David Barboza v. Ca Assn of Prof Firefighters

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

DAVID BARBOZA, No. 11-15472

Plaintiff-Appellant,

D.C. No.

v. 2:08-cv-02569-

FCD-GGH

CALIFORNIA ASSOCIATION OF

PROFESSIONAL FIREFIGHTERS, a

California corporation; CALIFORNIA

ASSOCIATION OF PROFESSIONAL

FIREFIGHTERS, LONG-TERM

DISABILITY PLAN; CALIFORNIA

ADMINISTRATION INSURANCE

SERVICES, INC., a California

corporation; KENNETH BLANTON;

DENNIS CAMPANALE; GENE

DANGEL; JAMES FLOYD; CHARLES

GLUCK; BRIAN PINOMAKI; WILLIAM

SOQUI, individually and as Plan

Directors,

Defendants-Appellees.

2 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS

DAVID BARBOZA, No. 11-16024

Plaintiff-Appellant,

D.C. No.

v. 2:08-cv-02569-

FCD-GGH

CALIFORNIA ASSOCIATION OF

PROFESSIONAL FIREFIGHTERS, a

California corporation; CALIFORNIA

ASSOCIATION OF PROFESSIONAL

FIREFIGHTERS, LONG-TERM

DISABILITY PLAN; CALIFORNIA

ADMINISTRATION INSURANCE

SERVICES, INC., a California

corporation; KENNETH BLANTON;

DENNIS CAMPANALE; GENE

DANGEL; JAMES FLOYD; CHARLES

GLUCK; BRIAN PINOMAKI; WILLIAM

SOQUI, individually and as Plan

Directors,

Defendants-Appellees.

BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 3

DAVID BARBOZA, No. 11-16081

Plaintiff-Appellee,

D.C. No.

v. 2:08-cv-02569-

FCD-GGH

CALIFORNIA ASSOCIATION OF

PROFESSIONAL FIREFIGHTERS, a

California corporation; CALIFORNIA

ASSOCIATION OF PROFESSIONAL

FIREFIGHTERS, LONG-TERM

DISABILITY PLAN; CALIFORNIA

ADMINISTRATION INSURANCE

SERVICES, INC., a California

corporation; KENNETH BLANTON;

DENNIS CAMPANALE; GENE

DANGEL; JAMES FLOYD; CHARLES

GLUCK; BRIAN PINOMAKI; WILLIAM

SOQUI, individually and as Plan

Directors,

Defendants-Appellants.

4 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS

DAVID BARBOZA, No. 11-16082

Plaintiff-Appellee,

D.C. No.

v. 2:08-cv-02569-

FCD-GGH

CALIFORNIA ASSOCIATION OF

PROFESSIONAL FIREFIGHTERS, a

California corporation; CALIFORNIA ORDER AND

ASSOCIATION OF PROFESSIONAL AMENDED

FIREFIGHTERS, LONG-TERM OPINION

DISABILITY PLAN; CALIFORNIA

ADMINISTRATION INSURANCE

SERVICES, INC., a California

corporation; KENNETH BLANTON;

DENNIS CAMPANALE; GENE

DANGEL; JAMES FLOYD; CHARLES

GLUCK; BRIAN PINOMAKI; WILLIAM

SOQUI, individually and as Plan

Directors,

Defendants-Appellants.

Appeal from the United States District Court

for the Eastern District of California

Frank C. Damrell, Jr., Senior District Judge, Presiding

Argued and Submitted

November 21, 2014—San Francisco, California

Filed April 7, 2015

Amended August 28, 2015

BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 5

Before: John T. Noonan and Sandra S. Ikuta, Circuit

Judges and William H. Albritton III,* Senior District Judge.

Order;

Opinion by Judge Ikuta

SUMMARY**

ERISA

The panel amended an opinion filed April 7, 2015, filed

a superseding opinion, denied the parties’ cross petitions for

rehearing, and denied on behalf of the court the parties’ cross

petitions for rehearing en banc, in a case in which the panel

affirmed in part and reversed in part the district court’s

judgment in an ERISA action alleging breach of fiduciary

duties in the management and administration of an employee

welfare benefit plan.

The panel affirmed the district court’s summary judgment

in favor of the defendants on a claim that they breached their

duty to hold plan assets in trust. Applying the common law

of trusts, the panel held that under 29 U.S.C. § 1103, a person

(legal or natural) must hold legal title to the assets of an

employee benefit plan with the intent to deal with these assets

*

The Honorable William H. Albritton III, Senior District Judge for the

U.S. District Court for the Middle District of Alabama, sitting by

designation.

**

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

6 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS

solely for the benefit of the members of that plan. Such a

person is the “trustee,” and the resulting relationship between

the trustee and the participants in the plan with respect to a

plan’s assets is a “trust” for purposes of § 1103. The panel

wrote that no specific terminology or label is required; as

long as the trust or plan instrument names a person who will

hold property in trust for another, § 1103(a) is satisfied. The

panel concluded that the plan here complied with § 1103(a).

