Tiblier ex rel. Tiblier v. Dlabal

• Decision Date: 28 February 2014
• Docket Number: No. 13–50344.,13–50344.
• Citation: 743 F.3d 1004
• Parties: Eric TIBLIER, as Trustee of and on Behalf of the Dr. Eric Tiblier, P.A. Cash Balance Plan; Susanne Tetzlaff, as Trustee of and on Behalf of the Dr. Eric Tiblier, P.A. 401(K) Profit Sharing Plan, Plaintiffs–Appellants, v. Paul DLABAL; Cach Capital Management, L.L.C., Defendants–Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

743 F.3d 1004

Eric TIBLIER, as Trustee of and on Behalf of the Dr. Eric Tiblier, P.A. Cash Balance Plan; Susanne Tetzlaff, as Trustee of and on Behalf of the Dr. Eric Tiblier, P.A. 401(K) Profit Sharing Plan, Plaintiffs–Appellants,

v.Paul DLABAL; Cach Capital Management, L.L.C., Defendants–Appellees.

No. 13–50344.

United States Court of Appeals,Fifth Circuit.

Feb. 28, 2014.

Maryann E. Norwood, Moster Wynne & Ressler, P.C., Melanie Jo Cogburn, Haddad Legal Group, Austin, TX, for Plaintiffs–Appellants.

Richard Douglas Yeomans, Boyce C. Cabaniss, Esq., Graves, Dougherty, Hearon & Moody, P.C., Austin, TX, for Defendants–Appellees.

Leonard Howard Gerson, Esq., U.S. Department of Labor, Washington D.C., for Amicus Curiae.

Appeal from the United States District Court for the Western District of Texas.

Before JONES, ELROD, and HAYNES, Circuit Judges.

JENNIFER WALKER ELROD, Circuit Judge:

This case arises out of two investments made by the pension plans of a small cardiology practice in the bonds of an oil and gas company. After the oil and gas company stopped making interest payments on the bonds, Plaintiffs filed suit alleging violations of the Employee Retirement Income Security Act (ERISA). The district court granted summary judgment in favor of investment advisor Paul Dlabal. Plaintiffs appealed. We hold that Dlabal is not a fiduciary under ERISA, and accordingly AFFIRM.

I.

Eric Tiblier was a cardiologist with a practice in Austin, Texas. His wife, Susan Tetzlaff, managed the practice. In January 2008, Tiblier's practice began leasing space one day a week to his former colleague, Dlabal. In addition to practicing medicine, Dlabal was a licensed broker and registered investment advisor representative.¹ Dlabal's licenses did not allow him to individually serve as either a broker or an investment advisor; instead, he had to affiliate with a firm that served clients in those capacities. At the time of the dispute, Dlabal was affiliated with the now-defunct firm CACH Capital Management, LLC (CACH).

Tiblier and Tetzlaff engaged Dlabal and CACH as their investment advisors for both their personal investments, and for the pension plans established for Tiblier's practice. The practice's pension funds were invested through two vehicles: the Dr. Eric Tiblier, P.A. Cash Balance Plan, and the Dr. Eric Tiblier, P.A. 401(k) Profit Sharing Plan (collectively, Plans). Tiblier and Tetzlaff acted as the trustees for these respective Plans.² According to Plaintiffs, the Plans were intended to be conservative cash-balance plans, emphasizing stable long-term grown and avoiding risk. Although the Plans were set up in the name of Tiblier's practice and were open to any employee of his office who qualified as a participant, Tiblier and Tetzlaff made at least 95% of the contributions to the Plans.

In May 2008, Tiblier signed an Investment Management Agreement (Agreement) with CACH, in which CACH was designated as the “Advisor,” and Dlabal was designated as the “Registered Representative.” The Agreement granted the Advisor “limited discretionary authority” over Plaintiffs' investment. The Agreement did not reference the Registered Representative in the “Discretionary Authority” provision, but did disclose Dlabal's roles as broker, dealer, and seller of insurance products in the “Potential Conflict of Interest” section.

Dlabal and CACH subsequently proposed a number of investments to Plaintiffs. Plaintiffs rejected some of these proposals and accepted others. Many of Dlabal's proposed investments performed successfully. This dispute arises out of one that did not: based on Dlabal's recommendation Plaintiffs invested $100,000 of the Plans' funds in the corporate bonds of a company called Adageo Energy Partners, L.P. (Adageo).

