contention that where a corporation is the named fiduciary, the persons who act on behalf of the corporation do not become individual fiduciaries by virtue of those acts, even under the functional definition of fiduciary set forth in ERISA Sec. 3(21)(A), 29 U.S.C. Sec. 1002(21)(A). PLC's argument lacks merit. 51 ERISA Sec. 3(21)(A), 29 U.S.C. Sec. 1002(21)(A), provides a functional definition of a fiduciary which depends, in part, upon whether a person 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.... The Supreme Court has held that ERISA defines 'fiduciary' not in terms of formal trusteeship, but in functional terms of control and authority over the plan, thus expanding the universe of persons subject to fiduciary duties--and to damages--under Sec. 409(a). Mertens v. Hewitt Assocs., --- U.S. ----, ----, 113 S.Ct. 2063, 2071, 124 L.Ed.2d 161 (1993) (citation omitted). 52 PLC does not claim that under this functional test Hurwitz and Leone are not fiduciaries. Instead, citing Confer, it asserts that because PLC acted solely on behalf of the corporation, only the corporation is a fiduciary, not its officers. In Confer, the Third Circuit held that when an ERISA plan names a corporation as a fiduciary, the officers who exercise discretion on behalf of that corporation are not fiduciaries within the meaning of section 3(21)(A)(iii), unless it can be shown that these officers have individual discretionary roles as to plan administration. 952 F.2d at 37. The gist of the Third Circuit's holding is that where a corporation is designated as the plan fiduciary, an officer's actions will not render that officer a fiduciary where those actions are ones with which the designated named fiduciary is chargeable. In other words, when the named fiduciary does not designate the officer, either explicitly or impliedly, as a fiduciary, the officer is shielded from personally becoming a fiduciary, id., so long as he acts within the corporate form. See id. at 38 n. 4. 53 Insofar as Confer holds that a corporate officer or director acting on behalf of a corporation is not acting in a fiduciary capacity if the corporation is the named plan fiduciary, we disagree with the Third Circuit's conclusion. The Confer holding is undermined by the decision of this court in Yeseta v. Baima, 837 F.2d 380 (9th Cir.1988), the text of ERISA, and the agency interpretations of ERISA. This court has held corporate officers to be liable as fiduciaries on the basis of their conduct and authority with respect to ERISA plans. In Yeseta we held that by withdrawing funds from plan assets a corporate officer of a plan sponsor was a fiduciary, whether or not the sponsoring corporation authorized him to make such withdrawals: 54 Under Sec. 1002(21), a fiduciary includes a person who exercises any authority or control respecting management or disposition of [a plan's] assets. Whether Yeseta was authorized to make the $14,200 and the $25,000 withdrawals or not, he did exercise control over and disposed of Plan assets.... On this basis, Yeseta is a fiduciary under Sec. 1002(21) whether or not he individually, or the business as an entity, incurred a benefit from the withdrawal. 55 Id. at 386. It was irrelevant for the purpose of Sec. 1002(21) whether Yeseta was acting on behalf of the corporation or outside of his authority. Either way, if he met the functional definition of Sec. 1002(21), Yeseta was a fiduciary. Thus, Yeseta rejected the distinction relied upon in Confer, 952 F.2d at 37, between officers exercising discretion on behalf of a corporation and officers hav[ing] individual discretionary roles. 56 PLC claims that Yeseta is distinguishable from both this case and Confer, because unlike the situation in Confer, where the corporation was named as the plan fiduciary, in Yeseta the corporate employer was not a named fiduciary. Rather, in Yeseta, two of the corporate employees were named fiduciaries. Therefore, the argument runs, Yeseta could not claim to have been exercising the fiduciary duty of the corporation, since the corporation was not a named fiduciary. PLC points out that Confer is the only case entirely on point in any federal circuit court. No other cases present the analogous situation in which a corporation is the named fiduciary, but the person acting on behalf of the corporation is charged with being a fiduciary. 57 Even if Yeseta were distinguishable on the ground suggested by PLC, the language of ERISA itself undermines the Third Circuit's holding and PLC's contentions. ERISA specifically provides for personal, as well as corporate, liability. 