Board of Trustees of Bricklayers and Allied Craftsmen Local 6 of New Jersey Welfare Fund v. Wettlin Associates, Inc. Appeal From the United States District Court for the…

Filed January 8, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 00-1382
BOARD OF TRUSTEES OF BRICKLAYERS AND
ALLIED CRAFTSMEN LOCAL 6 OF NEW JERSEY
WELFARE FUND,
Appellant
v.
WETTLIN ASSOCIATES, INC.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D. C. No. 99-cv-04874)
District Judge: Honorable Garrett E. Br own, Jr.
Argued November 14, 2000
Before: SLOVITER, AMBRO, and WEIS,
Circuit Judges
(Filed: January 8, 2001)
John A. Adams, Esquire (ARGUED)
Thomas J. McGoldrick, Esquire
McAleese, McGoldrick, Susanin &
Widman, P. C.
Suite 240 -- Executive Terrace
455 South Gulph Road
King of Prussia, Pennsylvania 19406
Counsel for Appellant

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Roland Morris, Esquire (ARGUED)
M. Elaine Jacoby, Esquire
Duane, Morris & Heckscher, LLP
One Liberty Place
Philadelphia, Pennsylvania
19103-7396
Counsel for Appellee
OPINION OF THE COURT
WEIS, Circuit Judge.
The issue in this case is whether ERISA' s definition of
"fiduciary" includes an entity that receives contributions
from employers and awards benefits to participants
pursuant to an agreement with trustees of a union welfare
fund. We conclude that the allegations in plaintiff's
complaint were sufficient to preclude a ruling that no
fiduciary status existed as a matter of law. Accor dingly, we
will reverse the District Court' s ruling that the complaint
failed to state a claim.
The facts are taken from the plaintif f' s proposed amended
complaint. Plaintiff is the Board of T rustees of Bricklayers
and Allied Craftsman Local 6 of New Jersey W elfare Fund,
an employee benefit plan within the meaning of ERISA, 29
U.S.C. § 1002(3). The members of the Boar d of Trustees
have the discretionary authority to manage and control the
Local 6 Fund and are fiduciaries under ERISA, 29 U.S.C.
§ 1002(21)(A). They meet only four to six times a year.
In 1988, the Board entered into an agr eement providing
that defendant Wettlin Associates, Inc. would provide
administrative services to Local 6 Fund. The Boar d
delegated to Wettlin the day-to-day r esponsibility to control,
manage, hold, safeguard, and account for the fund' s assets
and income. Wettlin determined the legitimate expenses of
the fund, wrote checks, and disbursed assets fr om the
fund' s bank account in accordance with such
determinations. That conduct was within W ettlin' s
discretion and it was not required to seek approval from the
Trustees in advance.
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Wettlin was also required to collect contributions from
employers under the terms of collective bar gaining
agreements, deposit them in Local 6 Fund' s bank account,
and make payments in accordance with the fund' s
obligations under the plan. As stated in the agr eement,
Wettlin would receive the following monthly compensation:
Welfare Fund $2,208.33
Pension Fund $ 833.33
Annuity Fund $ 833.33
Apprentice Training Fund $ 41. 67
TOTAL $3,916.66
According to the complaint, "effective as of January,
1996, the [Local 6] Fund also collected fringe benefit funds
from contributing employers which, in tur n, were to be
transferred by the Fund for deposit to the New Jersey
Bricklayers and Allied Craftworkers Health Fund[(` state-
wide fund' )]." In carrying out this arrangement, Wettlin was
to transfer ninety-eight percent of the employer
contributions earmarked for the state-wide fund to that
entity. The amended complaint alleges that the two percent
not transferred became an asset of Local 6 Fund.
In February 1998, the Board notified W ettlin that its
services would terminate on April 1, 1998. Beginning on
March 1 and continuing through Mar ch 31, Wettlin paid
itself $42, 743.71 from the Local 6 Fund account, the
amount representing the two percent withheld from
payments to the state-wide fund.
Upon learning of this series of payments, the Board
demanded reimbursement, and when this was r efused, filed
suit in the District Court of New Jersey. The Boar d alleged
that Wettlin was a fiduciary under ERISA and had breached
its duty to the fund. The complaint also pleaded various
state law claims.
