Court Opinion

ID: 4707273
Source: CourtListenerOpinion
Date Created: 2021-07-28 20:00:28.588867+00
Date Added: 2024-06-11T09:16:22.625945
License: Public Domain

In the

    United States Court of Appeals
                 For the Seventh Circuit
                    ____________________
No. 20-2793
ALAN D. HALPERIN and EUGENE I. DAVIS,
                                             Plaintiffs-Appellants,
                                v.

MARK R. RICHARDS, et al.,
                                            Defendants-Appellees.
                    ____________________

        Appeal from the United States District Court for the
                    Eastern District of Wisconsin.
       No. 1:19-cv-01561-WCG — William C. Griesbach, Judge.
                    ____________________

      ARGUED APRIL 15, 2021 — DECIDED JULY 28, 2021
                ____________________

   Before KANNE, ROVNER, and HAMILTON, Circuit Judges.
   HAMILTON, Circuit Judge. We consider in this case whether
the Employee Retirement Income Security Act (ERISA)
preempts certain state-law claims brought by bankruptcy
creditors on behalf of a company against its directors and
oﬃcers and others alleged to have inﬂated the company’s
stock value to conceal the company’s decline and to beneﬁt
corporate insiders. We hold that ERISA does not preempt the
plaintiﬀs’ claims against the company’s directors and oﬃcers.
2                                                    No. 20-2793

ERISA expressly contemplates parallel corporate liability
against directors and oﬃcers who serve dual roles as both
corporate and ERISA ﬁduciaries. We also hold, however, that
ERISA preempts the plaintiﬀs’ claims against the former
ERISA trustee of the employee beneﬁt plan and its non-
ﬁduciary contractor. Corporation-law aiding and abetting
liability against these defendants would interfere with the
cornerstone of ERISA’s ﬁduciary duties—the exclusive
beneﬁt rule in Section 404, 29 U.S.C. § 1104(a)(1)(A).
I. Factual and Procedural Background
    In reviewing a grant of a motion to dismiss under Federal
Rule of Civil Procedure 12(b)(6), we accept the plaintiﬀs’ fac-
tual allegations as true and draw all reasonable inferences in
their favor. Kolbe & Kolbe Health & Welfare Beneﬁt Plan v. Medi-
cal College of Wisconsin, Inc., 657 F.3d 496, 502 (7th Cir. 2011).
According to the plaintiﬀs, Appvion, Inc. was in ﬁnancial
freefall from 2012 to 2016 as revenues from its paper business
declined sharply. During those years, Appvion repeatedly
missed its ﬁnancial projections, yet the defendants continued
to project unrealistic success when valuing the company’s
stock—which was wholly-owned by employees under an
ERISA-covered Employee Stock Ownership Plan (ESOP).
    The plaintiﬀs assert that, while the corporate ship was
sinking, the defendants fraudulently inﬂated these stock val-
uations to line the pockets of directors and oﬃcers, whose pay
was tied to the ESOP valuations. Plaintiﬀs allege that the di-
rectors and oﬃcers carried out this scheme with knowing aid
from the ESOP trustee, Argent Trust Company (Argent), and
its independent appraiser, Stout Risius Ross, LLC (Stout),
who led the ESOP valuation process in coordination with the
directors and oﬃcers. The plaintiﬀs also allege that Appvion
No. 20-2793                                                   3

directors provided unlawful dividends to its parent company,
Paperweight Development Corporation, by forgiving and re-
extending certain intercompany notes to it.
    In October 2017, Appvion and its aﬃliates ﬁled for
bankruptcy protection in the Bankruptcy Court for the
District of Delaware. See In re OLDAPCO, Inc., No. 17-12082
(MFW) (Bankr. D. Del.). Under Appvion’s liquidation plan,
Appvion’s bankruptcy creditors were given authority
through a liquidating trust to pursue certain corporation-law
claims on behalf of Appvion to recover losses from the
defendants’ alleged wrongs against the corporation. See
Halperin v. Richards, 2020 WL 5095308, at *1 (E.D. Wis. Aug. 28,
2020) (describing bankruptcy proceedings).
    Plaintiﬀs here are Alan Halperin and Eugene Davis, co-
trustees of the Appvion Liquidating Trust. They originally
ﬁled this action in the Delaware bankruptcy court. The bank-
ruptcy court transferred Counts I–VIII of the plaintiﬀs’ Re-
vised Second Amended Complaint to the U.S. District Court
for the Eastern District of Wisconsin. Counts I–IV assert state-
law claims against the director and oﬃcer defendants (Mark
Richards, Thomas Ferree, Tami Van Straten, Jeﬀrey Fletcher,
Kerry Arent, Stephen Carter, Terry Murphy, Andrew Rear-
don, Kathi Seifert, Mark Suwyn, Carl Laurino, and David
Roberts) for breaching their corporate ﬁduciary duties.
Counts V and VI allege that Argent and Stout aided and abet-
ted those breaches. And Counts VII and VIII assert state-law
unlawful dividend claims against the directors and oﬃcers.
   All defendants moved in the district court to dismiss all of
these claims on the theory that their roles in Appvion’s ESOP
valuations were governed by ERISA and that ERISA
preempted state corporation-law liability arising from the
4                                                  No. 20-2793

ESOP valuation process. More speciﬁcally, the directors and
oﬃcers argue that, despite their dual roles as corporate and
ERISA ﬁduciaries, they acted exclusively in their ERISA roles
when carrying out the ESOP activity underlying the plaintiﬀs’
claims. See 29 U.S.C. § 1002(21)(A) (a corporate oﬃcer “is a
ﬁduciary with respect to a plan to the extent … he has any
discretionary authority or discretionary responsibility in the
administration of such plan”). Argent and Stout similarly ar-
gue that the claims against them “relate to” the plan, 29 U.S.C.
§ 1144(a), because they are based on the performance of their
ERISA duties in valuing the company stock owned by the
ESOP.
    The district court agreed with defendants that ERISA
preempts all of plaintiﬀs’ claims. The court granted the de-
fendants’ motion to dismiss Counts I–VIII with prejudice be-
cause they “are grounded in … ERISA-related duties … and
‘relate to’ the ESOP.” Halperin, 2020 WL 5095308, at *4. The
district court’s ERISA preemption ﬁnding is a matter of law
that we review de novo. Kolbe & Kolbe, 657 F.3d at 504.
II. Principles of ERISA Preemption
   In enacting ERISA, Congress included two distinct and
powerful preemption provisions: complete preemption un-
der ERISA § 502, 29 U.S.C. § 1132, and conﬂict preemption un-
der ERISA § 514, 29 U.S.C. § 1144. The defendants assert that
the claims in this case are conﬂict-preempted under the latter
provision, which preempts “any and all State laws insofar as
they may now or hereafter relate to any employee beneﬁt
plan” covered by ERISA.
    The fundamental challenge in interpreting this preemp-
tion provision stems from its broad language: “If ‘relate to’
No. 20-2793                                                      5