29 U.S.C. Sec. 1109(a) provides that [a]ny person who is a fiduciary ... who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable.... However, fiduciary and named fiduciary have separate definitions for purposes of the subchapter containing Sec. 1109. The term fiduciary is defined [f]or purposes of this subchapter at 29 U.S.C. Sec. 1002(21)(A), and it is a functional definition as noted above. In contrast, named fiduciary is given a separate and formal definition in 29 U.S.C. Sec. 1102(a)(2): 58 For purposes of this subchapter, the term named fiduciary means a fiduciary who is named in the plan instrument, or who, pursuant to a procedure specified in the plan, is identified as a fiduciary (A) by a person who is an employer or employee organization with respect to the plan or (B) by such an employer and such an employee organization acting jointly. 59 There is no indication that an officer of a named fiduciary cannot be a fiduciary and the personal liability provision asserts that all fiduciaries will be held personally liable, without mention of named fiduciaries. 29 U.S.C. Sec. 1109. 60 Moreover, 29 U.S.C. Sec. 1110 states that any provision in an agreement or instrument which purports to relieve a fiduciary from responsibility or liability for any responsibility, obligation, or duty under this part shall be void as against public policy. The section goes on to allow insurance of fiduciaries for potential liability, but not to permit relief from liability. See 29 C.F.R. Sec. 2509.75-4 (1993) (interpreting the statute in the above manner). Here, PLC relies upon a statement in the Plan itself to establish that the officers of PLC are not acting as fiduciaries, but are acting on behalf of the corporation. Because that statement purports to relieve the officers from fiduciary responsibility or liability, under Sec. 1110 it is void as against public policy. Application of Sec. 1110 requires one to find first that the person in question is a fiduciary. However, the definition of who is a fiduciary under Sec. 1110 is based on the person's functions, not the title conferred by the Plan. If the Plan itself could not define who was or was not a fiduciary, the Sec. 1110 prohibition against relieving fiduciaries from liability would be rendered wholly ineffective. Therefore, we hold that any interpretation of the Plan which prevents individuals acting in a fiduciary capacity from being found liable as fiduciaries is void. 61 Agency interpretations of ERISA indicate fiduciary status depends on an individual's functional role rather than title. In an ERISA bulletin answering questions, fiduciary status is consistently defined by reference to ERISA Sec. 3(21)(A), 29 U.S.C. Sec. 1002(21)(A): 62 D-3 Q: Does a person automatically become a fiduciary with respect to a plan by reason of holding certain positions in the administration of such plans? 63 A: Some offices or positions of an employee benefit plan by their very nature require persons who hold them to perform one or more of the functions described in section 3(21)(A) of the Act.... Persons who hold such positions will therefore be fiduciaries. 64 Other offices and positions should be examined to determine whether they involve the performance of any of the functions described in section 3(21)(A) of the Act. 65 29 C.F.R. Sec. 2509.75-8 (1993) (Department of Labor). See also id., Question D-4 (regarding members of an employer fiduciary's board of directors); id., Question FR-16 (regarding a fiduciary who is not a named fiduciary). The agency interpretations favor finding fiduciary status for discretionary actions and creating personal liability for breach of the fiduciary duties to which those actions necessarily give rise. 66 Accordingly, we reject the Third Circuit's interpretation in Confer that an officer who acts on behalf of a named fiduciary corporation cannot be a fiduciary if he acts within his official capacity and if no fiduciary duties are delegated to him individually. The broadly based liability policy underpinning ERISA and its functional definition of fiduciary compel the conclusion that the district court correctly found that Hurwitz and Leone were fiduciaries as a matter of law. As one court noted: 67 The legislative history is replete with indications of congressional concern to assure adequate protection for the interests of plan participants and beneficiaries beyond that available under conventional trust law. Applying a restrictive judicial gloss to the term fiduciary itself would, in effect, enable trustees to transfer important responsibilities to a largely immunized administrative entity. 68 Eaton v. D'Amato, 581 F.Supp. 743, 746 (D.D.C.1980) (citations omitted). Were we to accept PLC's argument, a corporation would be able to shield its decision-makers from personal liability merely by stating in the plan documents that all their actions are taken on behalf of the company and not in a fiduciary capacity. We find that this was not Congress's intent when it included the named fiduciary provision of 29 U.S.C. Sec. 1102(a)(1). We therefore affirm the district court on this point. 69