Opinion ID: 572470
Heading Depth: 2
Heading Rank: 2

Heading: NYL's Status as a Fiduciary Under ERISA

Text: 14 CBI next argues the district court erred in finding that NYL is not a fiduciary under ERISA. CBI asserts three theories as to why NYL is a fiduciary under ERISA: (1) Billings, NYL's agent, acted as a plan fiduciary through his control over plan assets and investment advice for a fee; (2) NYL is a fiduciary by virtue of its duty to exercise due care in training and supervising its employees; and (3) NYL, even if not technically a plan fiduciary, remains liable because it participated in a breach of trust under ERISA. ERISA defines a plan fiduciary as follows: 15 Except as otherwise provided in subparagraph (B), a person is a fiduciary with respect to a plan to the extent (i) he [or she] 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 [or she] 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 [or she] has any discretionary authority or discretionary responsibility in the administration of such plan. 16 29 U.S.C. § 1002(21)(A). The term fiduciary is to be broadly construed and a person's title does not necessarily determine if one is a fiduciary. 17 CBI first alleges that Billings exercised discretionary control and rendered investment advice for a fee thus making him a plan fiduciary. CBI asserts that it relied heavily on the advice of Billings so that a factfinder could find Billings had authority or control over the plan assets. Further, CBI claims that this advice is rendering investment advice for a fee as defined in 29 C.F.R. § 2510.3-21(c). CBI's claim is based on Billings' marketing and selling the § 401(k) plan. CBI alleges that Billings made more commissions by selling the § 401(k) plan because he was able to sell more annuities than he otherwise could have. Additionally, Billings recommended the change in plan administrator. 18 The record does not support these assertions. The plan documents explicitly name CBI as fiduciary and PPNA as plan administrator. Both of CBI's claims are based upon the investment advice given by Billings because it was through this advice that CBI alleges Billings exercised control over the management of the plan. However, Billings was not providing investment advice, but was instead selling his company's financial products. He recommended CBI purchase NYL's products and received commissions for these sales. These commissions were the only fees which Billings received. Billings' involvement in the plan was substantially less than that of the defendant Weber in Monson v. Century Mfg. Co., 739 F.2d 1293 (8th Cir.1984) (Monson ). The agent defendant in Monson was held to be a fiduciary because he had worked on the amendments to the plan, met with company's independent accountant, consulted on plan investments and had the authority to make some press releases without [the owner's] prior approval. Id. at 1303. Billings had no such power. Additionally, Billings' role was substantially different from the agent in Miller v. Lay Trucking Co., 606 F.Supp. 1326 (N.D.Ind.1985), who was found to be a fiduciary because he performed the role of a plan administrator, signed documents as the plan administrator, and was responsible for choosing among several plans. Id. at 1335. Billings did not recommend which stocks to invest in as did the stockbroker who was found to be a fiduciary under ERISA in Stanton v. Shearson Lehman/American Express, Inc., 631 F.Supp. 100, 102-04 (N.D.Ga.1986) (Stanton ). Billings was merely a salesperson earning commissions and not a fiduciary under ERISA. See American Fed'n of Unions Local 102 Health & Welfare Fund v. Equitable Life Assur. Soc'y, 841 F.2d 658, 664-65 (5th Cir.1988). 19 Second, CBI asserts that NYL is liable as a direct fiduciary, even if Billings is not a fiduciary. CBI's claim is based upon NYL's duty to exercise due care in the training and supervising of its employees. CBI relies on Stanton, 631 F.Supp. at 105, for this assertion. While we do not adopt the reasoning in Stanton, the instant case is distinguishable on the facts. In Stanton, the brokerage firm retained to handle the ERISA funds was considered a fiduciary because its unsolicited recommendations to invest in certain securities were blindly followed by the plan trustee. Id. NYL had no such control over CBI's ERISA funds. NYL simply sold CBI annuities; it did not recommend specific investments beyond its products. 20 Third, CBI asserts that NYL has non-fiduciary liability. Relying on Freund v. Marshall & Ilsley Bank, 485 F.Supp. 629 (W.D.Wis.1979) (Freund ), CBI asserts that a person who knowingly participates in a breach of trust under ERISA can be held liable under ERISA even though not a fiduciary. This court expresses no opinion on the validity of non-fiduciary liability because even under the standards in Freund, CBI has not proven NYL is liable as a non-fiduciary. CBI has not shown that NYL participated in a breach of trust with an ERISA fiduciary. CBI claims that NYL developed a defective § 401(k) plan in conjunction with NALAC and PPNA. The mere marketing of the § 401(k) plan does not implicate fiduciary conduct, nor has CBI proven that the § 401(k) plan was actually defective, only that it was administered poorly. NYL was not involved in the administration of the plan or any breach of trust that may have occurred in the administration of the plan. 21 Therefore, we affirm the district court grant of summary judgment for NYL. CROSS-APPEAL FOR ATTORNEY'S FEES 22 NYL cross-appeals the district court's denial of its motion for attorney's fees. The district court found that NYL had not established the requisite lack of merit to prevail on the attorney's fee motion. Consolidated Beef Indus., Inc. v. New York Life Ins. Co., Civil File No. 3-88-0442 (D.Minn. Jan. 11, 1990) (order denying motion for attorney's fees). NYL argues that the district court should have awarded it attorney's fees under ERISA, 29 U.S.C. § 1132(g)(1), which states: In any action under this subchapter ... by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney's fee and costs of action to either party. NYL contends that CBI's lawsuit was protracted, expensive and unnecessary, and that CBI acted unreasonably in rejecting all efforts at resolving their dispute without litigation. 23 This court's standard of review of an order awarding or denying attorney's fees is abuse of discretion. Gunderson v. W.R. Grace & Co. Long Term Disability Income Plan, 874 F.2d 496, 500 (8th Cir.1989) (Gunderson ). NYL argues that the district court should apply the prevailing plaintiff standard established in Gunderson and Landro v. Glendenning Motorways, Inc., 625 F.2d 1344 (8th Cir.1980) (Landro ), to prevailing defendants. Under that standard, [a] prevailing plan beneficiary or participant 'should ordinarily recover an attorney's fee unless special circumstances would render such an award unjust.'  Gunderson, 874 F.2d at 500, quoting Landro, 625 F.2d at 1356. We express no opinion on the appropriate standard for a prevailing defendant, but even under the prevailing plaintiff standard, the district court did not abuse its discretion in denying NYL's motion for attorney's fees. CBI's claims were serious and involved complicated legal issues that were sufficiently debatable to justify plaintiff's pursuit of the claims, and therefore an award of attorney's fees would be unjust. 24 Accordingly, we affirm both the district court grant of summary judgment and the order denying NYL attorney's fees.