were taken to extend to the furthest stretch of its indetermi-
nacy, then for all practical purposes pre-emption would never
run its course….” New York State Conf. of Blue Cross & Blue
Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995). But,
on the other hand, Congress clearly intended ERISA preemp-
tion to be broad. Congress chose “deliberately expansive” lan-
guage, “conspicuous for its breadth.” California Div. of Labor
Standards Enf’t v. Dillingham Construction, N.A., Inc., 519 U.S.
316, 324 (1997), quoting Morales v. Trans World Airlines, Inc.,
504 U.S. 374, 384 (1992).
    Since the broad and vague statutory text oﬀers little help
in drawing boundaries for ERISA conﬂict preemption, Travel-
ers, 514 U.S. at 655, the Supreme Court “considers ERISA’s ob-
jectives ‘as a guide to the scope of the state law that Congress
understood would survive.’” Rutledge v. Pharmaceutical Care
Mgmt. Ass’n, 141 S. Ct. 474, 480 (2020), quoting Dillingham
Construction, 519 U.S. at 325. Congress’s objective in enacting
ERISA’s conﬂict preemption provision was “‘to ensure that
plans and plan sponsors would be subject to a uniform body
of beneﬁts law,’ thereby ‘minimiz[ing] the administrative and
ﬁnancial burden of complying with conﬂicting directives’ and
ensuring that plans do not have to tailor substantive beneﬁts
to the particularities of multiple jurisdictions.” Id., quoting
Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990).
   Guided by that objective, the Supreme Court has written
that a law “relates to” an ERISA plan “if it has a connection
with or reference to such a plan.” Shaw v. Delta Air Lines, Inc.,
463 U.S. 85, 96–97 (1983) (state law requiring plans to pay
speciﬁc beneﬁts was not enforceable against ERISA plans).
This generally encompasses two categories of state laws.
Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 319 (2016). First,
6                                                   No. 20-2793

“[w]here a State’s law acts immediately and exclusively upon
ERISA plans … or where the existence of ERISA plans is
essential to the law’s operation …, that ‘reference’ will result
in pre-emption.” Id. at 319–20, quoting Dillingham
Construction, 519 U.S. at 325; see, e.g., Mackey v. Lanier
Collection Agency & Serv., Inc., 486 U.S. 825, 829 (1988) (“The
Georgia statute at issue here expressly refers to—indeed,
solely applies to—ERISA employee beneﬁt plans.”). Second,
ERISA preempts a state statute or claim that, while not facially
tied to ERISA, “‘governs … a central matter of plan
administration’ or ‘interferes with nationally uniform plan
administration.’” Gobeille, 577 U.S. at 320, quoting Egelhoﬀ v.
Egelhoﬀ, 532 U.S. 141, 148 (2001) (preempting Washington
beneﬁts rule that would create state-by-state diﬀerences in
plan administration).
    State laws that directly prohibit something ERISA permits,
and vice versa, fall into this second category. See, e.g., Alessi
v. Raybestos-Manhattan, Inc., 451 U.S. 504, 524 (1981) (state law
preempted “because it eliminates one method for calculating
pension beneﬁts—integration—that is permitted by federal
law”). But direct conﬂict is not always needed to show
preemption. Some state laws that run parallel to or in har-
mony with ERISA’s requirements are nonetheless preempted.
Gobeille, 577 U.S. at 323 (“even parallel[] regulations from
multiple jurisdictions could create wasteful administrative
costs and threaten to subject plans to wide-ranging liability”).
Some parallel state rules, however, are not preempted. See
Rutledge, 141 S. Ct. at 480 (“ERISA does not pre-empt state rate
regulations that merely increase costs or alter incentives for
ERISA plans without forcing plans to adopt any particular
scheme of substantive coverage.”), citing Travelers, 514 U.S. at
668. Relevant here, this second category of laws interfering
No. 20-2793                                                    7

with ERISA also includes state-law causes of action seeking
“alternative enforcement mechanisms” as an end run around
ERISA’s more limited remedial scheme. Travelers, 514 U.S. at
658, citing Ingersoll-Rand, 498 U.S. at 145 (ERISA preempted
state-law claim for wrongful discharge based on employee’s
allegation that employer ﬁred him to avoid making pension
contributions); see also Pilot Life Ins. Co. v. Dedeaux, 481 U.S.
41, 54 (1987) (ERISA preempted state-law claims for breach of
contract and tort for alleged improper processing of claims for
plan beneﬁts).
III. Director and Oﬃcer Defendants
    Applying these principles to the claims against the
directors and oﬃcers, we ﬁnd that the plaintiﬀs’ claims are
not preempted because ERISA contemplates parallel state-
law liability against directors and oﬃcers serving dual roles
as both corporate and ERISA ﬁduciaries. Section 408(c)(3) of
ERISA explicitly allows corporate insiders to serve as ERISA
ﬁduciaries. 29 U.S.C. § 1108(c)(3). This allowance has been
called ERISA’s “fundamental contradiction” because of the
tension it creates with both the traditional duty of loyalty at
the heart of the common law of trusts and ERISA’s “exclusive
beneﬁt” rule in 29 U.S.C. § 1104(a)(1)(A)(i). See Daniel R.
Fischel & John H. Langbein, ERISA’s Fundamental
Contradiction: The Exclusive Beneﬁt Rule, 55 U. Chi. L. Rev. 1105
(1988). Professors Fischel and Langbein defended this
“fundamental contradiction” as necessary given employers’
and employees’ dual roles as both settlors and beneﬁciaries of
ERISA plans. Id. at 1126. If dual-hat ﬁduciaries were not
allowed, employers that established ERISA plans would be
“assuming ﬁnancial liabilities without eﬀective controls,” and
“Employers tend not to write blank checks.” Id. at 1127.
8                                                  No. 20-2793

Allowing directors and oﬃcers to participate in plan decision-
making as ERISA ﬁduciaries therefore supports employers’
incentives to form ERISA plans—something Congress clearly
desired. Unsurprisingly, however, these dual roles also
produce conﬂicts of interest that have for decades challenged
ERISA plans and courts trying to implement ERISA faithfully
in an array of contexts.
    ERISA expressly allows corporate insiders to have dual
corporate and ERISA obligations. Whatever complications
those dual roles may entail, we are persuaded that ERISA
should not be interpreted to preempt parallel state-law
liability against the directors and oﬃcers in this case. Our
reasoning does not extend to preemption of the aiding and
abetting claims against Argent and Stout because those claims
seek, in essence, to impose the complicating dual roles on a
single-role ERISA ﬁduciary and its contractor, whose actions
should be governed by an undiluted exclusive-beneﬁt rule
under ERISA.
    A. Limited Precedent
    There is little circuit-level precedent assessing whether
and to what extent ERISA preempts corporation-law claims
against dual-hat directors and oﬃcers. Beyond the Fifth Cir-
cuit’s decision in Sommers Drug Stores Co. Employee Proﬁt Shar-
ing Trust v. Corrigan Enterprises, Inc., 793 F.2d 1456 (5th Cir.
1986), there seems to be only a handful of district court cases
that squarely address the problem. Most of these cases hold
that ERISA does not preempt corporation-law claims against
dual-hat directors and oﬃcers.
   In Sommers Drug Stores, for example, the Fifth Circuit as-
sessed whether ERISA preempted a common-law breach of
No. 20-2793                                                   9

