Opinion ID: 4707273
Heading Depth: 1
Heading Rank: 5

Heading: Stout Risius Ross

Text: The preemptive force of ERISA’s exclusive beneﬁt rule also protects the Stout Risius Ross defendants (Stout) from corporate aiding and abetting liability even though Stout is not a ﬁduciary under ERISA. Like Argent, Stout is not a dualhat director or oﬃcer for whom ERISA contemplates parallel corporate liability. Argent hired Stout for its expertise in aiding the ESOP valuation process. In this role, Stout owed no ﬁduciary duties to the corporation or to ERISA beneﬁciaries. This means Stout is not subject to the exclusive beneﬁt rule. So at ﬁrst glance, parallel non-ﬁduciary liability against Stout under both ERISA and state law would seem not to conﬂict with the exclusive beneﬁt rule. But upon closer inspection, Stout is situated more similarly to Argent than to the directors and oﬃcers when it comes to preemption. Three considerations point to this conclusion. First, to protect Argent’s single-minded focus on beneﬁciaries, it is also necessary to protect its contractor, Stout, whose involvement in the ESOP valuation stemmed solely from Argent’s trustee duties. Second, given Stout’s role in the ESOP valuation process, parallel state liability to the corporation would conﬂict with Stout’s non-ﬁduciary obligations to beneﬁciaries when performing core ERISA functions. Third, state-law liability for Stout could lead to a damages remedy that would arguably conﬂict with ERISA’s remedial limits on claims against non-ﬁduciaries. So, while the question is a closer call, ERISA also preempts the plaintiﬀs’ aiding and abetting claims against Stout. In assessing the state-law claims against Stout, it is ﬁrst important to clarify that, although Stout is not a ﬁduciary under ERISA, it still had federal-law obligations under ERISA when serving as Argent’s contractor. Speciﬁcally, under No. 20-2793 31 ERISA §§ 502(a)(5) & (l), 29 U.S.C. §§ 1132(a)(5) & (l), Stout can be sued by the Secretary of Labor for knowingly aiding an ERISA ﬁduciary’s breach of its duties to beneﬁciaries. See Harris Tr. & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 248 (2000) (“the Secretary may bring a civil action under § 502(a)(5) against an ‘other person’ who ‘knowing[ly] participat[es]’ in a ﬁduciary’s violation”), quoting 29 U.S.C. § 1132(l). Thus, under ERISA, Stout must concern itself with Argent’s and the directors and oﬃcers’ ﬁduciary duties to beneﬁciaries so as not to participate knowingly in a violation. 3 Because Stout incurs ERISA liability if it knowingly aids a breach of ﬁduciary duty, Stout was acting in a limited singlehat ERISA role when aiding the ESOP valuation process as Argent’s contractor. Stout was obligated under ERISA to avoid aiding Argent’s or the directors and oﬃcers’ alleged 3 While the Secretary’s cause of action against Stout suffices in this case to illustrate Stout’s non-fiduciary obligations to beneficiaries under ERISA, whether private parties could similarly sue Stout under § 502(a)(3) for aiding a fiduciary’s breach of duty remains undecided in our circuit. The logic of Harris suggests they can. Harris held that private parties could sue non-fiduciaries under § 502(a)(3) for knowingly aiding a prohibited transaction under § 406. 530 U.S. at 248–49. And Harris’s reasoning would seem to extend equally to a § 404 fiduciary duty claim. See id. (allowing § 502(a)(3) claim because Congress intended beneficiaries’ cause of action to match the Secretary’s cause of action under § 502(a)(5)). See also Daniels v. Bursey, 313 F. Supp. 2d 790, 807–08 (N.D. Ill. 2004) (extending Harris’s logic to a claim alleging participation in a breach of fiduciary duty). Nevertheless, even after Harris, some circuits have continued to hold that a non-fiduciary’s participation in a breach of fiduciary duty is not actionable under § 502(a)(3). See Renfro v. Unisys Corp., 671 F.3d 314, 325 (3d Cir. 2011); Gerosa v. Savasta & Co., 329 F.3d 317, 322–23 (2d Cir. 2003). We need not and do not decide this issue here. See Gordon v. CIGNA Corp., 890 F.3d 463, 477 n.2 (4th Cir. 2018) (flagging but not deciding this issue). 