Relying on Federal Rule of Civil Procedur e 12(b)(6), the
District Court dismissed plaintiff' s complaint because it
failed to offer any factual basis to support its allegation that
defendant was a fiduciary under ERISA. Plaintif f then
proffered an amended complaint, which was rejected by a
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magistrate judge on the ground that it failed to state a
claim that would survive a motion to dismiss. The District
Judge agreed and dismissed the case, observing that
Wettlin' s role was "nothing mor e than ministerial. " The
Board appealed.
We exercise plenary review when examining the grant of
a motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6). Lorenz v. CSX Corp., 1 F. 3d 1406, 1411
(3d Cir. 1993). We accept the allegations of the complaint as
true and draw all reasonable inferences in the light most
favorable to the plaintiff. Id. Only if it appears certain that
a plaintiff could prove no set of facts supporting its claim
and entitling it to relief do we affir m. Wisniewski v. Johns-
Manville Corp., 759 F.2d 271, 273 (3d Cir . 1985).
The Board of Trustees argues that W ettlin can be a
fiduciary under ERISA because discretion is not always a
prerequisite for such a role. Even if discretion is required,
the Board contends that the amended complaint sets forth
a factual basis for concluding that Wettlin did function in
that manner. Wettlin contends that it was not a fiduciary
because it acted in a ministerial capacity, exer cised no
discretion, and additionally asserts that the money in
question was not an asset of Local 6 Fund.
The ERISA provision at the heart of this case sets out the
description of a fiduciary:
"[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 respecting
management or disposition of its assets, (ii) he renders
investment advice for a fee . . . or has any authority or
responsibility to do so, or (iii) he has any discretionary
authority or discretionary responsibility in the
administration of such plan. "
29 U.S. C. § 1002(21)(A) (emphasis added).
This statutory definition requires that a fiduciary "must
be someone acting in the capacity of manager ,
administrator, or financial advisor to a` plan.' " Pegram v.
Herdrich, 530 U.S. ___ , 120 S.Ct. 2143, 2151 (2000). The
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statute uses differing criteria in imposingfiduciary
obligations for each of these roles. For planfinancial
advisors, Congress assigned a fiduciary duty in subsection
(ii) both to those who actually render advice and those who
simply have the authority to do so. 29 U.S.C.
§ 1002(21)(A)(ii). For plan administrators, subsection (iii)
limits fiduciary status to those who have discr etionary
authority or discretionary responsibility. 29 U.S.C.
§ 1002(21)(A)(iii). For managers, subsection (i) sets the
criteria.
Subsection (i) of 29 U.S.C. § 1002(21)(A) dif ferentiates
between those who manage the plan in general, and those
who manage the plan assets. These functions ar e set out in
two clauses under subsection (i) separated by the
conjunction "or. " A significant dif ference between the two
clauses is that discretion is specified as a prerequisite to
fiduciary status for a person managing an ERISA plan, but
the word "discretionary" is conspicuously absent when the
text refers to assets. " This distinction is not accidental -- it
reflects the high standard of car e trust law imposes upon
those who handle money or other assets on behalf of
another." FirsTier Bank, N.A. v. Zeller, 16 F. 3d 907, 911
(8th Cir. 1994). See Daniel Candee Knickerbocker, Jr.,
Fiduciary Responsibility Under ERISA, § 2.05 (2000).
This distinction was emphasized in IT Corp. v. General
American Life Insurance Co., 107 F.3d 1415 (9th Cir. 1997).
In that case, the administrator had check-writing authority
over the money received from the employer that was
deposited in the plan' s bank account. Id. at 1417. Noting
that the "statute treats control over the cash differently
from control over administration," the Court concluded that
"` [a]ny' control over disposition of plan money makes the
person who has the control a fiduciary." Id. at 1421.
The Court of Appeals noted that because the employer
had the responsibility to keep an amount in a bank
account sufficient to cover checks validly issued by the
administrator, "as a practical matter , a substantial amount
of money would [have been] under the contr ol of [the
administrator], in the form of a bank account which it
could deplete by writing checks." Id. Where there is such
"authority or control," the District Court could not hold that
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the administrator was a non-fiduciary as a matter of law.
Id.