ﬁduciary duty claim brought by an employee proﬁt sharing
trust (which was both a minority shareholder and ERISA
plan) against the company president (a dual-hat corporate
and ERISA ﬁduciary). 793 F.2d at 1468. The trust brought ﬁ-
duciary duty claims under both state common law and
ERISA. The district court held that ERISA preempted the
state-law claims, but the Fifth Circuit reversed. The Fifth Cir-
cuit’s reasoning focused on the shareholder-director relation-
ship, which imposed special duties wholly independent from
any parallel ERISA duties:
       The state common law of ﬁduciary duty that the
       Trust seeks to invoke in this case centers upon
       the relation between corporate director and
       shareholder. The director’s duty arises from his
       status as director; the law imposes the duty
       upon him in that capacity only. Similarly, the
       shareholder’s rights against the corporate direc-
       tor arise solely from his status as shareholder.
       That in a case such as ours the director happens
       also to be a plan ﬁduciary and the shareholder a
       beneﬁt plan has nothing to do with the duty
       owed by the director to the shareholder. The
       state law and ERISA duties are parallel but in-
       dependent: as director, the individual owes a
       duty, deﬁned by state law, to the corporation’s
       shareholders, including the plan; as ﬁduciary,
       the individual owes a duty, deﬁned by ERISA,
       to the plan and its beneﬁciaries.
Id. at 1468.
   Sommers Drug Stores’s “parallel but independent” duties
theory has been followed in other cases. See In re Ullico Inc.
10                                                   No. 20-2793

Litig., 605 F. Supp. 2d 210, 222 (D.D.C. 2009) (“[T]he allega-
tions of breach of ﬁduciary duty … were not preempted be-
cause they ‘derive from the counterclaim defendants’ obliga-
tions and responsibilities as oﬃcers of the corporation under
state corporate law, rather than their relationship to the …
plans as beneﬁciaries.’”), quoting Carabillo v. ULLICO, Inc., 357
F. Supp. 2d 249, 259 n.7 (D.D.C. 2004), in turn citing Sommers
Drug Stores, 793 F.2d at 1470; Crabtree v. Central Florida Invest-
ments, Inc. Deferred Comp. Plan, 2012 WL 6523584, at *2 (M.D.
Fla. Oct. 3, 2012), report and recommendation approved, 2012
WL 6523078 (M.D. Fla. Dec. 14, 2012) (“The preemption prin-
ciples do not apply when, as is the case here, the cause of ac-
tion for breach of ﬁduciary duty is against a corporate oﬃcer
for duties owed to the corporation.”); Richmond v. American
Sys. Corp., 792 F. Supp. 449, 458–59 (E.D. Va. 1992) (same: “The
state corporate laws … regulate relations between plaintiﬀs,
as minority shareholders … and Ramsey and Curran, as …
oﬃcers[] and directors. The relations … function irrespective
of [ERISA plan] administration.”); In re Antioch Co., 456 B.R.
791, 839 (Bankr. S.D. Ohio 2011), report and recommendation
adopted, 2011 WL 3664564 (S.D. Ohio Aug. 12, 2011), modi-
ﬁed on reconsideration sub nom. Antioch Co. Litig. Trust v.
Morgan, 2012 WL 6738676 (S.D. Ohio Dec. 31, 2012), (“[A]ll
three defendants were ESOP ﬁduciaries. However, … all the
claims against these defendants are based on independent le-
gal duties owed in their roles as corporate ﬁduciaries….”); In
re Dehon, Inc., 334 B.R. 55, 68 (Bankr. D. Mass. 2005) (relying
on Sommers Drug Stores and ﬁnding no preemption: “the
claims are brought by a third party to enforce rights held by
the corporation against directors of that corporation for their
acts as corporate directors”); see also Housman v. Albright, 368
No. 20-2793                                                   11

Ill. App. 3d 214, 223, 857 N.E.2d 724, 733 (2006) (same), citing
Sommers Drug Stores, 793 F.2d at 1465.
    Some courts have further noted that preempting state
claims against directors and oﬃcers “[s]imply because events
precipitating [them] occurred in the general context of an em-
ployee beneﬁt plan,” Richmond, 792 F. Supp. at 459, would
contravene ERISA’s core purpose to prevent misuse of plan
assets by enabling directors and oﬃcers to defraud sharehold-
ers and creditors whenever they don their ERISA hats. See In
re Antioch, 456 B.R. at 841–42 (preemption “would do nothing
more than immunize oﬃcers and directors … from allega-
tions of self-dealing by the corporate entity to which they
have deﬁned independent legal obligations”); see also Smith
v. Crowder Jr. Co., 280 Pa. Super. 626, 639, 421 A.2d 1107, 1114
(Pa. Super. 1980) (“ERISA was not intended as a device to per-
mit corporate directors and oﬃcers to defraud with impunity
corporate shareholders and creditors….”).
    The defendants rely on two cases ﬁnding that ERISA did
preempt certain state corporation-law claims: McLemore v.
Regions Bank, 682 F.3d 414, 425 (6th Cir. 2012), and AT & T v.
Empire Blue Cross/Blue Shield, 1994 WL 16057794, at *27 (D.N.J.
July 19, 1994). These cases oﬀer little support for the directors
and oﬃcers’ defense here. McLemore held ERISA preempted
an entirely diﬀerent sort of claim. The McLemore plaintiﬀs
asserted state-law damages claims against Regions Bank “for
knowingly permitting [ERISA ﬁduciaries] to breach their
ﬁduciary duties” under ERISA. 682 F.3d at 426. The Sixth
Circuit held such claims were preempted because the
plaintiﬀs were ERISA “participant[s], beneﬁciar[ies], or
ﬁduciar[ies]” who could bring these same claims under
ERISA. Such plaintiﬀs were seeking an “alternative
12                                               No. 20-2793

enforcement mechanism” under state law, which ERISA § 514
prohibits. Id. (internal quotation omitted). So, unlike in
Sommers Drug Stores, the plaintiﬀs’ claims in McLemore sought
to enforce ERISA duties, not corporation-law duties. And,
unlike McLemore, the plaintiﬀs here—bankruptcy creditors
suing on behalf of the corporation—have no corollary cause
of action under ERISA that they could invoke.
    The AT & T case is also unhelpful because it rested on a
faulty premise that ERISA preempts any state claim arising
from conduct that occurs in the context of plan
administration. AT & T held that since “ERISA at least
arguably governs the alleged misconduct at issue, plaintiﬀs’
state law claims predicated upon that same alleged conduct
are preempted.” 1994 WL 16057794 at *27. The Supreme Court
has rejected such a broad rule, clarifying that “lawsuits
against ERISA plans for run-of-the-mill state-law claims such
as unpaid rent, failure to pay creditors, or even torts
committed by an ERISA plan …, although obviously aﬀecting
and involving ERISA plans and their trustees, are not pre-
empted.” Mackey, 486 U.S. at 833. As a result, the defendants
are left without any ﬁrm precedent supporting the position
that ERISA preempts corporation-law claims against dual-hat
directors and oﬃcers.
     B. Analysis
   Turning to this case, we agree with the results reached in
most of the above cases, that ERISA did not preempt the
plaintiﬀs’ claims against the director and oﬃcer defendants.
But our reasons diﬀer somewhat from the “parallel but
independent” duties theory employed by other courts. We
agree with Sommers Drug Stores that the duties must be
parallel; state law cannot be allowed to require an act that
No. 20-2793                                                         13