Applying Skidmore rather than Auer deference, the panel

rejected the Department of Labor’s contention that the plan

at issue does not meet the statutory requirements because the

statute contemplates the “formal execution of a trust

instrument.” The panel wrote that the Department’s attempt,

in its amicus petition for rehearing, to clarify its interpretation

of the statute and regulation likewise lacks persuasive power.

The panel reversed the district court’s summary judgment

in favor of the defendants on a claim that they breached their

fiduciary duties by engaging in unlawful self-dealing. The

panel held that the plan administrator’s practice of paying its

own fees and expenses from the plan’s assets was a

prohibited transaction and therefore a breach of fiduciary

duty.

Reversing the district court’s partial summary judgment

in favor of the plaintiff, the panel held that the defendants did

not breach their fiduciary duties by failing to distribute a

summary annual report because the plan met the definition of

a “totally unfunded welfare plan.”

BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 7

COUNSEL

Geoffrey V. White (argued), Law Office of Geoffrey V.

White, San Francisco, California, for Plaintiff-Appellant/

Cross-Appellee.

Brendan J. Begley (argued) and Louis A. Gonzalez, Jr.,

Weintraub Tobin Chediak Coleman Grodin, Sacramento,

California, for Defendants-Appellees/Cross-Appellants.

Marcia E. Bove (argued), Senior Trial Attorney; M. Patricia

Smith, Solicitor of Labor; Timothy D. Hauser, Associate

Solicitor, Plan Benefits Security Division; Elizabeth Hopkins,

Counsel for Appellate and Special Litigation; and Alex

Felstiner, Attorney, United States Department of Labor,

Office of the Solicitor, Washington, D.C., for Amicus Curiae

Thomas Perez, Secretary of Labor.

ORDER

The opinion filed April 7, 2015, and appearing at

782 F.3d 1072, is hereby amended. The superseding

amended opinion will be filed concurrently with this order.

With these amendments, the panel has unanimously voted

to deny the parties’ cross petitions for rehearing, each filed

May 12, 2015. Judge Ikuta has voted to deny the parties’

cross petitions for rehearing en banc, each filed May 12,

2015, and Judge Noonan and Judge Albritton have so

recommended. The petitions for rehearing en banc were

circulated to the judges of the court, and no judge requested

a vote for en banc consideration.

8 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS

The petitions for rehearing and the petitions for rehearing

en banc are DENIED. No further petitions for rehearing or

rehearing en banc will be entertained.

OPINION

IKUTA, Circuit Judge:

This appeal requires us to interpret three different

provisions of the Employee Retirement Income Security Act

of 1974 (ERISA): (1) the requirement in 29 U.S.C. § 1103(a)

that “all assets of an employee benefit plan shall be held in

trust by one or more trustees,” sometimes called the “hold in

trust” requirement; (2) the prohibition against fiduciary self-

dealing under 29 U.S.C. § 1106; and (3) the “summary annual

report” requirement under 29 C.F.R. § 2520.104b-10(a).1

I

This case arises out of a disability benefits dispute

between David Barboza, a retired firefighter for the City of

Tracy, California, and the California Association of

Professional Firefighters (CAPF), the manager of an

employee welfare benefit plan. Barboza initially filed an

action against CAPF and other co-defendants in March 2008,

alleging that CAPF had withheld certain long-term disability

1

We address the parties’ additional claims on appeal and cross appeal

in an unpublished memorandum disposition filed concurrently with this

opinion. Barboza v. Cal. Ass’n of Prof’l Firefighters, 600 F. App’x 509

(9th Cir. 2015).

BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 9

benefits to which Barboza was entitled.2 While that related

action was ongoing, Barboza initiated a second lawsuit (the

action on appeal here) in October 2008 against CAPF,

California Administration Insurance Services, Inc. (CAISI),

and individual members of the board of directors for both

CAPF and CAISI (collectively, the defendants). This time,

Barboza alleged that the defendants had breached their

fiduciary duties under ERISA in a number of different ways.

Barboza and the defendants filed cross motions for summary

judgment. The district court’s order on these cross motions

is now before us on appeal.

A

An explanation of CAPF, CAISI, and the underlying

employee welfare benefits plan is necessary to understand

Barboza’s ERISA claims.

According to its corporate bylaws, CAPF is a non-profit

mutual benefit corporation. It was incorporated at the behest

of “[v]arious unions and other profit and non-profit mutual

benefit associations” for the purpose of providing long-term

disability benefits to participating employee members (and

their beneficiaries) from the various fire departments around

California. CAPF accomplishes this goal through its

2

The district court dismissed Barboza’s related action for failure to

exhaust available administrative remedies under the Plan. We reversed in

a published decision and remanded for further proceedings. Barboza v.