In Yeseta v. Baima, 837 F.2d 380, 386 (9th Cir. 1988),
the same Court of Appeals held that a corporate officer who
withdrew plan funds for the company' s benefit was a
fiduciary, despite authorization for the withdrawal from
other officers. Noting that section 1002(21)(A) establishes
that a person can be a fiduciary on the basis of control of
a plan' s assets, the Court concluded it was unnecessary to
sort through the disputed facts to deter mine authority
because control could decide the issue. Id .
A corporate officer in LoPresti v. T erwilliger, 126 F. 3d 34,
40 (2d Cir. 1997), commingled company assets with benefit
funds, and used them to pay company debts. Hinting that
the District Court had apparently failed to appreciate the
significance of the second clause of subsection (i), the Court
of Appeals reversed. Id. It held that an individual may also
become an ERISA fiduciary by exercising any authority or
control in connection with the management or disposition
of plan assets. Id.
We come then to Confer v. Custom Engineering Co., 952
F. 2d 34 (3d Cir. 1991), on which the District Court relied in
the present case. Confer, a participant in an employee
health benefit plan, alleged a breach offiduciary duty when
he was denied medical benefits following an accident. Id. at
35. He sued his employer, Custom Engineering Co., which
was the plan' s administrator and fiduciary, as well as the
officers of that company. Id. He also named as a defendant
Self-Funded Plans, Inc., which had been delegated day-to-
day administrative tasks for the plan. Id. W e affirmed
summary judgment in favor of the company officers,
concluding that corporate officers acting on behalf of a
corporation are not themselves fiduciaries unless they have
individual discretionary roles in plan administration. Id. at
37.
More important to the case before us, we also held that
Self-Funded, the day-to-day administrator, was not
responsible for wrongfully denying benefits to the plaintiff.
Id. at 39. "Since discretionary authority, responsibility or
control is a prerequisite to fiduciary status, it follows that
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persons who perform purely ministerial tasks, such as
claims processing and calculation, cannot befiduciaries
because they do not have discretionary r oles. Self-Funded
had no discretion to deny or allow [plaintif f]' s claim." Id.
(citation omitted). The plaintiff' s assertion to the contrary
had "no basis in the plan document, in Self-Funded' s
contract with Custom Engineering, or anywher e else in the
record." Id.
There are important distinctions between Confer and the
case at hand. Self Funded's alleged breach was with regard
to its responsibilities in the administration of benefits
under the plan; therefore, its fiduciary status under ERISA
was determined by subsection (iii) of 29 U.S.C.
§ 1002(21)(A). Plaintiff in that case never alleged
mismanagement of assets. Thus, Confer concluded only
that plaintiff had not demonstrated that Self-Funded had
discretionary authority or discretionary r esponsibility in the
administration of the plan. Confer, 952 F . 2d at 39.
Wettlin does not argue that subsection (iii) applies in the
present case. Although Confer addr essed subsection (iii),
id., Wettlin contends that the statements in that opinion
linking fiduciary status and discretion apply to all ERISA
fiduciaries. We reject this ar gument as contrary to the
statutory text. "Discretionary" authority or responsibility is
required to confer fiduciary status for plan administration
under subsection (iii), and "discretionary" authority or
"discretionary" control is r equired for plan management
under subsection (i). As noted earlier, however, the adjective
"discretionary," so carefully selected for plan administration
and management, is omitted in subsection (i) when dealing
with authority or control over the management or
disposition of plan "assets. " "The statute treats control over
the cash differently from contr ol over administration." IT
Corp., 107 F. 3d at 1421.
That Congress established a lower threshold for fiduciary
status where control of assets is at stake is not surprising,
given that "[a]t common law, fiduciary duties
characteristically attach to decisions about managing
assets and distributing property to beneficiaries." Pegram,
120 S.Ct. at 2155 ("[T]he common law trustee' s most
defining concern historically has been the payment of
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money in the interest of the beneficiary. "). "By mandating
the trust form and by transposing the duty of loyalty from
trust to pension law, the drafters of ERISA wer e able to
institute a familiar fiduciary regime to pr otect pension
funds against internal defalcation. " John H. Langbein &
Bruce A. Wolk, Pension and Employee Benefit Law, 649 (2d
ed. 1995).