ERISA forbids. So, here, the fact that the directors and oﬃcers’
corporation-law and ERISA duties both prohibit the
fraudulent conduct alleged by the plaintiﬀs is crucial. But,
unlike Sommers Drug Stores, we do not lean heavily on the fact
that the defendants’ corporation-law duties have
independent state-law grounds. Virtually all state-law causes
of action derive from independent state-law duties. Rather,
what we ﬁnd most important is that ERISA is written to invite,
and certainly to tolerate, these speciﬁc parallel and independent
duties—the directors and oﬃcers’ ﬁduciary duties to the
corporation.
       1. Alternative Remedies
    We can ﬁrst quickly dispel any notion that the plaintiﬀs
are attempting to circumvent ERISA’s exclusive remedial
scheme. These plaintiﬀs have no rights under ERISA as a
“participant, beneﬁciary, or ﬁduciary.” 29 U.S.C. § 1132(a)(3).
They are not asserting state-law claims as an end run around
their more limited federal remedies. See Pilot Life, 481 U.S. at
54 (ERISA’s “policy choices … would be completely under-
mined if ERISA-plan participants and beneﬁciaries were free to
obtain remedies under state law that Congress rejected in
ERISA”) (emphasis added). Unlike plaintiﬀs covered by
ERISA, these non-ERISA plaintiﬀs “were not parties to the
ERISA ‘bargain’”; they did not “g[i]ve up state law causes of
action” to “receive[] federal causes of action under ERISA in
exchange.” Lordmann Enters., Inc. v. Equicor, Inc., 32 F.3d 1529,
1533–34 (11th Cir. 1994), quoting Memorial Hosp. Sys. v. North-
brook Life Ins. Co., 904 F.2d 236, 249 (5th Cir. 1990). 1

   1  We need not decide whether ERISA would preempt similar
corporation-law claims brought by ERISA beneficiaries, participants, or
14                                                        No. 20-2793

    This is why, under the related ERISA doctrine of complete
preemption—which addresses state-law causes of action
more often—the ﬁrst prong of the Supreme Court’s test for
preemption is whether the plaintiﬀ “at some point in time,
could have brought his claim under ERISA….” Aetna Health
Inc. v. Davila, 542 U.S. 200, 210 (2004). This case arises under
conﬂict preemption rather than complete preemption. But
“given the similar underlying policy considerations,” Davila’s
test is useful in assessing the similar question of alternative
remedies under conﬂict preemption. Franciscan Skemp
Healthcare, Inc. v. Cent. States Joint Board Health & Welfare Trust
Fund, 538 F.3d 594, 600 n.3 (7th Cir. 2008). Here, Davila would
not preempt the plaintiﬀs’ claims because the plaintiﬀs cannot
sue under ERISA. That weighs against the presence of an al-
ternative remedies problem here.
        2. The Exclusive Beneﬁt Rule
    The alternative remedies issue, however, only begins our
inquiry. ERISA would still preempt the plaintiﬀs’ claims if
they “‘govern[] … a central matter of plan administration’ or
‘interfere[] with nationally uniform plan administration.’” Go-
beille, 577 U.S. at 320, quoting Egelhoﬀ, 532 U.S. at 148. We must
therefore analyze whether and to what extent the plaintiﬀs’
parallel state-law ﬁduciary duty claims interfere with how
Congress intended ERISA’s ﬁduciary duties to operate.
    Section 404 of ERISA imposes an exclusive duty of loyalty
on ﬁduciaries to act solely in the interest of ERISA beneﬁciar-
ies. Subject to certain qualiﬁcations, “a ﬁduciary shall dis-
charge his duties with respect to a plan solely in the interest of

fiduciaries who can sue Appvion’s directors and officers under ERISA for
the same conduct.
No. 20-2793                                                    15

the participants and beneﬁciaries and … for the exclusive pur-
pose of … providing beneﬁts to participants and their beneﬁ-
ciaries.” 29 U.S.C. § 1104(a)(1)(A)(i) (emphases added). This is
known as the “exclusive beneﬁt” rule. A related provision
provides another formulation of the rule: “the assets of a plan
shall never inure to the beneﬁt of any employer and shall be held
for the exclusive purposes of providing beneﬁts to participants in
the plan and their beneﬁciaries….” 29 U.S.C. § 1103(c)(1) (em-
phases added). In addition, 29 U.S.C. § 1106 provides a list of
“prohibited transactions” and implements the exclusive ben-
eﬁt rule by prohibiting various types of self-dealing and other
conﬂicts of interest.
    ERISA’s exclusive beneﬁt rule derives from “one of the
most fundamental and distinctive principles of trust law, the
duty of loyalty.” Langbein & Fischel, 55 U. Chi. L. Rev. at
1108. ERISA is built on a trust-law model. See 29 U.S.C.
§ 1103(a) (“all assets of an employee beneﬁt plan shall be held
in trust”). Congress intended courts to “apply rules and rem-
edies similar to those under traditional trust law to govern the
conduct of ﬁduciaries.” H.R. Rep. No. 93-1280, at 295 (1974)
(Conf. Rep.). By importing the trust form and its duty of loy-
alty into beneﬁt plans, ERISA drew from a familiar legal
framework to protect plans from the kind of internal misuse
that motivated ERISA’s enactment. Congress enacted ERISA
in response to widespread concern over the misuse of em-
ployee pensions, notoriously exempliﬁed by Studebaker’s de-
fault on its pension plan in 1963 and the severe corruption un-
covered in the Teamsters union through Senate investiga-
tions. See John H. Langbein, What ERISA Means by “Equitable”:
The Supreme Court’s Trail of Error in Russell, Mertens, and Great-
West, 103 Colum. L. Rev. 1317, 1322–24 (2003).
16                                                 No. 20-2793