32 No. 20-2793 breaches. For three reasons, this obligation imposed on Stout under ERISA preempts the plaintiﬀs’ attempt to impose additional duties on Stout based on aiding and abetting liability to the corporation. First, to ensure Argent’s single-minded focus as an ERISA ﬁduciary, that single-minded focus must also extend to Stout, whom Argent hired to help perform core trustee functions. Stout’s involvement in this case stems solely from Argent’s single-hat trustee duties. Argent hired Stout for its expertise to help Argent with the ESOP valuation process. If state law could burden Argent’s contractors with liability to the corporation, that would hinder Argent’s ability as trustee to hire trusted experts whose thinking is not clouded with concerns about recommending actions to directors and oﬃcers that might be contrary to the corporation’s interests. Hence, to protect Argent’s ability to act for the exclusive beneﬁt of beneﬁciaries, it becomes important also to prevent the expansion of dual-hat loyalties to non-ﬁduciary contractors like Stout. Otherwise, ERISA ﬁduciaries may not be able to conﬁde fully in non-ﬁduciary contractors to help perform core trustee duties with an eye single to beneﬁciaries. Second, and most simply, given Stout’s key role in the ESOP valuation process, ERISA’s focus on protecting beneﬁciaries weighs against permitting corporate aiding and abetting liability against Stout. Like Argent, Stout is not locked into the (potentially) conﬂicting dual roles that ERISA accepts for directors and oﬃcers. So, as with Argent, there is no need under ERISA to tolerate state laws that impose corporationlaw liability on non-ﬁduciary contractors who perform central ERISA functions such as ESOP valuations. Stout’s services were central to plan administration—preparing the No. 20-2793 33 independent valuation of the ESOP’s holdings. As with Argent, then, when performing such core plan tasks, Stout’s federal ERISA obligations should not be muddled with distracting and potentially conﬂicting state-law obligations to the corporation. Such liability rules would aﬀect central matters of plan administration in a manner not consistent with ERISA, and would thus “relate to” an ERISA plan, 29 U.S.C. § 1114(a). See, e.g., Egelhoﬀ, 532 U.S. at 147 (state rule requiring administrators to pay beneﬁts to beneﬁciaries chosen by state law was not consistent with ERISA’s rule that beneﬁts be paid to those identiﬁed in plan documents). Last, state-law liability against Stout could lead to a damages remedy that is arguably in tension with ERISA’s remedial limits on claims against non-ﬁduciaries. As mentioned above, the Secretary of Labor can sue a nonﬁduciary like Stout under § 502(a)(5) for knowingly participating in a breach of duty. Yet, like beneﬁciaries’ private cause of action under § 502(a)(3), the Secretary’s cause of action under § 502(a)(5) is limited to “equitable relief.” As a result, ERISA does not authorize suits for damages against non-ﬁduciaries who knowingly participate in a ﬁduciary’s breach of ﬁduciary duty. See Mertens v. Hewitt Assocs., 508 U.S. 248, 260–61 (1993) (explaining that even the Secretary’s ability to assess civil penalties against non-ﬁduciaries under § 502(l) does not “establish[] the existence of a damages remedy” against non-ﬁduciaries, but rather counts as “equitable relief” under § 502(a)(5)). Mertens’s equitable limit on Stout’s potential ERISA liability produces some additional tension in this case between plaintiﬀs’ state-law damages claims against Stout and ERISA’s remedial scheme. Although Mertens applies only 34 No. 20-2793 to ERISA claims, it would be odd if the corporation could obtain remedies against Stout that could not be sought by the Secretary of Labor on behalf of similarly injured beneﬁciaries. That result could give non-ﬁduciaries like Stout incentives to be more attentive to the corporation than to beneﬁciaries. Such an eﬀect would undermine ERISA’s purpose of ensuring that ERISA ﬁduciaries and their contractors focus ﬁrst and foremost on the interests of plan beneﬁciaries—not the corporation. For all these reasons, we ﬁnd that ERISA also preempts the plaintiﬀs’ state-law claims against Stout.