Cal. Ass’n of Prof’l Firefighters, 651 F.3d 1073 (9th Cir. 2011). On

remand, the district court granted in part and denied in part each party’s

motion for summary judgment. On appeal for a second time, we affirmed

in part and reversed in part the district court’s order and again remanded

the case to the district court for further proceedings. Barboza v. Cal.

Ass’n of Prof’l Firefighters, 594 F. App’x 903 (9th Cir. 2014).

10 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS

management of a long-term disability plan (“Plan”),

established by a document entitled the CAPF Long Term

Disability Plan (the “Plan Instrument”).

The parties do not dispute that the Plan is an employee

welfare benefit plan governed by ERISA, see 29 U.S.C.

§ 1002(1)(A), which receives its funding exclusively from

Plan participants and pays all benefits solely from Plan assets.

Under the terms of the Plan Instrument, all funds, property,

and additional assets held by the Plan are maintained

exclusively in the name of CAPF for the benefit of the

participants. CAPF manages the assets of the Plan through its

board of directors, and supervises the payment of benefits to

Plan members made pursuant to the terms of the Plan

Instrument. The Plan Instrument provides that the Plan will

be administered on a day-to-day basis by “a qualified

California-licensed third party administrator” pursuant to an

administrative services agreement that is consistent with the

terms of the Plan Instrument and is approved by CAPF’s

board of directors. Pursuant to this provision, the Plan

employs the California Administration Insurance Services,

Inc. (CAISI) to act as the Plan’s administrator under CAPF’s

supervision.

The Plan functions as follows. First, each participant

makes a monthly contribution to the Plan in an amount

established by the board of directors of CAPF. These

contributions are deposited into a Wells Fargo Bank checking

account, for which officers of CAISI are the signatories.

When a Plan participant suffers total disability from an

injury, sickness, or pregnancy, the participant submits

evidence of this disability to CAISI, which then determines

whether the participant is eligible to receive benefits under

the criteria provided by the Plan Instrument. If the participant

BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 11

is eligible, CAISI issues a check drawn on the Wells Fargo

account for the appropriate amount.

In addition to paying benefits to eligible participants,

CAISI also pays Plan expenses from the Wells Fargo account,

including its own administrative service fees. CAISI gives

CAPF quarterly financial statements itemizing the Plan’s fees

and expenses.

B

Barboza alleges that the defendants violated ERISA

through numerous breaches of their fiduciary duties in their

management and administration of the Plan. The district

court granted the defendants’ summary judgment motion on

Barboza’s claims that the defendants breached their fiduciary

duties by failing to hold Plan assets in trust, and by allowing

CAISI to pay its own fees from the Wells Fargo account. The

district court granted Barboza’s summary judgment motion

on his claim that defendants breached their fiduciary duty by

failing to distribute a summary annual report to Plan

participants. The parties subsequently brought this appeal

and corresponding cross appeal.

II

We have jurisdiction under 28 U.S.C. § 1291. We review

a district court’s decision on cross motions for summary

judgment de novo. See Guatay Christian Fellowship v. Cnty.

of San Diego, 670 F.3d 957, 970 (9th Cir. 2011). We must

determine, taking the evidence in the light most favorable to

the nonmoving party, whether there are any genuine disputes

of material fact and whether the moving party is entitled to

12 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS

judgment as a matter of law. See Olsen v. Idaho State Bd. of

Med., 363 F.3d 916, 922 (9th Cir. 2004).

A

We first consider Barboza’s claim that the defendants

violated ERISA’s hold-in-trust requirement. ERISA requires

that, subject to exceptions not relevant here, “all assets of an

employee benefit plan shall be held in trust by one or more

trustees.” 29 U.S.C. § 1103(a). “Such trustee or trustees

shall be either named in the trust instrument or in the plan

instrument . . . or appointed by a person who is a named

fiduciary.” Id. The trustee or trustees “shall have exclusive

authority and discretion to manage and control the assets of

the plan.” Id. The applicable regulations echo the statute,

stating that with an exception not applicable here, “all assets

of an employee benefit plan shall be held in trust by one or

more trustees pursuant to a written trust instrument.” 29

C.F.R. § 2550.403a-1(a). Neither ERISA nor the regulations

define the terms “trust,” “trustee,” or “trust instrument.”

In the absence of any statutory or regulatory definition of

these terms, we apply the “familiar maxim that a statutory

term is generally presumed to have its common-law

meaning.” E.g., Evans v. United States, 504 U.S. 255, 259

(1992) (internal quotation marks omitted). This maxim has

particular force in the ERISA context, because the Supreme

Court has held that “Congress invoked the common law of

trusts to define the general scope” of fiduciary duties when it

drafted the statute. Varity Corp. v. Howe, 516 U.S. 489, 496

(1996) (quoting Cent. States, Se. & Sw. Areas Pension Fund

v. Cent. Transp., Inc., 472 U.S. 559, 570 (1985)). Our

analysis therefore “both starts and ends” with the ordinary

meaning of the terms “trust” and “trustee,” as provided by the

BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 13

common law of trusts. See United States v. Lazarenko,

564 F.3d 1026, 1039 (9th Cir. 2009).

The common law of trusts has its roots in medieval

England and the ancestor of the trust, the land conveyance

device termed the “use.” See Amy Hess, George G. Bogert

& George T. Bogert, The Law of Trusts & Trustees § 2 (3d

ed. 2007) (hereinafter Hess et al., Trusts & Trustees). The

use was first employed to give gifts of property to religious

friars whose vows prohibited them from owning property

themselves, but by the beginning of the fifteenth century, it

was the leading means of land conveyance. Id.; see also

William M. McGovern, Sheldon F. Kurtz & David M.

