Court Opinion

ID: 858081
Source: CourtListenerOpinion
Date Created: 2013-04-16 14:17:39.632755+00
Date Added: 2024-06-11T15:37:17.642259
License: Public Domain

In the

United States Court of Appeals
               For the Seventh Circuit

Nos. 12-1081, 12-1213 & 12-2536

R OBERT L EIMKUEHLER, as trustee of and on behalf
of the L EIMKUEHLER, INC. P ROFIT S HARING P LAN, and
on behalf of all others similarly situated,

                                                Plaintiff-Appellant/
                                                    Cross-Appellee,
                                 v.

A MERICAN U NITED L IFE INSURANCE C O .,

                                                Defendant-Appellee/
                                                   Cross-Appellant.

            Appeals from the United States District Court
     for the Southern District of Indiana, Indianapolis Division.
      No. 10-CV-333-JMS-TAB—Jane Magnus-Stinson, Judge.

    A RGUED N OVEMBER 28, 2012—D ECIDED A PRIL 16, 2013

 Before K ANNE, W OOD , and SYKES, Circuit Judges.
  W OOD , Circuit Judge. This case presents a challenge to
the practice known in the 401(k) services industry as
“revenue sharing”—an arrangement allowing mutual
2                          Nos. 12-1081, 12-1213 & 12-2536

funds to share a portion of the fees that they collect from
investors with entities that provide services to the
mutual funds, the investors, or both. Although the
practice has been commonplace for years, until quite
recently it was opaque to both individual investors and
many 401(k) plan sponsors. As the existence and extent
of revenue sharing has become more widely known,
some have expressed concern that the practice unduly
benefits mutual funds and 401(k) service providers to
the detriment of plan participants. This concern has
fueled a number of lawsuits alleging that the practice
violates the Employee Retirement Income Security Act
of 1974 (ERISA). This is one such suit.
   The district court awarded summary judgment to the
defendant, American United Life Insurance Company
(AUL), which is an Indiana-based insurance company
that offers investment, record-keeping, and other ad-
ministrative services to 401(k) plans. The court ruled
that AUL was not a fiduciary of the Leimkuehler, Inc.
Profit Sharing Plan (the Plan) with respect to
AUL’s revenue-sharing practices. The Plan and Robert
Leimkuehler, its Trustee, have appealed. Although very
little about the mutual fund industry or the manage-
ment of 401(k) plans can plausibly be described as trans-
parent, we agree with the district court that AUL is not
acting as a fiduciary for purposes of 29 U.S.C. § 1002(21)(A)
when it makes decisions about, or engages in, revenue
sharing. We find it unnecessary to express any view on
the question whether revenue sharing yields net
benefits to individual 401(k) investors, and we thus
affirm the district court.
Nos. 12-1081, 12-1213 & 12-2536                           3

                             I
   Leimkuehler, Inc., a small company that manufactures
prosthetic limbs and braces, operates a 401(k) plan for
its employees. (So-called 401(k) plans are, more formally,
private, employer-based defined-contribution retire-
ment plans that meet the requirements of Internal Revenue
Code Section 401(k). 26 U.S.C. § 401(k). We commented on
the importance to millions of people of this type of retire-
ment plan in Spano v. The Boeing Co., 633 F.3d 574,
576 (7th Cir. 2011).) Robert Leimkuehler, president of
Leimkuehler, Inc., and Trustee of the Plan, brought this
suit against AUL, which has provided services to the
Plan since 2000.
  One of the services AUL provides to the Plan is the
use of a group variable annuity contract, which enables
individual Plan participants to invest their 401(k) con-
tributions “in” mutual funds. We use quotation
marks because, as the contract is structured, no Plan
participant invests in a mutual fund directly. Rather,
participants’ contributions are deposited into a “separate
account”—distinct because state insurance law and
ERISA require AUL to keep retirement contributions
separate from other assets—that AUL owns and controls.
AUL uses the funds in the separate account to invest
in whatever mutual funds the Plan participants have
selected; it credits the proceeds of these investments
back to the participants. Because the performance of the
separate account mirrors that of the mutual funds, in-
vesting in the separate account is the equivalent from
the perspective of a Plan participant of investing in
the funds directly.
4                          Nos. 12-1081, 12-1213 & 12-2536