    ERISA’s duty of loyalty is the “highest known to the law.”
Donovan v. Bierwirth, 680 F.2d 263, 272 n.8 (2d Cir. 1982). A
ﬁduciary of a trust has “a duty to the beneﬁciary to administer
the trust solely in the interest of the beneﬁciary.” Restatement
(Second) of Trusts § 170(1) (1959). The reason for such a strict
and exclusive duty of loyalty stems from the unique trust re-
lationship, where a third party is entrusted with a settlor’s
property to be used for the beneﬁciary. Under this arrange-
ment, “neither the transferor nor the beneﬁciaries are well sit-
uated to monitor closely the actions of the trustee.” Langbein
& Fischel, 55 U. Chi. L. Rev. at 1114.
    With such power comes responsibility. The duty of loyalty
steps in as a forceful substitute for direct monitoring. It pro-
tects beneﬁciaries by barring any conﬂict of interest that
might put the ﬁduciary in a position to engage in self-serving
behavior at the expense of beneﬁciaries. The rule is designed
to deter misbehavior by establishing an “irrebuttable pre-
sumption of wrongdoing whenever the trustee engages in
conﬂict tainted transactions.” Id. at 1114–15. This is strong
medicine—so strong that a “trustee who deals with trust
property for his own account is not allowed a defense even
when the transaction was … harmless to the beneﬁciaries,”
and even if it actually “beneﬁt[s] both” the beneﬁciary and
trustee. Id. at 1115.
    These common-law trust principles apply equally to
ERISA’s duty of loyalty, embodied in the exclusive beneﬁt
rule. Good faith is not a defense. Leigh v. Engle, 727 F.2d 113,
124 (7th Cir. 1984). And “ERISA clearly contemplates actions
against ﬁduciaries who proﬁt by using trust assets, even
where the plan beneﬁciaries do not suﬀer direct ﬁnancial
loss.” Id. at 122. As 29 U.S.C. § 1104(a)(1)(A)(i) commands,
No. 20-2793                                                    17

ERISA ﬁduciaries must always act with an “eye single to the
interests of the participants and beneﬁciaries.” Id. at 123, quot-
ing Donovan v. Bierwirth, 680 F.2d at 271.
    Given the formidable backdrop of ERISA’s exclusive ben-
eﬁt rule, we are skeptical of any state-law attempt to saddle
ERISA ﬁduciaries with other distracting and potentially con-
ﬂicting duties to the corporate employer. Nevertheless, when
it comes to corporate directors and oﬃcers, ERISA tolerates
some measure of dual loyalty.
       3. Exception for Dual-Hat Directors and Oﬃcers
    Despite the exclusive beneﬁt rule, ERISA § 408(c)(3) ex-
plicitly allows corporate insiders—who already have ﬁduci-
ary duties under corporation law—to serve as ERISA ﬁduci-
aries. Section 408(c)(3) states that ERISA’s “prohibited trans-
actions” rules shall not “be construed to prohibit any ﬁduci-
ary from … serving as a ﬁduciary in addition to being an of-
ﬁcer, employee, agent, or other representative of a party in in-
terest.” 29 U.S.C. § 1108(c)(3). ERISA deﬁnes “party in inter-
est” to include corporate employers and other plan sponsors.
29 U.S.C. § 1002(14). Moreover, ERISA invites conﬂicts of in-
terest within ESOPs like the plan in this case. ERISA’s prohib-
ited transaction rules ordinarily forbid deals between plans
and other interested parties such as large stockholders, see 29
U.S.C. § 1106(a)(1)(E) & (a)(2), but ERISA speciﬁcally allows
such deals for ESOPs, see 29 U.S.C. § 1107(b)(1) & (d)(3)(A)(ii).
    By “expressly contemplat[ing] ﬁduciaries with dual loyal-
ties,” § 408(c)(3) takes “an unorthodox departure from the
common law” that is in obvious tension with ERISA’s exclu-
sive beneﬁt rule. Donovan v. Bierwirth, 538 F. Supp. 463, 468
(E.D.N.Y. 1981), aﬀ’d as modiﬁed, 680 F.2d 263 (2d Cir. 1982).
18                                                No. 20-2793

As noted, scholars have defended this “fundamental contra-
diction” as necessary to encourage employers to establish
beneﬁt plans. Without dual-hat ﬁduciaries, employers that es-
tablish ERISA plans would be “assuming ﬁnancial liabilities
without eﬀective controls.” Langbein & Fischel, 55 U. Chi. L.
Rev. at 1127. The eﬀect of adhering strictly to the common-
law rule would likely be a lower rate of plan formation. Id.
    ERISA’s necessary accommodation for dual-hat directors
and oﬃcers has produced messy conﬂicts of interest that
courts and commentators have long recognized and struggled
to resolve. See generally Laurence B. Wohl, Fiduciary Duties
Under ERISA: A Tale of Multiple Loyalties, 20 U. Dayton L. Rev.
43 (1994). Courts “are faced with the problem of reconciling
the overwhelming requirements of common-law trustee
singlemindedness with the ERISA permission for dual
loyalties.” Id. at 58. Courts “must develop a tolerance for the
resulting conﬂicts such dual roles undoubtedly will cause.”
Id. The Supreme Court itself has noted this problem, writing
that “the analogy between ERISA ﬁduciary and common law
trustee becomes problematic … because the trustee at
common law characteristically wears only his ﬁduciary hat
when he takes action to aﬀect a beneﬁciary, whereas the
trustee under ERISA may wear diﬀerent hats.” Pegram v.
Herdrich, 530 U.S. 211, 225 (2000).
    Accordingly, since the 1980s, courts have recognized and
tried to harmonize directors and oﬃcers’ dual loyalties under
ERISA. In Donovan v. Bierwirth, for example, the Secretary of
Labor sued dual-hat trustees of an ERISA plan for breaching
their duty of loyalty to beneﬁciaries by using plan assets to
purchase company stock at an inﬂated price to fend oﬀ an out-
side takeover bid. 538 F. Supp. at 465–68. The district court
No. 20-2793                                                   19

ﬁrst noted that, because ERISA “abrogated the traditional
common law rule” and “clearly contemplates … ﬁduciaries
with dual loyalties,” the trustees “did not commit per se vio-
lations of ERISA either by their failure to abstain from the in-
vestment decision … or by the mere acquisition of [company]
stock.” Id. at 469–70.
    Nevertheless, the court held that “when a ﬁduciary has
dual loyalties, his independent investigation into the basis for
an investment decision which presents a potential conﬂict of
interests must be both intensive and scrupulous” to ensure
that the conﬂict is not inﬂuencing the decision. Id. at 470, dis-
cussing 29 U.S.C. § 1104(a)(1)(B) (ERISA duty of prudence).
Applying that standard, the court found that the trustees
failed to exercise such care by not recognizing and taking
steps to neutralize their inherent conﬂict—such as, at the very
least, consulting independent counsel. Id. at 473.
    The Second Circuit aﬃrmed, clarifying that dual-hat di-
rectors and oﬃcers must do everything possible to “avoid
placing themselves” in a decision presenting an actual con-
ﬂict, and if faced with such a conﬂict must inform themselves
and act to neutralize it, perhaps by temporarily resigning as
trustees. Donovan v. Bierwirth, 680 F.2d at 271–72. But unlike
at common law, the court acknowledged, “oﬃcers of a corpo-
ration … do not violate their duties as trustees by taking ac-
tion which, after careful and impartial investigation, they rea-
sonably conclude best to promote the interests of participants
and beneﬁciaries simply because it incidentally beneﬁts the
corporation or, indeed, themselves.” Id at 271.
   In this circuit, we used a similar approach to reconcile
ERISA’s exclusive beneﬁt rule with its allowance for dual-hat
directors and oﬃcers in Leigh v. Engle, 727 F.2d 113 (7th Cir.
20                                                  No. 20-2793