English, Wills, Trusts & Estates 370 (4th ed. 2010)

(hereinafter McGovern et al., Wills, Trusts & Estates). In its

simplest form, the use was a legal relationship by which one

party, called the “feoffee to uses,” agreed to accept and hold

legal title to property on behalf and for the use of the

beneficiary party, called the “cestui que use.” See Hess et al.,

Trusts & Trustees § 2; McGovern et. al, Wills, Trusts &

Estates at 370. Although King Henry VIII attempted to

abolish this practice through the passage of the Statute of

Uses in 1535, the statute left unaffected a number of uses,

including a use by which the feoffee to uses (the modern day

“trustee”) took on active administrative duties when it agreed

to hold the property on behalf of the cestui que use (the

modern day “beneficiary”). Hess et al., Trusts & Trustees

§ 4, 5. The uses that survived the Statute of Uses became

known as “trusts” and were legally enforceable in courts of

equity in England and, later, in the United States. Id. § 5; see

also Davis v. United States, 495 U.S. 472, 481 (1990)

(holding that the statutory phrase “for the use of ” “suggested

a trust relationship” because “[f]rom the dawn of English

14 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS

common law through the present, the word ‘use’ has been

employed to refer to various forms of trust arrangements”).

As this legal relationship became more pervasive in both

England and its American colonies (and later the United

States) in the eighteenth and nineteenth centuries, legal

scholars sought to identify its main components. After

surveying various definitions of the term “trust” between

1734 and 1897, one scholar concluded that a trust was “an

obligation imposed either expressly or by implication of law

whereby the obligor is bound to deal with property over

which he has control for the benefit of certain persons of

whom he may himself be one, and any one of whom may

enforce the obligation.” Walter G. Hart, What Is a Trust?,

15 L.Q. Rev. 294, 301 (1899). A later scholar observed that

the law of trusts appeared “to have two aspects, the creation

of personal relations, and the creation of rights in rem.”

Pierre Lepaulle, Civil Law Substitutes for Trusts, 36 Yale L.J.

1126, 1126 (1927). Thus, at common law, the term “trust”

referred to a legal relationship by which one party, the

“trustee,” agreed to hold and administer property (the trust

“res”) for the benefit of another.

Consistent with this traditional common law doctrine,

both scholars and courts define the terms “trust” and “trustee”

as legal relationships.3 E.g., Austin Wakeman Scott, William

3

Courts and treatises differentiate between the trust as a legal

relationship, as it existed at common law, and “the use of the trust as a

substitute for incorporation, as in the case of the so-called business trust

or Massachusetts trust.” Scott & Ascher on Trusts § 2.1.2. While the

latter device is sometimes referred to as a “trust,” it is not a common law

trust relationship. Rather, a business or “‘Massachusetts Trust’ is a form

of business organization” similar to a corporation. Hecht v. Malley,

265 U.S. 144, 146 (1924); see also Northstar Fin. Advisors Inc. v. Schwab

BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 15

Franklin Fratcher & Mark L. Ascher, Scott & Ascher on

Trusts § 2.1.4 (5th ed. 2006) (hereinafter Scott & Ascher on

Trusts) (“We have said that a trust is a relationship with

certain characteristics.”); Id. § 2.2.2 (“A trust is a relationship

with respect to property held by a trustee.”). For example, the

Restatement (Third) of Trusts defines the term “trust” as “a

fiduciary relationship with respect to property, arising from

a manifestation of intention to create that relationship and

subjecting the person who holds title to the property to duties

to deal with it for the benefit of charity or for one or more

persons, at least one of whom is not the sole trustee.”