  While the separate account means little to a Plan par-
ticipant, it makes quite a difference to the mutual fund
companies. If every individual participant in the Plan
were to invest directly in the mutual funds that AUL
services, the funds would have to keep track of
and service thousands of individual accounts, many of
which would contain little money. By pooling individual
contributions into the separate account, AUL radically
simplifies matters for the participating funds. From the
funds’ perspective, AUL is a single investor. The use of
the separate account thus substantially reduces the
mutual funds’ administrative, marketing, and service costs.
  These costs do not, however, disappear altogether.
Instead, AUL must perform many of the services that
the mutual funds would otherwise handle themselves.
Among other things, AUL keeps track of individual
accounts, takes responsibility for calculating the daily
value of assets in the separate account, distributes infor-
mation to the Plan sponsor and participants, and pro-
vides a customer-service hotline.
  In principle, AUL could cover the costs of providing
these services in one of two ways. One way would be to
bill the Plan sponsor or Plan participants directly. The
other way would be to engage in a practice known
as “revenue sharing,” whereby the mutual fund com-
panies pay a portion of the fees they charge inves-
tors—fees that are referred to as a fund’s “expense ratio”
and that are expressed as a percentage of a fund’s as-
sets—to AUL. Because a portion of a mutual fund’s
expense ratio is typically intended to cover the costs of
Nos. 12-1081, 12-1213 & 12-2536                          5

providing the participant-level services that the mutual
fund would be furnishing if it were not for AUL,
the mutual funds are willing to pay some of these fees
to AUL as compensation for AUL’s provision of these
services.
  One additional complication plays an important role
in our case. Within a single mutual fund, there are often
several different expense-ratio/revenue-sharing levels
available, because most mutual funds offer multiple
“share classes” to investors. Although each share class
within a given fund is invested in an identical portfolio
of securities, the classes have differing price structures.
The share classes typically made available to 401(k)
investors vary primarily (and possibly exclusively) in
terms of expense ratio and revenue sharing (if any).
  As a general matter, expense ratios and revenue-
sharing payments move in tandem: the higher a given
share class’s expense ratio, the more the fund pays AUL
in revenue sharing. It is also generally the case that
the more AUL receives in revenue sharing, the less it
charges plan sponsors or participants directly for its
services. AUL employees stated in deposition testi-
mony (and Leimkuehler does not contest) that AUL
offers a range of 401(k) investment products, some of
which offer mutual funds with relatively high expense
ratios and relatively low billed fees, and others
with relatively low expense ratios and relatively high
billed fees.
  None of this is meant to suggest that there is neces-
sarily a one-to-one correspondence between the cost to
6                          Nos. 12-1081, 12-1213 & 12-2536

AUL of providing participant-level services and the
amount that AUL receives in revenue-sharing payments.
AUL may be making a profit, perhaps even a sizeable
profit, from revenue sharing (just as it may be making
a profit when it bills a plan directly for its services).
The foregoing discussion simply places AUL’s revenue
sharing in context. (We note as well that to the extent
Leimkuehler’s concerns about revenue sharing arise
from AUL’s historical failure to disclose its revenue-
sharing practices, that issue has been addressed re-
cently. The Department of Labor (DOL) promulgated
a final rule, effective July 1, 2012, that requires entities
like AUL to disclose their revenue-sharing arrange-
ments. 29 C.F.R. § 2550.408b-2 (2012).)
  AUL’s contract with the Leimkuehler Plan did not
enable Plan participants to invest in all of the roughly
7,500 mutual funds currently available on the market.
Instead, Plan participants had a significantly narrower
range of investment options for their 401(k) contribu-
tions. The winnowing of investment options occurred in
two stages. At stage one, AUL selected a “menu” of
mutual funds and presented this menu to Leimkuehler,
in his capacity as Plan Trustee. As of 2010, this invest-
ment menu contained 383 funds. For each fund on the
menu, AUL also selected a particular share class, and
thus a particular expense ratio and level of revenue
sharing. As counsel for Leimkuehler conceded at oral
argument, share classes were selected at the time AUL
developed the menu; they did not change thereafter.
Although AUL did not disclose to Leimkuehler or to
Plan participants which share class was associated with
Nos. 12-1081, 12-1213 & 12-2536                        7

