Teets v. Great-West Life & Annuity Ins. Co.

• Decision Date: 27 March 2019
• Docket Number: No. 18-1019,18-1019
• Citation: 921 F.3d 1200
• Court: U.S. Court of Appeals — Tenth Circuit
• Parties: John TEETS, Plaintiff - Appellant, v. GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY, Defendant - Appellee, AARP; AARP Foundation; American Council of Life Insurers, Amici Curiae.

921 F.3d 1200

John TEETS, Plaintiff - Appellant,

v. GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY, Defendant - Appellee,AARP; AARP Foundation; American Council of Life Insurers, Amici Curiae.

No. 18-1019

United States Court of Appeals, Tenth Circuit.

March 27, 2019

As Clarified April 22, 2019 nunc pro tunc to March 27, 2019

Panel Rehearing and Rehearing En Banc Denied April 22, 2019

Peter K. Stris, Stris & Maher LLP, Los Angeles, California (Rachana A. Pathak, John Stokes, Stris & Maher LLP, Los Angeles, California; Nina Wasow, Todd F. Jackson, Feinberg, Jackson, Worthman & Wasow LLP, Oakland, California; Todd Schneider, Mark Johnson, James Bloom, Schneider Wallace Cottrell Konecky Wotkyns LLP, Emeryville, California; Scot Bernstein, Law Offices of Scot D. Bernstein, P.C., Folsom, California; Garret W. Wotkyns, Michael McKay, Schneider Wallace Cottrell Konecky Wotkyns LLP, Scottsdale, Arizona; Erin Riley, Matthew Gerend, Keller Rohrback LLP, Seattle, Washington; Jeffrey Lewis, Keller Rohrback LLP, Oakland, California, with him on the brief), for the Plaintiff - Appellant.

Carter G. Phillips, Sidley Austin LLP, Washington, D.C. (Michael L. O’Donnell, Edward C. Stewart, Wheeler Trigg O’Donnell LLP, Denver, Colorado; Joel S. Feldman, Mark B. Blocker, Sidley Austin LLP, Chicago, Illinois, with him on the brief), for the Defendant - Appellee.

William Alvarado Rivera, (Mary E. Signorille, AARP Foundation Litigation, Washington, D.C. with him on the brief) for AARP and AARP Foundation Litigation, Amici Curiae.

James F. Jorden, (Waldemar J. Pflepsen, Jr., Carlton Fields Jorden Burt, P.A., Washington D.C.; and Michael A. Valerio, Carlton Fields Jorden Burt, P.A., Hartford, Connecticut with him on the brief), for American Council of Life Insurers, Amicus Curiae.

Nancy G. Ross, Mayer Brown LLP, Chicago, Illinois, (Jed W. Glickstein, Mayer Brown LLP, Chicago, Illinois; Brian D. Netter, Mayer Brown LLP, Washington, D.C.; Steven P. Lehotsky, U.S. Chamber Litigation Center, Washington, D.C.; Janet M. Jacobson, Washington, D.C., with her on the brief), for the Chamber of Commerce of the United State of America and the American Benefits Council, Amici Curiae.

Before MATHESON, BACHARACH, and McHUGH, Circuit Judges.

ORDER

This matter is before the court on the appellant’s Petition for Panel Rehearing and Rehearing En Banc.

Upon consideration, the request for panel rehearing is denied by the original panel members. The panel has, however, made small sua sponteclarifications to the original opinion at pages 24 through 28. That amended version is attached to this order. The Clerk is directed to file the clarified decision nunc pro tuncto the original filing date of March 27, 2019.

In addition, the Petitionwas circulated to all members of the court who are in regular active service and who are not recused. SeeFed. R. App. P. 35(a). As no member of the original panel or the full court called for a poll, the request for en banc reconsideration is likewise denied.

MATHESON, Circuit Judge.

Great-West Life Annuity and Insurance Company ("Great-West") manages an investment fund that guarantees investors will never lose their principal or the interest they accrue. It offers the fund to employers as an investment option for their employees’ retirement savings plans, which are governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq.

John Teets—a participant in an employer retirement plan—invested money in Great-West’s fund. He later sued Great-West under ERISA, alleging Great-West breached a fiduciary duty to participants in the fund or that Great-West was a non-fiduciary party in interest that benefitted from prohibited transactions with his plan’s assets.

After certifying a class of 270,000 plan participants like Mr. Teets, the district court granted summary judgment for Great-West, holding that (1) Great-West was not a fiduciary and (2) Mr. Teets had not adduced sufficient evidence to impose liability on Great-West as a non-fiduciary party in interest. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.

I. BACKGROUND

Great-West is a Colorado-based insurance company that provides "recordkeeping, administrative, and investment services to 401(k) plans." Aplt. App., Vol. II at 149. It qualifies as a service provider—a "person providing services to [a] plan"—under ERISA. See ERISA § 3(14)(B), 29 U.S.C. § 1002(14)(B).