Restatement (Third) of Trusts § 2 (2003). Under the

Restatement’s definition, “[t]he term ‘trust’ also includes

public funds and public and private pension-fund

arrangements in trust form.” Id. § 2 cmt. a. The Restatement

defines “trustee” as simply the person, including a

corporation or unincorporated association, “who holds

property in trust.” Id. § 3(3); see also id § 3(3) cmt. e. It is

not necessary to use specific words to create a trust. George

T. Bogert, Trusts § 11 (6th ed. 1987). Rather, “[i]f the words

used convey the intent to establish a trust, they will have that

effect.” Id.; see also United States v. Mitchell, 463 U.S. 206,

225 (1983) (holding in a different context that a trust

relationship arises where “[a]ll of the necessary elements of

Invs., 779 F.3d 1036, 1040 (9th Cir. 2015) (distinguishing “a

Massachusetts trust from the ordinary or private trust”). As such, a

business trust is generally governed by rules applicable to that form of

business organization. See Restatement (Third) of Trusts § 1 cmt.b (2003)

(excluding “[t]he law relating to the use of trusts as devices for conducting

business and investment activities” from its scope because such devices

are business arrangements “best dealt with in connection with business

associations” and more “properly governed by laws applicable to

investment companies and to the issuance and sale of securities” rather

than the common law of trusts).

16 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS

a common-law trust are present: a trustee (the United States),

a beneficiary (the Indian allottees), and a trust corpus (Indian

timber, lands, and funds)” notwithstanding the fact that

“nothing is said expressly in the authorizing or underlying

statute (or other fundamental document) about a trust fund, or

a trust or fiduciary connection” (quoting Navajo Tribe of

Indians v. United States, 224 Ct.Cl. 171, 183, 624 F.2d 981,

987 (1980))).

Applying the common law definitions to ERISA’s

requirement that “all assets of an employee benefit plan shall

be held in trust by one or more trustees,” 29 U.S.C. § 1103(a),

a person (legal or natural) must hold legal title to the assets of

an employee benefit plan with the intent to deal with these

assets solely for the benefit of the members of that plan.

Such a person is the “trustee,” and the resulting relationship

between the trustee and the participants in the plan with

respect to a plan’s assets is a “trust” for purposes of

§ 1103(a). Finally, while these trustees must be identified in

either “the trust instrument or in the plan instrument . . . or

appointed by a person who is a named fiduciary,” id., no

specific terminology or labels are required. Bogert, Trusts

§ 11. As long as the trust or plan instrument names a person

who will hold property in trust for another, § 1103(a) is

satisfied.

Accordingly, we conclude that the Plan complies with

§ 1103(a). The Plan Instrument requires CAPF to hold legal

title to “all property, monies and contract rights” as well as all

of the funds maintained in connection with the Plan. CAPF

holds these assets for the Plan on behalf of the participants,

and is therefore the named trustee. Restatement (Third) of

Trusts § 3(3). The Plan Instrument thus establishes a

fiduciary relationship between CAPF, as the trustee, and the

BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 17

participants, as beneficiaries, with respect to the property

contributed to the Plan (the trust res); this constitutes a trust

according to its common law definition. Because the Plan

Instrument here is a written instrument that establishes a trust

relationship and names CAPF as the trustee, it is a written

trust instrument for purposes of § 1103(a) and 29 C.F.R.

§ 2550.403a-1(a). Cf. Mitchell, 463 U.S. at 225; George T.

Bogert, Trusts § 1 (6th ed. 1987).

In arguing against this conclusion, the Department of

Labor contends that the Plan at issue here does not meet the

statutory requirements in § 1103(a) because “[t]he statute

clearly contemplates the formal execution of a trust

instrument and the appointment of trustees, as the Secretary’s

regulations [at 29 C.F.R. § 2550.403a-1] reflect.” The

Department’s brief does not further explain its interpretation

of what § 1103(a) requires or what it means by the “formal

execution of a trust instrument.”

Although we are doubtful that the single sentence quoted

above qualifies as an interpretation of either § 1103(a) or 29

C.F.R. § 2550.403a-1, we will give the Department the

benefit of the doubt and review its argument pursuant to our

framework for examining agency interpretations of statutes

and regulations. In general, “[i]f the intent of Congress is

clear, that is the end of the matter; for the court, as well as the

agency, must give effect to the unambiguously expressed

intent of Congress.” Chevron, U.S.A., Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837, 842–43

(1984). If “the statute is silent or ambiguous” as to the

precise question at issue, Gonzales v. Dep’t of Homeland

Sec., 508 F.3d 1227, 1235 (9th Cir. 2007) (internal quotation

marks omitted), we next consider the agency’s “regulations,

which are entitled to deference if they resolve the ambiguity

18 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS

in a reasonable manner.” Coeur Alaska, Inc. v. SE Alaska

Conservation Council, 557 U.S. 261, 277–78 (2009). But if

these “regulations, too, are ambiguous . . . we next turn to the

agencies’ subsequent interpretation of those regulations.” Id.

at 278.

If the agency’s interpretation of its regulations resolves

the ambiguity of the regulations in a manner that is not

“plainly erroneous or inconsistent with the regulation,” we

will ordinarily defer to it even when the agency’s

“interpretation comes to us in the form of a legal brief.” Auer

v. Robbins, 519 U.S. 452, 461–62 (1997) (internal quotation

marks omitted). Auer deference is not warranted, however,

if “the underlying regulation does little more than restate the

terms of the statute itself.” Gonzales v. Oregon, 546 U.S.

