Opinion ID: 777035
Heading Depth: 1
Heading Rank: 3

Heading: The Prohibited Transaction Claim.

Text: 24 The Plan agreed to pay Granite's investment advisor, Askin Capital Management (ACM), a fee contingent on the success of the Granite investment. The Plan paid ACM approximately $1.17 million in March 1993, the only fee paid during the life of the investment. ACM was a Plan fiduciary because it had discretion to invest on behalf of the Plan. Plaintiffs argue that ACM's fee arrangement violated the prohibition against a fiduciary dealing with plan assets for its own account, see 29 U.S.C. § 1106(b)(1), because ACM determined the value of Granite's holdings without an independent valuation; and that 3M breached its fiduciary duty to the Plan by failing to discover and remedy this prohibited transaction, see 29 U.S.C. § 1105(a)(2). The district court dismissed this claim because plaintiffs presented no evidence the ACM fee was unreasonable. 42 F.Supp.2d at 909-11. We agree. 25 Section 1106(b)(1) prohibits a fiduciary from deal[ing] with the assets of the plan in his own interest or for his own account. However, § 1108(c)(2) provides that [n]othing in section 1106 of this title shall be construed to prohibit any fiduciary from... receiving any reasonable compensation for services rendered ... in the performance of his duties with the plan. 3M introduced uncontradicted expert testimony that the compensation paid to ACM was reasonable. 26 Plaintiffs counter this factual showing with a legal argument — that § 1108(c)(2) does not apply to prohibited transactions under § 1106(b) but only clarifies the exemption provided in § 1108(b)(2). Plaintiffs rely for this argument on their interpretation of a regulation, 29 C.F.R. § 2550.408c-2(a). But in this case, the general prohibition in § 1106(b)(1) — that a fiduciary should not deal in plan assets for its own account — is alleged to have been violated when a fiduciary influenced its own compensation for investment services. At least in this situation, the plain language of § 1108(c)(2) sensibly insulates the fiduciary from liability if the compensation paid was reasonable. We reject plaintiffs' reading of the ambiguous regulation because it conflicts with an unambiguous statute. Moreover, the legislative history of § 1108 does not support the contention that the § 1108(c)(2) exemption merely clarifies § 1108(b)(2). See, e.g., H.R. CONF. REP. NO. 93-1280 (1974), reprinted in 1974 U.S.C.C.A.N. 5038, 5092; Lowen v. Tower Asset Mgmt., Inc., 829 F.2d 1209, 1216 & n. 4 (2d Cir.1987). Thus, summary judgment was proper because plaintiffs failed to rebut the uncontradicted evidence that ACM's compensation was reasonable. 27 For the foregoing reasons, we affirm the grant of summary judgment dismissing plaintiffs' claims against 3M. Because those claims were properly dismissed on the merits, we need not consider plaintiffs' contention that the district court's class notice omitted pertinent information and was not fair and neutral. 28