1984). Dual-hat directors and oﬃcers invested ERISA trust as-
sets in companies that were targets of directors and oﬃcers’
hostile takeover attempts. We said that “plan trustees who are
also oﬃcers of either the ‘target’ or the ‘raider’ could be seen
as having a signiﬁcant ‘interest’ of their own in the outcome
of the contest.” Id. at 127. We invoked the Donovan v. Bierwirth
method of addressing directors and oﬃcers’ dual loyalties
and held that the directors and oﬃcers violated ERISA’s ﬁdu-
ciary requirements:
       Where the potential for conﬂicts is substantial,
       it may be virtually impossible for ﬁduciaries to
       discharge their duties with an “eye single” to
       the interests of the beneﬁciaries, and the ﬁduci-
       aries may need to step aside, at least temporar-
       ily, from the management of assets where they
       face potentially conﬂicting interests. … Where it
       might be possible to question the ﬁduciaries’
       loyalty, they are obliged at a minimum to en-
       gage in an intensive and scrupulous independ-
       ent investigation of their options to insure that
       they act in the best interests of the plan beneﬁ-
       ciaries. In the case before us, we believe there is
       an additional factor which weighs heavily in
       evaluating the loyalty of the ﬁduciaries. Here
       the control eﬀorts lasted for several months, and
       in the case of Hickory, for over a year. The Reli-
       able Trust held its shares involved in the control
       contests throughout these periods, and, as we
       discuss below, the trust’s use of its assets at all
       relevant times tracked the best interests of the
       Engle [corporate insiders’] group in the control
       contest. We believe that the extent and duration
No. 20-2793                                                   21

       of these actions congruent with the interests of
       another party are also relevant for courts in de-
       ciding whether plan ﬁduciaries were acting
       solely in the interests of plan beneﬁciaries.
Id. at 125–26, citing Donovan v. Bierwirth, 680 F.2d at 272; see
also Newton v. Van Otterloo, 756 F. Supp. 1121, 1127–30 (N.D.
Ind. 1991) (applying Leigh’s “three-pronged approach”); Dan-
aher Corp. v. Chicago Pneumatic Tool Co., 635 F. Supp. 246, 250
(S.D.N.Y. 1986) (doubting “the appropriateness of [a] chief ex-
ecutive oﬃcer continuing in his position of ESOP trustee dur-
ing [a] takeover attempt” that was favored by current beneﬁ-
ciaries at the expense of potential future beneﬁciaries).
    These cases illustrate how courts have adapted ERISA’s ﬁ-
duciary rules to account for the exception allowing for dual-
hat director and oﬃcer ﬁduciaries. Courts have even applied
these adapted ﬁduciary rules in cases involving ESOP valua-
tions much like the one at issue in this case. In Donovan v. Cun-
ningham, for example, the Fifth Circuit applied Donovan v.
Bierwirth’s approach in a case where an ESOP trustee who was
also a corporate oﬃcer participated in the valuation of corpo-
rate stock for an ESOP purchase. 716 F.2d 1455 (5th Cir. 1983).
The court recognized that “the stringent prophylactic rules of
the common law cannot be incorporated reﬂexively under”
ERISA, id. at 1466–67, but that ERISA’s exception allowing
ESOPs to purchase employer stock for “adequate considera-
tion” must still be interpreted to imply an exacting duty of
prudence for dual-hat ﬁduciaries with potential conﬂicts of
interest. Id. at 1467 & n.27.
   The Fifth Circuit reaﬃrmed this principle in a case where
dual-hat directors and oﬃcers were involved in an ESOP’s
purchase of company stock at an inﬂated price. Perez v.
22                                                  No. 20-2793

Bruister, 823 F.3d 250, 262–63 (5th Cir. 2016) (“The trustees did
not separate Bruister’s personal interests from Donnelly’s val-
uation process so as to avoid a conﬂict of interest. Their breach
of the duty of loyalty turns on their failure to place the inter-
ests of participants and beneﬁciaries ﬁrst”; to prove ESOP
purchase was “prudent”, “care must be taken to avoid any
identiﬁed conﬂicts of interest”); see also Howard v. Shay, 100
F.3d 1484, 1488–89 (9th Cir. 1996) (citing Donovan v. Bierwirth
and Leigh v. Engle and holding that dual-hat ﬁduciaries vio-
lated their ERISA duties of care and loyalty when ESOP sold
undervalued shares back to the dual-hat company president).
       4. Preemption Implications
    These cases inform our preemption holding as to the
directors and oﬃcers in this case. Congress explicitly
departed from the common law to allow directors and oﬃcers
to serve as ERISA ﬁduciaries despite their dual loyalties.
These permissible dual loyalties weigh in favor of allowing
parallel corporation-law liability against the directors and
oﬃcers in this case. If parallel liability were preempted, the
directors and oﬃcers would in eﬀect cease to be corporate
ﬁduciaries when carrying out their ERISA ﬁduciary roles.
That result would contravene § 408(c)(3)’s mandate that
ERISA not be construed to prevent corporate ﬁduciaries from
also serving as ERISA ﬁduciaries.
    Preempting the plaintiﬀs’ corporation-law claims against
the directors and oﬃcers would also thwart ERISA’s purpose
to protect plan assets from misuse. The third-party bank-
ruptcy creditors in this case cannot sue under ERISA. So, as-
suming the plaintiﬀs’ allegations are true, completely fore-
closing their state-law claims could leave them without re-
course for a fraudulent ESOP valuation that enabled insiders
No. 20-2793                                                  23