243, 257 (2006). When an agency promulgates a regulation

that merely paraphrases the statute, we treat the agency’s

interpretation of the “parroting regulation” as an

interpretation of the statute itself, which is entitled to

deference “only to the extent it is persuasive.” Id. at 257,

268–69 (citing Skidmore v. Swift & Co., 323 U.S. 134, 140

(1944)). Nor do we accord Auer deference to an

interpretation that “would seriously undermine the principle

that agencies should provide regulated parties fair warning of

the conduct [a regulation] prohibits or requires.” Christopher

v. SmithKline Beecham Corp., 132 S. Ct. 2156, 2167 (2012)

(internal quotation marks omitted). Where an agency

announces its interpretation for the first time in an

enforcement proceeding, and has not previously taken any

action to enforce that interpretation, “the potential for unfair

surprise is acute.” Id. at 2167–68. Accordingly, under such

circumstances, the agency’s interpretation is entitled only to

the “measure of deference proportional to the thoroughness

evident in its consideration, the validity of its reasoning, its

BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 19

consistency with earlier and later pronouncements, and all

those factors which give it power to persuade.” Id. at

2168–69 (quoting United States v. Mead Corp., 533 U.S. 218,

228 (2001) (quoting Skidmore, 323 U.S. at 140)).

Applying this framework to the Department’s amicus

brief, and assuming for the sake of argument that 29 U.S.C.

§ 1103 and 29 C.F.R. § 2550.403a-1 are “silent or

ambiguous” as to the “precise question” at issue here, we do

not defer to the Department’s interpretation in this case.

First, Auer deference is not warranted here because the

Department’s regulation “does little more than restate the

terms of the statute itself.” Gonzales, 546 U.S. at 257.

Compare 29 U.S.C. § 1103(a), with 29 C.F.R. § 2550.403a-

1(a), (c). Indeed, the only difference between the statute and

the regulation is that the regulation adds the phrase “pursuant

to a written trust instrument” to its hold in trust requirement.

29 C.F.R. § 2550.403a-1(a). Both the regulation and the

statute, however, require that the trustees of the Plan “shall be

either named in the trust instrument or in the plan

instrument.” Compare 29 U.S.C. § 1103(a), with 29 C.F.R.

§ 2550.403a-1(c). As a result, “the near equivalence of the

statute and regulation belies the Government’s argument for

Auer deference.” Gonzales, 546 U.S. at 257. Therefore, we

defer to any interpretation by the Department only to the

extent it has the “power to persuade.” Skidmore, 323 U.S. at

140.

Applying Skidmore deference, the Department’s minimal

interpretation of its regulation—which is little more than the

assertion that the Plan does not meet statutory and regulatory

requirements, as interpreted by the Department—lacks any

persuasive power. The Department’s statement that “[t]he

statute clearly contemplates the formal execution of a trust

20 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS

instrument and the appointment of trustees, as the Secretary’s

regulations reflect,” does not provide clear guidance, or make

plain how the Plan fell short of this requirement. See, e.g.,

Bogert, Trusts § 1 (“The trust instrument is the document by

which property interests are vested in the trustee and

beneficiary and the rights and duties of the parties (called the

trust terms) are set forth.”). Nor does the Department contend

that it has taken enforcement actions against those deemed to

have violated its interpretation of § 1103(a) or that its view is

consistent “with earlier and later pronouncements,” which

might clarify its interpretation and “give it power to

persuade.” See Mead, 533 U.S. at 228 (quoting Skidmore,

323 U.S. at 140). Because we owe no deference to the

Department’s nominal interpretation, we reject its argument

that the Plan falls short of this interpretation in some

undefined way.

After this appeal was decided, the Department attempted

to clarify its interpretation of the statute and regulation. In an

amicus petition for rehearing, the Department argued that

§ 1103 required “that the written document establishing the

trust must clearly label the trustees, beneficiaries, and trust

res, and thus in express and unambiguous terms establish the

intent to have a named or appointed trustee who formally

accepts such appointment and exclusively hold all plan assets

in trust for the beneficial interest of the plan participants and

beneficiaries.” But contrary to this labeling requirement, the

Department also stated in the same sentence of this petition

that it does not “take the position that the trust necessarily

must be established by using defined terms or any particular

word formulation.” As a result of this internal inconsistency,

we are left to guess what specific words or procedures are

required in order to ensure compliance with the statute as

interpreted by the Department.

BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 21

Even assuming that an agency’s interpretation first raised

in a petition for rehearing could be entitled to deference under

some circumstances, deference is not appropriate here. As

explained above, Auer deference is not warranted because the

Department’s regulation, 29 C.F.R. § 2550.403a-1(a), (c),

does little more than parrot 29 U.S.C. § 1103(a). Gonzales,

546 U.S. at 257. Moreover, because the Department’s

inconsistent views about labels and “particular word

formulation” do not inform regulated entities what words or

procedures are needed to meet the Department’s

requirements, affording Auer deference in these

circumstances “would seriously undermine the principle that

agencies should provide regulated parties fair warning of the

conduct [a regulation] prohibits or requires.” Christopher,

132 S. Ct. at 2167 (internal quotation marks omitted).

Applying Skidmore, we conclude that the Department’s

interpretation of § 1103(a) lacks persuasive power. As noted

above, the Department’s statements are internally

inconsistent, fail to provide clear direction to regulated

parties, and otherwise lack the “hallmarks of thorough

consideration.” Id. at 2169. Accordingly, we do not defer to

the Department’s belated interpretation in its petition for

rehearing.

We likewise reject Barboza’s remaining arguments on

this issue. Although Barboza argues that “a corporation like

CAPF is not a trust,” CAPF itself does not purport to be a

trust; rather, it serves as the trustee in the trust relationship

established by the written Plan Instrument.4 See, e.g.,

4

In the week before oral argument, the defendants filed a motion

requesting that we take judicial notice of IRS paperwork filed by CAPF

demonstrating that CAPF’s assets “currently are held in two trusts.”

Because it is not clear that these documents demonstrate matters

22 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS

Restatement (Third) of Trusts § 3(3) & cmt. e (noting that

both corporations and unincorporated associations can serve

as trustees in a trust relationship). Barboza also argues that

CAPF failed to maintain “exclusive authority and control”

over the assets of the Plan in violation of ERISA because the

Plan Instrument delegates the administration of the Plan to

CAISI. This argument fails because the Plan Instrument

entrusts CAISI with the administration of the Plan under the

management and supervision of CAPF’s board of directors.

Because the Plan here complies with the requirement that

“all assets of an employee benefit plan shall be held in trust

by one or more trustees,” 29 U.S.C. § 1103(a), we therefore

affirm the district court’s grant of summary judgment to the

defendants on this issue.

B

We next consider whether the district court erred in

granting summary judgment to the defendants on Barboza’s

claim that the defendants breached their fiduciary duties by

engaging in unlawful self-dealing. This dispute centers on

CAISI’s practice of paying its own fees and expenses from

the Plan’s assets held in the Wells Fargo account. Barboza

argues that this practice constitutes a per se violation of

ERISA’s prohibition against self-dealing under 29 U.S.C.

§ 1106(b)(1) because CAISI is a fiduciary dealing with the

assets of the plan for its own account. The parties do not

dispute that CAISI is a fiduciary of the Plan.

“generally known within the trial court’s territorial jurisdiction” we deny

this motion. See Fed. R. Evid. 201(b)(1).

BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 23

Section 1106 prohibits a number of transactions between

ERISA welfare benefit plans and other parties. First,

§ 1106(a) states that “[e]xcept as provided in section 1108,”

which establishes exemptions from the list of prohibited

transactions, a fiduciary cannot cause the plan to engage in a

number of transactions with “a party in interest.” 29 U.S.C.

§ 1106(a). A “party in interest” is defined in 29 U.S.C.

§ 1002(14) to include all “those entities that a fiduciary might

be inclined to favor at the expense of the plan’s

beneficiaries,” Harris Trust & Sav. Bank v. Salomon Smith

Barney, Inc., 530 U.S. 238, 242 (2000), including another

fiduciary or an administrator of an employee benefit plan.

Second, § 1106(b) prohibits a fiduciary from engaging in

certain types of transactions with respect to a plan:

A fiduciary with respect to a plan shall not—

(1) deal with the assets of the plan in his own

interest or for his own account,

(2) in his individual or in any other capacity

act in any transaction involving the plan on

behalf of a party (or represent a party) whose

interests are adverse to the interests of the

plan or the interests of its participants or

beneficiaries, or

(3) receive any consideration for his own

personal account from any party dealing with

such plan in connection with a transaction

involving the assets of the plan.

24 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS

29 U.S.C. § 1106(b). Finally, § 1106(c) prohibits any transfer

of real or personal property to a plan by a party in interest.

29 U.S.C. § 1106(c). These prohibited transactions constitute

“per se violations of ERISA.” Waller v. Blue Cross of Cal.,

32 F.3d 1337, 1345 (9th Cir. 1994).

ERISA carves out a number of exemptions to these broad

prohibitions. See 29 U.S.C. § 1108. Among others,

§ 1108(c)(2) states that “[n]othing in section 1106 of this title

shall be construed to prohibit any fiduciary from . . . receiving

any reasonable compensation for services rendered, or for the

reimbursement of expenses properly and actually incurred, in

the performance of his duties with the plan . . . .” 28 U.S.C.