Adageo was an oil and gas start-up company that intended to generate profits by purchasing under-utilized oil and gas investments and making them more productive. In order to help raise the $50 million that it needed to make these purchases, Adageo issued bonds that promised to pay 12% interest. Plaintiffs invested in these Adageo bonds in two $50,000 increments: one in July 2009, and the second in December 2009 (collectively, the Adageo Investment).

Under the Agreement, Dlabal was entitled to receive a 1.5% recurring annual fee from the Plans for the Adageo Investment. Dlabal choose instead to take a portion of the commission that Adageo paid to the third-party broker/dealer that Dlabal and CACH used to make this private placement investment. Dlabal's portion of that commission equated to roughly 2–2.5% of the Plans' investment, or about $2,500. This commission was expressly disclosed in the first line of each Non–Liquid Investment Risk & Disclosure Form that Tiblier signed. Dlabal did not receive any other compensation in connection with the Adageo Investment.

In mid–2010, Adageo ceased making interest payments on the bonds, and non-party Wells Fargo, acting as trustee of the debentures, sought to liquidate Adageo in an action in Minnesota in state court.³ Plaintiffs filed suit on January 24, 2012, in the United States District Court for the Western District of Texas, asserting that Dlabal and CACH: (1) violated § 10(b) of the Securities Act, and the attendant regulations under Rule 10–b(5); (2) breached their fiduciary duty under ERISA, including by transfer and self-dealing in violation of 29 U.S.C. § 1106(a)(1)(D) & (b); (3) breached their fiduciary duty by failing to comply with the terms of the investment plans, and by failing to provide Tiblier with necessary information; (4) were liable as co-fiduciaries for the other defendants' acts and omissions; and (5) violated the Investment Advisors Act, 15 U.S.C. § 80b–6(2). In essence, Plaintiffs alleged that the Adageo bonds were an unsuitable investment for the Plans' funds, and that Dlabal made multiple oral misrepresentations to Plaintiffs in violation of his fiduciary duties.

CACH was defunct by the time of the suit and did not answer the complaint. Dlabal moved for summary judgment on all claims. The district court granted summary judgment on all of Plaintiffs' non-ERISA claims because Plaintiffs “made no attempt to support” those claims in their response to the motion for summary judgment. As to the ERISA claims, the district court ruled that there was a disputed issue of material fact as to whether Dlabal was an ERISA fiduciary, but nonetheless granted summary judgment on these claims because Dlabal provided Plaintiffs with written disclosures revealing all but one of the risks that Plaintiffs claim they were unaware of. Plaintiffs filed a motion to vacate/motion for new trial, which the district court denied. Plaintiffs then appealed, contesting only the district court's decision on its ERISA claims.

II.

We now review Plaintiffs' ERISA claims, and conclude that summary judgment was appropriate. “A grant of summary judgment is reviewed de novo, applying the same standard on appeal that is applied by the district court.” Coliseum Square Ass'n, Inc. v. Jackson, 465 F.3d 215, 244 (5th Cir.2006) (internal quotation marks omitted). “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “[S]ummary judgment will not lie if the dispute about a material fact is ‘genuine,’ that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “As to materiality, the substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Id. “Factual disputes that are irrelevant or unnecessary will not be counted.” Id.

When ruling on a motion for summary judgment, the court views all inferences drawn from the factual record in the light most favorable to the nonmoving party, in this case, Plaintiffs. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). A court “may not make credibility determinations or weigh the evidence” in ruling on a motion for summary judgment. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000); Anderson, 477 U.S. at 254–55, 106 S.Ct. 2505. “Where, as here, the movants for summary judgment advanced several independent arguments in district court in support of their motions for summary judgment, we will affirm if any of those grounds support the district court's decision.” Chevron U.S.A., Inc. v. Traillour Oil Co., 987 F.2d 1138, 1146 (5th Cir.1993).⁴

III.

The district court concluded that Dlabal had not violated ERISA because he provided Plaintiffs with written disclosures regarding the investment risks. Plaintiffs argue on appeal that Dlabal's disclosures were insufficient to overcome ERISA's strict fiduciary duties. We need not address this difficult question of first impression today because we conclude that Dlabal was not a fiduciary as defined by ERISA.

In order for Dlabal to be liable for his advice regarding the Adageo Investment, he must first be a fiduciary as definedby ERISA. Dlabal is only a fiduciary:

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 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). It is not enough for Plaintiffs to show that Dlabal acted in a general fiduciary capacity. Rather, Plaint...