to loot the company as it was sinking toward bankruptcy.
Congress enacted ERISA in response to Senate investigations
into “widespread looting of plan funds through sweetheart
deals, kickbacks, and … cronyism,” especially within the
Teamsters union. Langbein, 103 Colum. L. Rev. at 1324. It
would be odd if ERISA operated to shield similar fraudulent
activity in this case. “ERISA was not intended as a device to
permit corporate directors and oﬃcers to defraud with impu-
nity corporate shareholders and creditors.” Smith, 421 A.2d at
1114.
    Preempting all of plaintiﬀs’ claims could also frustrate
congressional intent by discouraging ESOP formation. It
could be rational for creditors to demand higher interest rates
or more security for loans to ESOP-owned companies to ac-
count for the risk that directors and oﬃcers might abuse the
corporation without any recourse for creditors under corpo-
ration law. In the healthcare arena, courts have relied on a
similar concern in refusing to preempt negligent misrepresen-
tation claims by third-party hospitals against ERISA plan in-
surers. See Lordmann, 32 F.3d at 1533, citing Memorial Hospital
Sys., 904 F.2d at 246 (“If ERISA preempts [hospitals’] potential
causes of action for misrepresentation, health care providers
can no longer rely as freely and must either deny care or raise
fees…. In that event, the employees whom Congress sought
to protect would ﬁnd medical treatment more diﬃcult to ob-
tain.”).
    Finally, allowing plaintiﬀs to pursue their claims under
corporation law against the directors and oﬃcers should not
disrupt national uniformity in plan administration. The famil-
iar “internal aﬀairs” doctrine is a conﬂict of laws principle
that recognizes that only one state should have authority to
24                                                   No. 20-2793

regulate a corporation’s internal aﬀairs, including ﬁduciary
duties of directors and oﬃcers. See LaPlant v. Northwestern
Mutual Life Ins. Co., 701 F.3d 1137, 1139 (7th Cir. 2012), citing
Edgar v. MITE Corp., 457 U.S. 624, 645 (1982); Treco, Inc. v. Land
of Lincoln Sav. & Loan, 749 F.3d 374, 377 (7th Cir. 1984); Re-
statement (Second) of Conﬂict of Laws § 302, cmts. a & e
(1971).
   Our holding as to the directors and oﬃcers is limited to
the plaintiﬀs’ particular claims in this case, which would
impose corporate liability that runs parallel to, not in conﬂict
with, ERISA’s ﬁduciary duties. By that we mean that the
directors and oﬃcers’ corporation-law and ERISA duties both
prohibit the fraudulent conduct alleged by plaintiﬀs. ERISA
expressly contemplates such parallel liability for dual-hat
directors and oﬃcers.
    We agree with the Fifth Circuit’s prediction in Sommers
Drug Stores that a director’s state-law and ERISA duties will
often run parallel, so that duties to shareholders require the
same conduct as the duties to ERISA beneﬁciaries. See
Sommers Drug Stores, 793 F.2d at 1468. In cases like this one,
where shareholders and beneﬁciaries are both suing the
directors and oﬃcers for the same conduct, if shareholders
can recover then ERISA beneﬁciaries likely can as well.
ERISA’s trust duty “imposes a standard of care at least as high
as that imposed by the director-shareholder duty.” Id. at
1468–69; see also Wohl, 20 U. Dayton L. Rev. at 78 n.139 (when
dual-hat directors and oﬃcers face “questions from the
corporation’s shareholders,” they “will ﬁnd at least some
protection by virtue of the business judgment rule”). If a dual-
hat director or oﬃcer’s duties irreconcilably conﬂict, however,
the director or oﬃcer “might have to resign one position or
No. 20-2793                                                                25

the other,” Sommers Drug Stores, 793 F.2d at 1469. And if he or
she does not, ERISA’s federal duties will trump conﬂicting
corporation-law duties. Here, the plaintiﬀs are pursuing
parallel corporation-law claims against dual-hat directors and
oﬃcers, so ERISA does not preempt those claims.
IV. Argent Trust Company
    The plaintiﬀs’ Count V aiding and abetting claims against
Argent Trust Company (Argent) are a diﬀerent matter. These
claims are preempted because ERISA does not permit states
to dilute the exclusive beneﬁt rule further, beyond its narrow
exception for dual-hat directors and oﬃcers.
    Unlike the directors and oﬃcers, Argent is a “single-hat”
ERISA ﬁduciary. It has no state-law duty of loyalty to the
corporation. Still, the plaintiﬀs seek to extend corporation-law
liability to Argent through an aiding and abetting theory.2
Aiding and abetting a breach of a ﬁduciary duty is a well-
established tort. See Restatement of Torts (Second) § 874, cmt.
c (1979). Yet it is expansive in that it requires any third party
working with a corporate ﬁduciary to be alert to the
ﬁduciary’s special duties and to avoid knowingly giving aid
to a breach. In this respect, aiding and abetting claims use

    2 The parties dispute whether Wisconsin or Delaware law applies. We

need not resolve that question because both states impose liability on par-
ties who knowingly aid and abet a corporate fiduciary’s breach of duty.
See Burbank Grease Servs., LLC v. Sokolowski, 294 Wis. 2d 274, 304, 717
N.W.2d 781, 796 (2006) (“If a duty of loyalty exists, and a third party en-
courages and profits from a breach of the duty of loyalty, a claim for aiding
and abetting the breach will lie.”); Gotham Partners, L.P. v. Hallwood Realty
Partners, L.P., 817 A.2d 160, 172 (Del. 2002) (stating elements of a claim for
aiding and abetting a breach of fiduciary duty under Delaware law).
26                                                    No. 20-2793

directors and oﬃcers’ corporation-law duties as a foundation
for a wider layer of tort liability reaching third parties.
    States are usually within their rights to impose aiding and
abetting liability on third parties. However, ERISA preempts
such liability when it comes to third parties like Argent who
are subject to exclusive federal duties to act solely in the inter-
est of beneﬁciaries. Unlike with dual-hat directors and oﬃc-
ers, ERISA does not contemplate single-hat ﬁduciaries owing
any parallel duties to the corporation—even a limited duty
not to aid and abet breaches against the corporation.
   The prospect of aiding and abetting liability in this case
simply creates too great a risk that single-hat ERISA
ﬁduciaries like Argent would be forced to worry about
whether directors and oﬃcers were complying with separate
corporation-law duties. This would interfere with the single-
minded focus on the plan and its beneﬁciaries that ERISA’s
exclusive beneﬁt rule prescribes for ﬁduciaries like Argent. In
particular, the conﬂicts of interest that plague dual-hat
directors and oﬃcers would suddenly infect single-hat
entities, as well. Imagine, for example, an ERISA ﬁduciary
worrying whether it would be aiding a breach of ﬁduciary
duty simply by convincing a dual-hat director or oﬃcer to
approve a plan decision that favors beneﬁciaries at the
expense of company proﬁts.
     Such conﬂicts of interest are challenging enough when
they aﬀect only the directors and oﬃcers. They can paralyze
eﬃcient plan administration. “[W]ith the strict common-law
standard of not holding conﬂicting oﬃces removed by ERISA,
it is very diﬃcult for an ERISA ﬁduciary to be assured of a
benign assessment by third parties of the motivational factors
underlying the ﬁduciary’s act.” Wohl, 20 U. Dayton L. Rev. at
No. 20-2793                                                    27