§ 1008(c)(2). This exemption for reasonable compensation

under 29 U.S.C. § 1008(c) does not apply, however, to a

fiduciary who engages in a prohibited transaction under

29 U.S.C. § 1106(b)(1) by paying itself from the assets of a

welfare benefit plan. Patelco Credit Union v. Sahni, 262 F.3d

897 (9th Cir. 2001). In other words, while a plan may pay a

fiduciary “reasonable compensation for services rendered”

under 29 U.S.C. § 1108, the fiduciary may not engage in self-

dealing under 29 U.S.C. § 1106(b) by paying itself from plan

funds. See Patelco, 262 F.3d at 910–11. Such conduct

constitutes a per se violation of § 1006(b)(1). See Patelco,

262 F.3d at 911.

Here, CAISI is a fiduciary that paid its own fees from

Plan assets, and thus engaged in a prohibited transaction

under 29 U.S.C. § 1106(b)(1). See Patelco, 262 F.3d at 911.

Because § 1108(c)(2)’s safe harbor for fiduciary

compensation is not applicable in this context, we conclude

that CAISI breached its fiduciary duties. See Patelco,

BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 25

262 F.3d at 911.5 We therefore reverse the district court’s

order granting summary judgment to the defendants, and

remand with instructions to enter summary judgment in favor

of Barboza on this issue.

C

Finally, we consider Barboza’s claim that the defendants

breached their fiduciary duties by failing to distribute a

summary annual report. Under the regulations promulgated

by the Department, an administrator of an employee benefit

plan is required to provide a summary annual report to each

Plan member annually under 29 C.F.R. § 2520.104b-10(a)

unless the administrator is otherwise exempt from doing so

under 29 C.F.R. § 2520.104b-10(g). 29 C.F.R. § 2520.104b-

10(g) exempts, among other plans, a “totally unfunded

welfare plan described in 29 C.F.R. § 2520.104-44(b)(1)(i),”

from this summary annual report requirement.

A “totally unfunded welfare plan described in 29 C.F.R.

§ 2520.104-44(b)(1)(i),” is “[a]n employee welfare benefit

plan under the terms of which benefits are to be paid . . .

[s]olely from the general assets of the employer or employee

organization maintaining the plan.” 29 C.F.R. § 2520.104-

44(b)(1)(i). An “employee organization” is defined in ERISA

as “any employees’ beneficiary association organized for the

purpose in whole or in part, of establishing” an “employee

benefit plan.” 29 U.S.C. § 1002(4). An “employee benefit

plan” is defined in turn as “an employee welfare benefit plan

5

Because fiduciary self-dealing under 29 U.S.C. § 1106(b)(1) is a per

se violation of ERISA, it is irrelevant that CAISI was authorized to pay its

own fees and expenses from Plan assets pursuant to its administrative

services agreement with CAPF.

26 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS

or an employee pension benefit plan or a plan which is both

an employee welfare benefit plan and an employee pension

benefit plan.” 29 U.S.C. § 1002(3). Accordingly, 29 C.F.R.

§ 2520.104b-10(g) exempts an employee welfare benefit plan

that pays benefits from the general assets of an employee

organization, which includes an employees’ beneficiary

association organized for the purpose of establishing such a

plan.

The Plan at issue here meets the definition of “a totally

unfunded welfare plan.” See 29 C.F.R. § 2520.104b-10(g)(1).

First, the Plan is an employee welfare benefit plan because it

is a plan established “for the purpose of providing for its

participants or their beneficiaries” long-term disability

benefits. 29 U.S.C. § 1002(1)(A). Second, CAPF is an

“employee organization” as defined in 29 U.S.C. § 1002(4)

because, according to its bylaws, it was incorporated

specifically for the purpose of establishing and maintaining

a long-term disability benefits plan. Finally, under the terms

of the Plan Instrument, benefits are paid solely from the

general assets of CAPF, which is the employee organization

that maintains the Plan. Accordingly, the Plan is exempt

from the summary annual report requirement.6

6

The Plan is also exempt from the summary annual report requirement

as a “dues financed welfare plan which meets the requirements of

29 C.F.R. 2520.104-26.” 29 C.F.R. § 2520.104b-10(g). “Dues financed

welfare plans” are “welfare benefit plans maintained by an employee

organization, as that term is defined in [29 U.S.C. § 1002(4)], paid for out

of the employee organization’s general assets, which are derived wholly

or partly from membership dues, and which cover employee organization

members and their beneficiaries.” Id. § 2520.104-26(b). As explained

supra, the Plan is a welfare benefit plan under 29 U.S.C. § 1002(1)(A)

because it is a plan established “for the purpose of providing for its

participants or their beneficiaries” long-term disability benefits; it is

BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 27

We therefore reverse the district court’s order granting

summary judgment to Barboza, and remand with instructions

to grant the defendants’ motion for summary judgment on

this issue.7

AFFIRMED IN PART, REVERSED IN PART, AND

REMANDED.

maintained by CAPF, an employee organization as defined by 29 U.S.C.

§ 1002(4); and these benefits are paid for out of CAPF’s general assets,

which are derived in part from membership dues, to covered Plan

members and their beneficiaries.

7

Each party shall bear its own costs on appeal.