Opinion ID: 11177
Heading Depth: 3
Heading Rank: 2

Heading: Assignment Under Federal Common Law

Text: We have determined that the Guaranty Act’s assignment provision is preempted. We must therefore look to federal law for guidance in determining the validity of the Plan Administrators’ assignment of the breach of fiduciary duty claims. The text of ERISA gives us no guidance in determining the proper method for assigning ERISA breach of fiduciary duty claims against pension plan administrators. The Supreme Court has instructed that in the absence of statutory guidance, courts should develop federal common law regarding ERISA rights. Pilot Life Ins. Co. v. DeDeaux, 481 U.S. 41, 56 (1987) (Congress “expect[ed] that a federal common law of rights and obligations under ERISAregulated plans would develop.”). Because an assignment of a fiduciary duty breach claim affects all plan participants, and unsuccessful claims can waste plan resources that are meant to be available for employees’ retirements, these claims are not assigned by implication or by operation of law. Instead, only an express and knowing assignment of an ERISA fiduciary breach claim is valid. Cf. Gulfstream III Assoc., Inc. v. Gulfstream Aerospace Corp., 995 F.2d 425, 439 (3d Cir. 1993) (Greenberg, J., concurring) (“only an express assignment 15 of an antitrust claim can be valid”); RESTATEMENT (SECOND) OF CONTRACTS § 324 (1981) (“It is essential to an assignment of a right that the obligee manifest an intention to transfer the right to another person without further action or manifestation of intention by the obligee.”).12 There is no evidence in the record that the Plan Administrators expressly and knowingly assigned the fiduciary duty breach claims. Instead, the only putative assignment is the Guaranty Act’s broad provision that anyone accepting benefits under the Act “is considered to have assigned the rights under, and any causes of action relating to, the covered policy or contract to the [Guaranty A]ssociation to the extent of the benefits received under this Act.” TEX. INS. CODE Art. 21.28-D § 8(t). This assignment by operation of law is not an express and knowing assignment and, thus, is insufficient to assign the fiduciary breach claims. Because the fiduciary breach claims were not validly assigned, the Guaranty Association does not have derivative standing to bring suit against the Plan Administrators. 12 While an express assignment by a plan administrator is sufficient to transfer the cause of action, it may not be sufficient to comply with all of ERISA’s fiduciary requirements. Because the decision to assign a fiduciary breach claim is itself a fiduciary act, ERISA plan fiduciaries must comply with all fiduciary duties when assigning an ERISA claim, including the duties of loyalty and prudence. As the Secretary of Labor notes in his amicus curiae brief, where a plan administrator is asked to assign a claim against himself or his co-fiduciaries arising from imprudent investments, he faces a conflict of interest which may require him to appoint an independent fiduciary to decide whether to assign the claim. See, e.g., Leigh v. Engle, 727 F.2d 113, 135026 (7th Cir. 1984); Schwartz v. Interfaith Medical Ctr., 715 F. Supp. 1190, 1196 (E.D.N.Y. 1989). 16