48–49. As a result, “the ﬁduciary may be reluctant to act” even
where no malfeasance is afoot. Id. at 49. These problems are
most likely to arise in cases like this one involving failing com-
panies. Langbein & Fischel, 55 U. Chi. L. Rev. at 1132 (In cases
involving “plant closings or in corporate reorganizations …,
the gains from self-interested action by nonneutral ﬁduciaries
may outweigh the usual … costs. It is for this reason, we sus-
pect, that the contested plan administration cases so often
arise when the incentives of the long term relationship” be-
tween employer and employees “are attenuated”).
    Such conﬂicts of interest are exactly what ERISA’s exclu-
sive beneﬁt rule is meant to prevent. So while ERISA explicitly
tolerates some conﬂicts among directors and oﬃcers, both the
text and purpose of ERISA’s exclusive beneﬁt rule make clear
that courts should resist any further dilution through state-
law aiding and abetting claims that would eﬀectively force a
second hat onto single-hat ERISA ﬁduciaries. Cf. UNUM Life
Ins. Co. of Am. v. Ward, 526 U.S. 358, 378–79 (1999) (ERISA
preempted state-law doctrine deeming employer an agent of
insurer; state-law rule would force the employer, “as plan ad-
ministrator, to assume a role, with attendant legal duties and
consequences, that it has not undertaken voluntarily” under
ERISA).
   We recognize that “aiding and abetting” liability against
Argent would impose liability only for intentionally
fraudulent conduct. It is therefore unlikely that the conduct
prohibited by state law—aiding a fraud—would be
something that Argent’s corollary ERISA duties require or
even allow. In fact, ERISA beneﬁciaries, participants, and
ﬁduciaries can sue Argent under ERISA for knowingly aiding
the directors and oﬃcers’ alleged breaches of their ERISA
28                                                  No. 20-2793

duties. See 29 U.S.C. § 1105(a)(1) (“a ﬁduciary … shall be
liable for a breach of ﬁduciary responsibility of another
ﬁduciary … if he participates knowingly in, or knowingly
undertakes to conceal, an act or omission of such other
ﬁduciary, knowing such act or omission is a breach”). As with
the directors and oﬃcers, then, state-law liability against
Argent would run parallel to Argent’s ERISA liability. But,
again, the key diﬀerence is that the exclusive beneﬁt rule
preempts such parallel state-law liability outside the narrow
and unavoidable exception for dual-hat directors and oﬃcers.
    Indeed, the preeminence of ERISA’s exclusive beneﬁt rule
is what distinguishes the aiding and abetting claims against
Argent from other non-preempted, “run-of-the-mill” tort
claims brought against single-hat ERISA ﬁduciaries. See
Mackey, 486 U.S. at 833. In Mackey, the Supreme Court
recognized that claims for ordinary torts allegedly committed
by ERISA ﬁduciaries are often not preempted. Id. (“lawsuits
against ERISA plans for run-of-the-mill state-law claims such
as unpaid rent, failure to pay creditors, or even torts
committed by an ERISA plan—are relatively commonplace….
[T]hese suits, although obviously aﬀecting and involving
ERISA plans and their trustees, are not pre-empted by ERISA
§ 514(a).”).
    Accordingly, courts have permitted many tort claims
against ERISA ﬁduciaries even when the tortious conduct oc-
curred in the context of plan activity. See Mackey, 486 U.S. at
833 n.8 (collecting cases); see also, e.g., Franciscan Skemp, 538
F.3d at 601 (third-party hospital’s negligent misrepresenta-
tion claim against ERISA plan insurer was not completely
preempted); Dishman v. UNUM Life Ins. Co. of Am., 269 F.3d
974, 979–84 (9th Cir. 2001) (beneﬁciary could pursue invasion
No. 20-2793                                                    29

of privacy tort against ERISA plan insurer for actions taken to
investigate beneﬁts claim); Lane v. Goren, 743 F.2d 1337, 1340
(9th Cir. 1984) (beneﬁciary could pursue state-law race and
age discrimination claims against ERISA ﬁduciaries).
   In those and other “run-of-the-mill” cases, however, the
plaintiﬀs were either (1) beneﬁciaries who suﬀered torts
unrelated to their ERISA rights, as in Dishman and Lane, or (2)
true third parties, such as the hospital in Franciscan Skemp or
the outside creditors in Mackey. State-law liability to the
beneﬁciaries in Dishman and Lane thus did not risk distracting
ﬁduciaries from their single-minded focus on beneﬁciaries.
And in Franciscan Skemp and Mackey, because liability ﬂowed
to third parties, there was no risk of dividing single-hat
ﬁduciaries’ allegiance between the beneﬁciary and her
corporate employer—the foremost entity that ERISA
ﬁduciaries are not supposed to serve.
    Here, however, the injured plaintiﬀ is the corporate em-
ployer. Parallel state-law liability would foster just the sort of
dual loyalty that the exclusive beneﬁt rule prohibits. The
plaintiﬀs in this case are bankruptcy creditors, not the corpo-
ration itself, but they are suing on behalf of the corporate em-
ployer for alleged breaches of duties owed to the corporation
before the bankruptcy. So, unlike in Mackey-type cases, the
aiding and abetting claims against Argent here would in fact
impose on single-hat ﬁduciaries new state-law duties to the
corporate employer. Such liability is fundamentally at odds
with the text and purpose of ERISA’s exclusive beneﬁt rule
and is therefore preempted.
30                                                  No. 20-2793

V. Stout Risius Ross
    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 dual-
hat director or oﬃcer for whom ERISA contemplates parallel
corporate liability. Argent hired Stout for its expertise in aid-
ing 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 con-
ﬂict with the exclusive beneﬁt rule. But upon closer inspec-
tion, Stout is situated more similarly to Argent than to the di-
rectors and oﬃcers when it comes to preemption. Three con-
siderations 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. Sec-
ond, 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 un-
der 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] partic-
ipat[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 single-
hat 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). Nev-
ertheless, 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 addi-
tional 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 corpo-
ration, 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 ben-
eﬁciaries, 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 du-
ties 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 beneﬁ-
ciaries weighs against permitting corporate aiding and abet-
ting 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 corporation-
law liability on non-ﬁduciary contractors who perform cen-
tral 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 Ar-
gent, then, when performing such core plan tasks, Stout’s fed-
eral ERISA obligations should not be muddled with distract-
ing and potentially conﬂicting state-law obligations to the cor-
poration. 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 admin-
istrators 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 non-
ﬁduciary 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.
                          Conclusion
    The exclusive beneﬁt rule is a cornerstone of ERISA that
state law cannot dilute. While ERISA narrowly contemplates
parallel liability against the dual-hat director and oﬃcer de-
fendants, it preempts further aiding and abetting liability that
would impose additional duties on Argent and Stout beyond
their exclusive ERISA obligations. We therefore REVERSE the
dismissal of Counts I–IV and Counts VII and VIII against the
directors and oﬃcers and AFFIRM the dismissal of Counts V
and VI against Argent and Stout and REMAND the case for
further proceedings consistent with this opinion.