Finally, Confer cited a series of interpr etive questions and
answers promulgated by the Department of Labor and
published at 29 C. F. R. § 2509.75-8. Confer, 952 F. 2d at 36-
37. Wettlin contends that question D-2 is r elevant to our
determination, characterizing its own actions as simply
"administratively ministerial," similar to those the
Department of Labor concluded were non-fiduciary
functions of a plan administrator. After examining the
Department of Labor' s interpretation to which W ettlin
points to, we conclude that it addresses situations like that
in Confer, involving the administration of benefits under a
plan, and does not speak to the activities under subsection
(i). 1 In any event, these agency interpretations are not
binding on us. See Christensen v. Harris County , 529 U.S.
___, 120 S.Ct. 1655, 1662-63 (2000).
This is not the first case in which we have noted that the
structure of subsection (i) is significant in its interpretation.
In Curcio v. John Hancock Mutual Life Insurance Co. , 33
F. 3d 226, 233 (3d Cir. 1994), we observed that although the
party in that case was not a fiduciary under the second half
of subsection (i), separate analysis was necessary to
_________________________________________________________________
1. Wettlin relies on 29 C. F. R.§ 2509.75-8 D-2, function (8), one of the
categories that the Labor Department opines is non-fiduciary, as similar
to its role in the present plan: "Collection of contributions and
application of contributions as provided in the plan." The other listed
functions in the illustrative answer are pur ely administrative. We also
examined question FR-15, which states that a namedfiduciary may not
delegate responsibility for management and control of plan assets to
anyone other than investment managers. 29 C.F . R. § 2509.75-8 FR-15.
As we read this answer, it distinguishes responsibility for management
of assets from discretionary conduct in other management functions.
Thus, read as a whole the questions and answers do not aid Wettlin' s
cause.
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determine whether the first clause did give the party that
status.
Unlike the defendant in Confer, Wettlin' s potential
liability is created by subsection (i), which addresses fund
assets and directs that fiduciary status be assigned to the
extent that a person "exercises any authority or control
respecting management or disposition of its assets. " 29
U.S.C. § 1002(21)(A)(i). To the extent it applied dicta in
Confer to the analysis of subsection (i), the District Court
erred.
The contract attached to the plaintiff' s amended
complaint lists the functions to be perfor med by Wettlin.
Most of these appear to be purely ministerial and are
specifically subject to the direction of the trustees. The
provisions directing Wettlin to collect contributions and
write checks on Local 6 Fund' s account, however , are quite
general in scope. Wettlin would have us construe these
terms narrowly, in effect establishing it as a mere
depository of Local 6 Fund assets. See IT Corp. , 107 F. 3d at
1421.
We are inclined to agree that ERISA does not consider as
a fiduciary an entity such as a bank when it does no more
than receive deposits from a benefit fund on which the fund
can draw checks. The allegations in the amended
complaint, however, do not describe W ettlin' s role as so
circumscribed. Rather, the amended complaint alleges that
the Board delegated to defendant the "day to day
responsibility to control, manage, hold, safeguard, and
account for the Fund' s assets and income."
Moreover, the contract provides that Wettlin is to
"[r]eceive request for benefits fr om employees and take
appropriate action thereon." Notably lacking in the record is
a description of the various benefits that ar e available and
what actions the parties have considered to be
"appropriate. "
At this stage we are left with substantial doubt that there
exist no facts that might establish that Wettlin did indeed
exercise such authority and control over the management
and disposition of Local 6 Fund assets so as to come within
the statutory definition of a fiduciary. Further development
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is required and on this recor d we cannot say that, as a
matter of law, Wettlin is not a fiduciary. The amended
complaint does state a claim and the case should not have
been dismissed at the pleading stage. 2
The Order of the District Court will be r eversed and the
case will be remanded for further proceedings in
accordance with this Opinion.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
_________________________________________________________________
2. Because the issue was not raised in the District Court, we need not
consider the Board' s alternative ar gument that Wettlin is nevertheless
liable as a party in interest under 29 U.S.C. §§ 1106(a)(1)(D) and
1132(a)(3). See Harris Trust and Savings Bank v. Salomon Smith Barney
Inc., 530 U.S. ___, 120 S.Ct. 2180 (2000).
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