each fund on the menu, all parties agree that AUL did
disclose each fund’s expense ratio. Leimkuehler there-
fore knew how much each mutual fund cost, though he
did not know how those costs were allocated between
the fund companies and AUL.
  At stage two, Leimkuehler selected from the menu
the specific funds that he wished to make available to
Plan participants. Plan participants could then direct
their contributions to one or more of the investment
options that Leimkuehler had selected. Under the
contract, Leimkuehler retained the right to change his
selections, and he in fact did make changes to the mix
of available funds at least twice between 2000 and 2010.
AUL also reserved the right to make substitutions to
or deletions from Leimkuehler’s selections; it exercised
this right twice—once in 2000 to substitute one S&P 500
index fund for another, and again in 2011 to substitute
one Vanguard fund for another.
  Leimkuehler filed this suit against AUL on behalf of
the Leimkuehler Plan individually and as a class action,
alleging that AUL’s revenue-sharing practices breached
a fiduciary duty to the Plan under ERISA. The district
court granted AUL’s motion for summary judgment,
concluding that AUL did not owe any fiduciary responsi-
bility to the Plan with respect to its revenue-sharing
practices and that it therefore was not a “functional
fiduciary” within the meaning of 29 U.S.C. § 1002(21)(A).
In a separate ruling, the district court declined to
grant AUL’s motion for either attorney’s fees and costs
under ERISA, or costs under Federal Rule of Civil Pro-
8                          Nos. 12-1081, 12-1213 & 12-2536

cedure 54(d). Both parties now appeal: the Plan chal-
lenges the grant of summary judgment for AUL; and AUL
challenges the rulings on fees and costs.

                            II
  AUL is not named as a fiduciary to the Leimkuehler
Plan. Accordingly, any fiduciary responsibility that
AUL owes to the Plan must stem from its status as a
“functional fiduciary.” The general term “fiduciary” is
defined as follows:
    [A] person is a fiduciary with respect to a plan to
    the extent (i) he exercises any discretionary authority
    or discretionary control respecting management of
    such plan or exercises any authority or control re-
    specting management or disposition of its assets,
    (ii) he renders investment advice for a fee or other
    compensation, direct or indirect, with respect to
    any moneys or other property of such plan, or has
    any authority or responsibility to do so, or (iii) he
    has any discretionary authority or discretionary re-
    sponsibility in the administration of such plan.
29 U.S.C. § 1002(21)(A).
  Focusing on the second clause of subpart (i), Leimkuehler
offers two theories of how AUL satisfies its require-
ments. First, he asserts that AUL exercises authority or
control over the management or disposition of the Plan’s
assets by selecting which mutual fund share classes to
include on its investment menu. Second, he asserts
that AUL exercises authority or control through the
Nos. 12-1081, 12-1213 & 12-2536                         9

various activities associated with maintaining the
separate account. DOL, which appeared in this appeal as
amicus curiae on behalf of Leimkuehler, offers a third
theory: it argues that AUL’s contractual reservation of
the right to substitute or delete funds made available to
the Leimkuehler Plan’s participants is itself an exercise
of authority or control over the Plan’s assets, even if
AUL never affirmatively exercises its contractual right
in a way that gives rise to a claim. We address each argu-
ment in turn.

                            A
  Leimkuehler’s first theory of AUL’s fiduciary status
might broadly be termed a “product design” theory, as it
centers on actions that AUL takes when designing the
products it offers to its 401(k) plan customers. In
crafting its menu of investment options, AUL decides
which mutual funds to include and which share classes
of those funds to select. In making both these decisions,
AUL is also setting the stage for any revenue sharing
in which it wishes to engage. These product-design
decisions shape the disposition of Plan assets: they
limit the universe of funds, as well as the share classes
within those funds, in which Plan assets are invested.
Leimkuehler urges that this suffices to make AUL a
fiduciary under the terms of Section 1002(21)(A)(i).
  The problem with this theory is that it is functionally
indistinguishable from the one this court rejected in
Hecker v. Deere & Co., 556 F.3d 575 (7th Cir. 2009). In
Hecker, participants in Deere & Company’s 401(k) plan
10                         Nos. 12-1081, 12-1213 & 12-2536