Mr. Teets participated through his employment in the Farmer’s Rice Cooperative 401(k) Savings Plan ("the Plan"). Under the Plan, employees contribute to their own retirement accounts and choose how to allocate their contributions among the investment options offered. When employees invest in a particular fund, they become "participants" in that fund. Great-West contracts with the Plan and other comparable employer plans to offer the investment fund that is the subject of this case. Great-West is not in a contractual relationship with participants.

In this section, we first provide an overview of the ERISA legal framework governing this appeal. We then detail the factual background of the case and the proceedings in the district court.

A. Statutory Background

1. ERISA Protections Against Benefit Plan Mismanagement

ERISA regulates employee benefit plans, including health insurance plans, pension plans, and 401(k) savings plans. It is a "comprehensive and reticulated statute, the product of a decade of congressional study of the Nation’s private employee benefit system." Mertens v. Hewitt Assocs. , 508 U.S. 248, 251, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993) (quotations omitted). It governs employers that create and administer benefit plans as well as third parties that provide services for plans. See 29 U.S.C. § 1002(1), (4), (14), (16).

ERISA seeks to protect employees against mismanagement of their benefit plans. See Fort Halifax Packing Co., Inc. v. Coyne , 482 U.S. 1, 15, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987) ("The focus of the statute thus is on the administrative integrity of benefit plans."). "[T]o ensure that employees will not be left empty-handed," Lockheed Corp. v. Spink , 517 U.S. 882, 887, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996), ERISA imposes fiduciary duties on those responsible for plan management and administration. See ERISA §§ 404, 406, 29 U.S.C. §§ 1104, 1106. "Congress commodiously imposed fiduciary standards on persons whose actions affect the amount of benefits retirement plan participants will receive." John Hancock Mut. Life Ins. Co. v. Harris Tr. & Sav. Bank , 510 U.S. 86, 96, 114 S.Ct. 517, 126 L.Ed.2d 524 (1993) ("Harris Trust ").

2. ERISA Fiduciaries

a. Establishing fiduciary status—named and functional fiduciaries

Under ERISA, a party involved in managing a benefit plan takes on fiduciary obligations in one of two ways. See In re Luna , 406 F.3d 1192, 1201 (10th Cir. 2005). First, the instrument establishing a plan must specify at least one fiduciary—typically the employer or a trustee—that will have the "authority to control and manage the operation and administration of the plan." ERISA § 402(a), 29 U.S.C. § 1102(a). These are "named fiduciaries." See Maez v. Mountain States Tel. & Tel., Inc. , 54 F.3d 1488, 1498 (10th Cir. 1995) (defining "named fiduciary"). Second, a party not named in the instrument can nonetheless be a "functional fiduciary" by virtue of the authority the party holds over the plan. See Santomenno v. Transamerica Life Ins. Co. , 883 F.3d 833, 837 (9th Cir. 2018) (" Transamerica Life Insurance "); David P. Coldesina, D.D.S., P.C., Emp. Profit Sharing Plan & Tr. v. Estate of Simper , 407 F.3d 1126, 1132 (10th Cir. 2005) (" Coldesina ") (describing the "functional" approach to evaluating fiduciary status). Under § 3(21)(A) of ERISA,¹ a party becomes a functional fiduciary when

(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 other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.

29 U.S.C. § 1002(21)(A) (emphasis added).²

Functional fiduciaries’ obligations are limited in scope: "Plan management or administration confers fiduciary status only to the extent the party exercises discretionary authority or control." Coldesina , 407 F.3d at 1132. And they must actually exercise their authority or control over the plan’s assets.³ Leimkuehler v. Am. United Life Ins. Co. , 713 F.3d 905, 914 (7th Cir. 2013) (explaining that a decision not to exercise control over a plan’s assets does not confer fiduciary status). Any alleged breach of a functional fiduciary’s obligations must arise out of an exercise of that authority or control. See id. at 913 ; Assocs. in Adolescent Psychiatry, S.C. v. Home Life Ins. Co. , 941 F.2d 561, 569 (7th Cir. 1991).

As the following discussion illustrates, although named fiduciaries and functional fiduciaries obtain fiduciary status in different ways, they are bound by the same restrictions and duties under ERISA.⁴

b. Fiduciary duties and prohibited transactions

Section 404 of ERISA imposes general duties of loyalty on fiduciaries, requiring them to "discharge [their] duties with respect to a plan solely in the interest of the participants and beneficiaries" and "for the exclusive purpose of ... [1] providing benefits as to participants and their beneficiaries; and [2] defraying reasonable expenses of administering the plan." 29 U.S.C. § 1104(a)(1).

In addition to imposing general duties, ERISA prohibits fiduciaries from engaging in certain specific transactions. First, it restricts transactions between plans and fiduciaries. Under § 406(b)(1), a fiduciary may not "deal with the assets of the plan in his own interest or for his own account." 29 U.S.C. § 1106(b)(1...