Bricklayers & All'd Craftsmen v. Wettlin Assoc.

• Citation: 237 F.3d 270
• Decision Date: 08 January 2001
• Docket Number: No. 00-1382,00-1382
• Parties: (3rd Cir. 2001) BOARD OF TRUSTEES OF BRICKLAYERS AND ALLIED CRAFTSMEN LOCAL 6 OF NEW JERSEY WELFARE FUND, APPELLANT V. WETTLIN ASSOCIATES, INC
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 270

237 F.3d 270 (3rd Cir. 2001)

BOARD OF TRUSTEES OF BRICKLAYERS AND ALLIED CRAFTSMEN LOCAL 6 OF NEW JERSEY WELFARE FUND, APPELLANT

V.

WETTLIN ASSOCIATES, INC.

No. 00-1382

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued November 14, 2000

Filed January 8, 2001

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (D.C. No. 99-cv-04874) District Judge: Honorable Garrett E. Brown, Jr.

Counsel for Appellant: 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 Appellee: Roland Morris, Esquire (argued) M. Elaine Jacoby, Esquire Duane, Morris & Heckscher, Llp One Liberty Place Philadelphia, Pennsylvania 19103-7396

Before: Sloviter, Ambro, and Weis, Circuit Judges

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. Accordingly, we will reverse the District Court's ruling that the complaint failed to state a claim.

The facts are taken from the plaintiff's proposed amended complaint. Plaintiff is the Board of Trustees of Bricklayers and Allied Craftsman Local 6 of New Jersey Welfare Fund, an employee benefit plan within the meaning of ERISA, 29 U.S.C. S 1002(3). The members of the Board of Trustees have the discretionary authority to manage and control the Local 6 Fund and are fiduciaries under ERISA, 29 U.S.C. S 1002(21)(A). They meet only four to six times a year.

In 1988, the Board entered into an agreement providing that defendant Wettlin Associates, Inc. would provide administrative services to Local 6 Fund. The Board delegated to Wettlin the day-to-day responsibility 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 from the fund's bank account in accordance with such determinations. That conduct was within Wettlin's discretion and it was not required to seek approval from the Trustees in advance.

Wettlin was also required to collect contributions from employers under the terms of collective bargaining 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 agreement, 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 turn, 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 Wettlin that its services would terminate on April 1, 1998. Beginning on March 1 and continuing through March 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 refused, filed suit in the District Court of New Jersey. The Board 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 Procedure 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. Plaintiff then proffered an amended complaint, which was rejected by a 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 more 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 affirm. Wisniewski v. Johns-Manville Corp., 759 F.2d 271, 273 (3d Cir. 1985).

The Board of Trustees argues that Wettlin 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, exercised 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. S 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. 211, 120 S.Ct. 2143, 2151 (2000). The statute uses differing criteria in imposing fiduciary obligations for each of these roles. For plan financial 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 discretionary authority or discretionary responsibility. 29 U.S.C. S 1002(21)(A)(iii). For managers, subsection (i) sets the criteria.

Subsection (i) of 29 U.S.C. § 1002(21)(A) differentiates between those who manage the plan in general, and those who manage the plan assets. These functions are set out in two clauses under subsection (i) separated by the conjunction "or." A significant difference 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 care 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 control 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 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 determine authority because control could decide the issue. Id.

A corporate officer in LoPresti v. Terwilliger, 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...