sued two Fidelity entities that provided investment
services to the plan. Id. at 578. Fidelity offered a menu
of mutual funds and other investment options to
Deere, which then selected which of those investment
options it wished to make available to plan participants.
Id. The menu of funds presented to Deere did not
include every mutual fund on the market; rather, it was
a select, though still expansive, list compiled by Fidelity
in advance. Id. at 581, 583. The plaintiffs alleged that
Fidelity’s control over which funds made it onto the
list gave it authority or control over the plan’s assets,
because the menu limited the universe of funds in which
a plan participant could invest. Id. at 583. This court
concluded that the act of selecting which funds will
be included in a particular 401(k) investment product,
without more, does not give rise to a fiduciary responsi-
bility, both because there is “no authority that holds
that limiting funds . . . automatically creates discre-
tionary control sufficient for fiduciary status,” and
because, in any event, “the Trust Agreement gives Deere,
not Fidelity Trust, the final say on which investment
options will be included.” Id.
  Although Hecker did not address share classes specifi-
cally, its facts are otherwise strikingly similar to those
in this case. Indeed, we perceive only two factual distinc-
tions that might even conceivably be of any practical
significance. First, AUL, unlike Fidelity, is an in-
surance company and therefore operates through
the separate account. As discussed below in part II.B,
however, this difference does not alter the result. Second,
AUL reserves the right to make substitutions to the
Nos. 12-1081, 12-1213 & 12-2536                           11

funds that Leimkuehler chooses to offer to Plan partici-
pants, and thus there is at least some basis for ques-
tioning whether Leimkuehler has “the final say on
which investment options will be included.” But
Leimkuehler concedes that AUL has never exercised
this contractual right in a way that could give rise to a
claim, and so on the present record this distinction
falls away as well. (As mentioned above, AUL has exer-
cised this right on two occasions; one instance fell
outside the limitations period, and the other involved
a substitution of Vanguard funds, neither of which
made revenue-sharing payments to AUL.)
  Nor does adding the concept of share classes to the
mix meaningfully differentiate this case from Hecker. We
grant that the failure to offer every share class of every
fund that AUL includes on its menu results in the lim-
itation of the universe of investment options available
to Plan participants. But we fail to see how this is signifi-
cantly different from Fidelity’s limiting the universe of
investment options by offering certain mutual funds
and not others. True, some share classes are more ex-
pensive than others, but the cheapest option may not
inevitably be the best option. There is also no particular
reason to think that AUL would not seek to make up
the revenue it missed by offering cheaper share classes
by charging higher direct fees to plans like Leimkuehler’s.
Furthermore, given that AUL does disclose the bottom-
line cost of every fund that it offers, Leimkuehler was
free to seek a better deal with a different 401(k) service
provider if he felt that AUL’s investment options were
too expensive. In short, we see no basis for distin-
12                        Nos. 12-1081, 12-1213 & 12-2536

guishing AUL’s actions here from those in Hecker. We
therefore confirm that, standing alone, the act of
selecting both funds and their share classes for inclu-
sion on a menu of investment options offered to 401(k)
plan customers does not transform a provider of
annuities into a functional fiduciary under Section
1002(21)(A)(i).

                            B
  Leimkuehler argues, however, that AUL does more
than merely select funds and share classes for its invest-
ment menu: AUL, he says, exercises control over
the management and disposition of the Plan’s assets by
maintaining the separate account, which AUL alone
controls. In order to manage that account, AUL must
keep track of individual Plan participants’ contributions
and investment directions. It then must invest partici-
pants’ funds in the mutual funds they select and
credit returns from the funds to the participants’ ac-
counts. Although these tasks are essentially ministerial,
Leimkuehler argues that they are nevertheless suf-
ficient to make AUL a fiduciary, because Section
1002(21)(A)(i) requires only that AUL exercise “any au-
thority or control respecting management or disposition
of its assets.” (Emphasis added.)
  The district court concluded that Leimkuehler was
reading too much into the word “any,” and that fiduciary
status arises only if the authority or control permits the
exercise of discretion. Although Section 1002(21)(A)(i)
does not spell out such a limitation, the district court
Nos. 12-1081, 12-1213 & 12-2536                            13

