Opinion ID: 410958
Heading Depth: 2
Heading Rank: 1

Heading: Defendants as ERISA Fiduciaries

Text: 39 The district court concluded that American, Evans and Klekamp are not fiduciaries within the meaning of E.R.I.S.A. and therefore are not subject to suit in this court. Order of Nov. 24, 1980, at 7. The fiduciary duty standards imposed by ERISA, see 29 U.S.C. Secs. 1104, 1105 (1976), are enforceable in civil damage actions only against parties who are fiduciaries under the ERISA statute. 29 U.S.C. Sec. 1109(a) (1976). A person is a fiduciary for purposes of ERISA to the extent that he or she exercises discretion over the management of plan assets, renders investment advice for a fee or exercises discretionary control over the administration of a plan. 29 U.S.C. Sec. 1002(21)(A) (1976). 33 40 The facts recited in the plaintiffs' complaint do not support their general allegation that the defendants in this case are fiduciaries because they exercised control over the funds of [the Fund] and converted them to their own use. Second Amended Complaint p 35. Plaintiffs have not alleged any facts which would indicate that these defendants exercised any discretionary control over either the investment of Fund assets or the administration of the Fund. At best, the allegations of the complaint reveal a pattern of conspiratorial actions in support of actions by parties, such as Hauser and his associates, who may be fiduciaries as defined in ERISA. Cf. Freund v. Marshall & Ilsley Bank, 485 F.Supp. 629, 634-35 (W.D.Wis.1979) (trustees, administrators and officers of union pension plan were ERISA-defined fiduciaries). See also Brink v. DaLesio, 496 F.Supp. 1350, 1374-75 (D.Md.1980), aff'd in part, rev'd in part on other grounds, 667 F.2d 420 (4th Cir. 1981). 41 But, even though plaintiffs have failed to state a claim against these defendants as fiduciaries within the meaning of ERISA, they may still have stated a claim under ERISA on the theory that the defendants conspired with parties who are fiduciaries to breach the duties imposed by ERISA. In Fremont v. McGraw-Edison Co., 606 F.2d 752 (7th Cir. 1979), cert. denied, 445 U.S. 951, 100 S.Ct. 1599, 63 L.Ed.2d 786 (1980), the defendant-employer, who was sued by several former employees for an alleged wrongful withholding of pension benefits, counter-claimed against the employees by asserting that they had breached fiduciary duties under ERISA by concealing their involvement in a theft of the employer's property and trade secrets. This court held that the employer could assert a cause of action for breach of fiduciary duty only against the employee who was a trustee (and thus an ERISA fiduciary) of the pension plan. The court reasoned that it would not be proper to impose, without any statutory authority, a fiduciary duty on the non-trustee employee (thus depriving him of vested pension rights) because he failed to reveal his own involvement in the theft. But the limited scope of this holding, made in the context of a unique factual setting, was also suggested by the court when it reaffirmed the general principle we believe is applicable here: 42 We are not saying that in an ordinary civil action against a trustee, others who have aided him, or conspired with him, in a breach of fiduciary duty may not be liable to the extent that they have profited from the breach. See Restatement, Second, Trusts Sec. 256. 43 606 F.2d at 759; accord Freund v. Marshall & Ilsley Bank, 485 F.Supp. 629, 641-42 (W.D.Wis.1979). (In an ERISA action, the Court is fully empowered to award the relief available in traditional trust law against nonfiduciaries who knowingly participate ... in a breach of trust.) (footnote omitted). 44 In its November 24 order, the district court noted this principle in passing but did not elaborate upon it or apply it to the facts alleged in plaintiffs' complaint. See Order of Nov. 24, 1980, at 6. In contrast, the court had previously held, when denying motions by American, Evans and Klekamp to dismiss plaintiffs' other complaints, that these defendants, even if not ERISA-defined fiduciaries, might still be accountable under ERISA for conspiring with parties who are fiduciaries to breach the duties imposed by ERISA. See Order of June 30, 1980, at 2 (A non-fiduciary can be joined in such an action on the plaintiffs' theory that [American, Evans and Klekamp] conspired with the fiduciary ....); Order of Dec. 5, 1979, at 3. The district court's sudden turnabout on this issue is unexplained in the record, is inconsistent with a reasonable interpretation of the allegations of the complaint and contravenes the principle recently affirmed by us in Fremont. Moreover, we do not believe that there are any mitigating factors similar to those found in Fremont, which counsel against imposing ERISA-based liability upon any of the defendants. Thus we reject the district court's conclusion that the plaintiffs' action must be dismissed because the defendants are not ERISA-defined fiduciaries. 34 Our holding in this regard is also applicable to Kleindienst and his former law firm since they too argue on appeal that Kleindienst lacked fiduciary status under ERISA. 45