Opinion ID: 1466164
Heading Depth: 1
Heading Rank: 4

Heading: Functional Fiduciaries

Text: Before we delve into the question whether any of the defendants breached a fiduciary duty, we must identify who owed such duties to plaintiffs with respect to the actions at issue here. Deere does not contest the fact that it owed some fiduciary duties to the plan participants; it argues instead that plaintiffs have too expansive a concept of its fiduciary responsibilities and, in any event, that it did not breach any fiduciary duty. Fidelity Trust and Fidelity Research, in contrast, argue that they were not fiduciaries at all. The Hecker group appears to concede that neither Fidelity entity was a named fiduciary under the Trust Agreement. It argues, however, that one or both of the Fidelity entities functioned as a fiduciary under 29 U.S.C. § 1002(21)(A). In order to find that they were functional fiduciaries, we must look at whether either Fidelity Trust or Fidelity Research exercised discretionary authority or control over the management of the Plans, the disposition of the Plans' assets, or the administration of the Plans. The Hecker group first argues that Fidelity Trust exercised the necessary control to confer fiduciary status by its act of limiting Deere's selection of funds through the Trust Agreement to those managed by Fidelity Research. But what if it did? Plaintiffs point to no authority that holds that limiting funds to a sister company automatically creates discretionary control sufficient for fiduciary status. To the contrary, as Fidelity points out, there are cases holding that a service provider does not act as a fiduciary with respect to the terms in the service agreement if it does not control the named fiduciary's negotiation and approval of those terms. Chi. Dist. Council of Carpenters Welfare Fund v. Caremark, Inc., 474 F.3d 463 (7th Cir. 2007); Schulist v. Blue Cross of Iowa, 717 F.2d 1127 (7th Cir.1983). In any event, the Trust Agreement gives Deere, not Fidelity Trust, the final say on which investment options will be included. The fact that Deere may have discussed this decision, or negotiated about it, with Fidelity Trust does not mean that Fidelity Trust had discretion to select the funds for the Plans. Plaintiffs retort that, notwithstanding the language of the Trust Agreement, Fidelity Trust exercised de facto control over the selection of the funds and Deere rubber-stamped its recommendations. That is not, however, what the Complaint alleges. It asserts instead that Fidelity Trust played a role in the selection of investment options, Complaint ¶ 21, and it concedes that Deere had final authority, id. Merely playing a role or furnishing professional advice is not enough to transform a company into a fiduciary. Pappas v. Buck Consultants, Inc., 923 F.2d 531, 535 (7th Cir.1991); Farm King Supply, Inc. Integrated Profit Sharing Plan & Trust v. Edward D. Jones & Co., 884 F.2d 288, 292 (7th Cir.1989). Many people help develop and manage benefit planslawyers and accountants, to name two groupsbut despite the influence of these professionals we do not consider them to be Plan fiduciaries. This is not a case like Johnson v. Georgia, 19 F.3d 1184, 1189 (7th Cir.1994), on which plaintiffs rely, because in that case the fiduciary both managed a defined-benefits plan and had ultimate authority over the selection of funds. Nor do we find plaintiffs' reference to the district court's decision in Haddock v. Nationwide Fin. Servs., 419 F.Supp.2d 156 (D.Conn. 2006), helpful or persuasive, since the service provider in that case had the authority to delete and substitute mutual funds from the plan without seeking approval from the named fiduciary. There is an important difference between an assertion that a firm exercised final authority over the choice of funds, on the one hand, and an assertion that a firm simply played a role in the process, on the other hand. The Complaint on which the Hecker group proceeded made the latter allegation, not the former. It gave no notice to the defendants that they would be required to defend on the former basis. For that reason, we reject plaintiffs' tardy effort to present the de facto fiduciary argument, and we make no comment on the possible scope of the functional fiduciary concept. Plaintiffs also argue that Fidelity Research, and possibly Fidelity Trust, exercised discretion over the disposition of the Plans' assets by determining how much revenue Fidelity Research would share with Fidelity Trust. The Fidelity defendants (with the support in this instance of the Department of Labor) respond that the fees that Fidelity Research collected were not Plan assets under 29 U.S.C. § 1101(b)(1). The fees were drawn from the assets of the mutual funds in question, which, as the statute provides, are not assets of the Plans: In the case of a plan which invests in any security issued by a [mutual fund], the assets of such plan shall be deemed to include such security but shall not, solely by reason of such investment, be deemed to include any assets of such [mutual fund]. Id. Once the fees are collected from the mutual fund's assets and transferred to one of the Fidelity entities, they become Fidelity's assetsagain, not the assets of the Plans. See also Caremark, 474 F.3d at 476 n. 6. We conclude that the Complaint fails to state a claim against either Fidelity Trust or Fidelity Research based on the supposition that either one is a functional fiduciary. Plaintiffs' effort to proceed against these companies thus fails at the threshold.