read several of this court’s prior decisions as holding
that discretion is an essential prerequisite for finding a
fiduciary duty under ERISA, rather than a characteristic
that is often present but is not an ironclad requirement.
We recognize that some imprecise language in our prior
decisions in this area has generated confusion. See, e.g.,
Hecker, 556 F.3d at 583 (“In order to find that they were
‘functional fiduciaries,’ we must look at whether either
Fidelity Trust or Fidelity Research exercised discre-
tionary authority or control over the management of the
Plans, the disposition of the Plans’ assets, or the adminis-
tration of the Plans.”); Pohl v. National Benefits Con-
sultants, 956 F.2d 126, 129 (7th Cir. 1992) (“At all events,
ERISA makes the existence of discretion a sine qua non
of fiduciary duty.”). Our prior decisions tended to
discuss Section 1002(21)(A) (which does make frequent
mention of “discretion”) as a whole. That section, how-
ever, not only contains three subparts, but subpart (i)
identifies two different situations: “[first] [the person]
exercises any discretionary authority or discretionary
control respecting management of such plan or [second]
[the person] exercises any authority or control re-
specting management or disposition of its assets.” 29
U.S.C. § 1002(21)(A)(i) (emphasis added). The concept of
discretion is thus integral to Plan management, but it is
conspicuously missing when it comes to asset manage-
ment or disposition.
  A number of our sister circuits have taken note of this
distinction and concluded that discretionary control is
not required with regard to the management or disposi-
tion of plan assets. See Briscoe v. Fine, 444 F.3d 478, 492-94
14                          Nos. 12-1081, 12-1213 & 12-2536

(6th Cir. 2006); Chao v. Day, 436 F.3d 234, 237-38 (D.C. Cir.
2006); Coldesina v. Estate of Simper, 407 F.3d 1126, 1132
(10th Cir. 2005); Board of Trustees of Bricklayers & Allied
Craftsmen Local 6 of N.J. Welfare Fund v. Wettlin Assoc., Inc.,
237 F.3d 270, 273 (3d Cir. 2001); Herman v. NationsBank
Trust Co., (Georgia), 126 F.3d 1354, 1365 (11th Cir. 1997);
LoPresti v. Terwilliger, 126 F.3d 34, 40 (2d Cir. 1997); IT
Corp. v. General Am. Life Ins. Co., 107 F.3d 1415, 1421 (9th
Cir. 1997); FirsTier Bank, N.A. v. Zeller, 16 F.3d 907, 911
(8th Cir. 1994). We agree with them that this reading
is most faithful to the language of the statute, and we
now make explicit that insofar as “management or dis-
position of assets” is concerned, there is no separate
requirement of discretionary authority or control.
  Unfortunately for Leimkuehler, however, this does
not help him as much as he might think. Critically,
Section 1002(21)(A) additionally states that an entity is a
fiduciary only “to the extent” it exercises its authority
or control. The Supreme Court has interpreted this
phrase as requiring that an entity exercise authority or
control with respect to the action at issue in the suit
in order to be subject to liability as a fiduciary under
this section. In Pegram v. Herdrich, 530 U.S. 211 (2000), the
Court explained:
     In every case charging breach of ERISA fiduciary
     duty, [] the threshold question is not whether the
     actions of some person employed to provide services
     under a plan adversely affected a plan beneficiary’s
     interest, but whether that person was acting as a
     fiduciary (that is, was performing a fiduciary func-
     tion) when taking the action subject to complaint.
Nos. 12-1081, 12-1213 & 12-2536                         15

Id. at 226 (emphasis added); see also Chicago Dist. Council
of Carpenters Welfare Fund v. Caremark, Inc., 474 F.3d 463,
471-72 (7th Cir. 2007) (ERISA plaintiff must show that
entity “was acting in its capacity as a fiduciary at the
time it took the actions that are the subject of the com-
plaint”). Thus, AUL’s control over the separate account
can support a finding of fiduciary status only if
Leimkuehler’s claims for breach of fiduciary duty arise
from AUL’s handling of the separate account.
  They do not. Leimkuehler does not allege that AUL in
any way mismanaged the separate account—say, by
losing track of participants’ contributions or withdrawing
funds in the separate account to pay for a com-
pany-wide vacation to Las Vegas. Cf. Chao, 436 F.3d at 235
(defendant that received plan assets for purposes of
purchasing insurance policies was a fiduciary under
Section 1002(21)(A)(i) when he kept the money and pro-
vided fake insurance policies). Rather, Leimkuehler’s
claims focus on share-class selection and revenue
sharing, and AUL’s maintenance of the separate
account involves neither. As we noted earlier and as
Leimkuehler concedes, AUL selects share classes and
decides how much it will receive in revenue sharing
when it designs its investment-options menu. Those
steps occur well before a Plan participant deposits her
contributions in the separate account and directs AUL
where to invest those contributions. Because the
actions Leimkuehler complains of do not implicate
AUL’s control over the separate account, the separate
account does not render AUL a fiduciary under the
circumstances of this case.
16                         Nos. 12-1081, 12-1213 & 12-2536

                            C
  Finally, DOL proposes that AUL is a fiduciary
because, in section 3.3 of its contract with the Plan, it
retains the right to delete or substitute the funds
Leimkuehler has selected for the Plan. DOL acknowl-
edges that AUL can be liable as a fiduciary only “to
the extent” it exercises this contractual authority. DOL
also acknowledges that neither of the two occasions
on which AUL exercised its right under section 3.3
gives rise to an ERISA claim. In DOL’s view, however,
AUL need never affirmatively exercise its section 3.3
authority in order to incur fiduciary responsibilities to
the Plan. Instead, it “exercises” this authority in a nega-
tive sense every time it invests a participant’s contribu-
tions in one of the chosen mutual fund share classes, as
opposed to a less expensive share class of that same
mutual fund. This is effectively a “non-exercise” theory
of exercise: because AUL could unilaterally substitute
less expensive share classes, its failure to do so
amounts to an exercise of its authority.
   This theory is unworkable. It conflicts with a common-
sense understanding of the meaning of “exercise,” is
unsupported by precedent, and would expand fiduciary
responsibilities under Section 1002(21)(A) to entities
that took no action at all with respect to a plan. In con-
trast to a named fiduciary, a functional fiduciary under
Section 1002(21)(A) owes a duty to a plan through
its actions, regardless of whether it chose to assume
fiduciary responsibilities or even anticipated that such
responsibilities might arise. Section 1002(21)(A)’s “reach
Nos. 12-1081, 12-1213 & 12-2536                           17

is limited to circumstances where the individual
actually exercises some authority,” Trustees of the Graphic
Commc’ns Int’l Union Upper Midwest Local 1M Health &
Welfare Plan v. Bjorkedal, 516 F.3d 719, 733 (8th Cir. 2008),
and “people may be fiduciaries when they do certain
things but be entitled to act in their own interests
when they do others,” Johnson v. Georgia-Pacific Corp.,
19 F.3d 1184, 1188 (7th Cir. 1994). We agree with the
Eighth Circuit that “[a]n act of omission fails to satisfy
the requirement that the individual exercise discretionary
authority over plan assets.” Bjorkedal, 516 F.3d at 733
(emphasis in original). This means that AUL’s decision
not to exercise its contractual right to substitute
different (less expensive) funds for the Leimkuehler
Plan does not make it a fiduciary.

                             III
  In its cross-appeal, AUL challenges the district court’s
order denying its motion for attorney’s fees and costs
under ERISA, 29 U.S.C. § 1132(g), or costs under Federal
Rule of Civil Procedure 54(d). The decision to award
fees and/or costs under either provision is committed to
the discretion of the district court, and we will reverse
only in the case of an abuse of discretion. See Holmstrom
v. Metropolitan Life Ins. Co., 615 F.3d 758, 779 (7th Cir.
2010) (fees and costs under ERISA); Rivera v. City of
Chicago, 469 F.3d 631, 636 (7th Cir. 2006) (costs under
Rule 54(d)).
 Although it acknowledged that AUL was entitled to a
“modest presumption” that it would recover its fees
18                         Nos. 12-1081, 12-1213 & 12-2536

and costs under ERISA, see, e.g., Herman v. Central States,
Se. & Sw. Areas Pension Fund, 423 F.3d 684, 695-96 (7th
Cir. 2005), the district court declined to do so because
it concluded that Leimkuehler’s position was “substan-
tially justified.” (Although the Supreme Court’s decision
in Hardt v. Reliance Standard Life Ins. Co., 130 S. Ct. 2149
(2010), has generated some confusion about the test
that governs fee and costs determinations under Section
1132(g), compare Kolbe & Kolbe Health & Welfare Benefit
Plan v. Medical Coll. of Wis., Inc., 657 F.3d 496, 505-06
(7th Cir. 2011), with Loomis v. Exelon Corp., 658 F.3d 667,
675 (7th Cir. 2011), AUL stated to the district court that
it preferred the substantial justification test, and AUL
does not challenge the district court’s use of that test on
appeal.) The district court found that Leimkuehler’s
suit was substantially justified for four reasons: that
there were legitimate arguments for distinguishing this
case from Hecker; that case law in other circuits sup-
ported Leimkuehler’s position; that AUL officials had
themselves expressed reservations about disclosing
revenue sharing; and that DOL had threatened AUL with
suit over its revenue-sharing practices. AUL notes that
this last point is incorrect (DOL was, in fact, threatening
suit over something unrelated), but this error is not
enough to undermine the district court’s substantial
justification finding. The district court’s remaining
reasons fall well within the bounds of its discretion and
are enough by themselves to justify its denial of fees
and costs under Section 1132(g).
  We are likewise disinclined to disturb the district
court’s denial of costs under Rule 54(d), which provides
Nos. 12-1081, 12-1213 & 12-2536                          19

that “[u]nless a federal statute, these rules, or a court
order provides otherwise, costs—other than attorney’s
fees—should be allowed to the prevailing party.” At
times, we have taken the view that Section 1132(g) “pro-
vides otherwise,” and that costs are therefore unavail-
able under Rule 54(d) in ERISA actions. See Nichol v.
Pullman Standard, Inc., 889 F.2d 115, 121 (7th Cir.
1989). That approach must be reconsidered in light of
the Supreme Court’s recent decision in Marx v. General
Revenue Corp., 133 S. Ct. 1166 (2013). In Marx, the Court
was faced with the question whether Section 1692k(a)(3)
of the Fair Debt Collection Practices Act “provided other-
wise” than Rule 54(d)(1), or if instead the two could be
harmonized. Id. at 1170-71. The Court opted for the
latter approach. It began by noting that despite the
“venerable presumption” in favor of granting costs
under Rule 54(d), “the decision whether to award costs
ultimately lies within the sound discretion of the dis-
trict court.” Id. at 1172. It then held that a statute
“provides otherwise” for purposes of Rule 54(d) only if
it is literally contrary to the rule, in the sense that it
constricts discretion that the rule recognizes. Id. at 1173.
Applying that approach to Section 1132(g), we see
nothing contrary to Rule 54(d) in the statute.
  The district court anticipated all of this, however,
when it proceeded under the assumption that costs were
available under Rule 54(d). The only question was
thus whether, as a matter of discretion, costs should be
awarded. The court thought not, because it found that
Leimkuehler (who was a party to the suit only in his
capacity as Plan trustee) was unable to satisfy a costs
award. The district court noted in this regard that AUL
20                        Nos. 12-1081, 12-1213 & 12-2536

had advised the court that neither the Plan nor any indi-
vidual Plan participants were necessary parties, and
that the court had refrained from joining additional
parties in partial reliance on AUL’s assurances. Because
the district court had no authority to order an award of
costs against a non-party, see In re Cardizem CD Antitrust
Litig., 481 F.3d 355, 359 (6th Cir. 2007), and because
Leimkuehler holds no assets in his capacity as trustee,
the district court did not abuse its discretion in con-
cluding that the losing party was unable to pay and that
a costs award under Rule 54(d) was therefore unwar-
ranted. See Rivera, 469 F.3d at 636 (inability to pay can
overcome Rule 54(d)’s “heavy presumption” that the
losing party should pay costs).
 The judgment of the district court is A FFIRMED.

                          4-16-13