Petition for Writ of Certiorari — Useden v. Greenberg

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“s Bupreme Court, U.3,

LY FILED

91-1944 | swt i599

oe OFFICE O& THE CLERK

In The

Supreme Court of the United States

October Term, 1991

NEIL A. USEDEN, AS TRUSTEE OF THE

AIR FLORIDA SYSTEM, INC., PROFIT SHARING

PLAN AND TRUST,

Petitioner,

GREENBERG TRAURIG HOFFMAN LIPOFF

ROSEN & QUENTEL, SUN BANK, INC.,

AND SUN BANK OF MIAMI, INC.,

Respondents.

Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Eleventh Circuit

PETITION FOR A WRIT OF CERTIORARI

Rosert A. SHUPACK ApaM H. LAwRENCE

2250 International Place 100 North Biscayne

100 Southeast 2nd Street Boulevard

Miami, Florida 33131 21st Floor

and Miami, Florida 33132

(305) 358-3371

Epwarp A. KAUFMAN C lof R 3

4650 S.E. Financial Center ounsei of hecor

200 South Biscayne

Boulevard

Miami, Florida 33131

Counsel for Petitioner

——_

QUESTIONS PRESENTED

1. Was the Eleventh Circuit correct in concluding

— contrary to the vast majority of circuit and district

courts to consider the issue — that the Employee Retire-

ment Income Security Act of 1974, 29 U.S.C. § 1001, et.

seq. (“ERISA”), does not provide an ERISA plan with a

monetary remedy against a non-fiduciary who know-

ingly participates in the plan fiduciary’s breach of duty?

2. In ascertaining whether ERISA incorporates a

monetary remedy against non-fiduciaries from the com-

mon law of trusts, is the focal point Congress’ intent as

determined using traditional methods of statutory

analysis from cases such as Cort v. Ash, 422 U.S. 66

(1975), or was the Eleventh Circuit correct in ignoring

Cort v. Ash and concluding that ERISA “should only

incorporate a given trust law principle if the statute’s

text negates an inference that the principle was omit-

ted deliberately from the statute”?

PARTIES TO THE PROCEEDING

Although the phrase “C. Edward Acker, et al.,

Defendants” appears in the caption of the officially

reported Eleventh Circuit opinion, only Greenberg,

Traurig, and the Sun Bank defendants, were parties to

the appeal. The Secretary of Labor filed a brief as

amicus curiae in support of the Petitioner’s motion for

rehearing and suggestion for rehearing en banc. Nei-

ther Petitioner nor the ERISA plan on whose behalf he

sues is a corporation under Rule 29.1.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ....................... i

PARTIES TO THE PROCEEDING................ ii

EE 2

Tete ak kk 54606 08b45 sb ed nd cee ns 2

EE MEW EPEIUURED ase rsccccceseesesccceess 2

STATEMENT OF THE CASE..................... 5

REASONS FOR GRANTING THE WRIT.......... 11

I. THE CIRCUIT COURT’S WHOLLY TEX-

TUAL ANALYSIS TO DETERMINE

WHETHER ERISA INCORPORATES A

CAUSE OF ACTION AGAINST NON-

FIDUCIARIES CONFLICTS WITH THE

DECISIONS OF THIS COURT WHICH

REQUIRE A WIDE-RANGING INQUIRY

INTO CONGRESSIONAL INTENT AND

PURPOSE AS WELL AS AN ANALYSIS OF

pee ge Uv + 11

A. The Circuit Court’s Decision Conflicts

With Decisions of this Court Which

Define the Basic Rules of Statutory Con-

struction Applicable to Remedial and

Equitable Legislation Like ERISA ...... 14

II. THE CIRCUIT COURT MISREAD THE TEXT

OF ERISA WHICH ALLOWS A MONETARY

CAUSE OF ACTION AGAINST NON-

FIDUCIARIES UNDER SUBSECTIONS

1132(a)(2), OR (aX3), OR BOTH............. 16

ITT.

IV.

TABLE OF CONTENTS - Continued

A. The Circuit Court’s ERISA Analysis Con-

flicts With the Vast Majority of Courts

Which Have Allowed or Would Allow a

Monetary Remedy Against a Non-fiduci-

ary Who Knowingly Participates in a

Fiduciary’s Breach. .............cecccee0.

THE CIRCUIT COURT FAILED TO DETER-

MINE OR IMPLEMENT CONGRESS’

INTENT AND PURPOSE IN ENACTING

ERISA WHICH WAS TO BROADLY FEDER-

ALIZE REMEDIES TRADITIONALLY AVAIL-

ABLE UNDER THE LAW OF TRUSTS FOR

THE PROTECTION OF ERISA PLANS AND

TT ES 53 63k UKS dees ebEbecehcnsacie

A. The Circuit Court’s Decision Conflicts

With Firestone Tire & Rubber Co. v. Bruch

Which Requires ERISA to Provide Bene-

ficiaries With Trust Remedies That Are

Not Less Favorable to Them Than the

Remedies They Would Have Enjoyed

a ar a ee

THE IMPORTANCE OF A RESOLUTION OF

THE NON-FIDUCIARY LIABILITY ISSUE IN

THIS CASE TO THE EFFECTIVE ENFORCE-

MENT OF ERISA JUSTIFIES THIS COURT’S

EXERCISE OF JURISDICTION..............

ee Beery eer eT ere eae aeenceaseedees

Page

TABLE OF CONTENTS -—- Continued

Page

Appendix:

‘

OPINION OF THE ELEVENTH CIRCUIT

COURT OF APPEALS....................0-. App. 1

OPINION OF THE DISTRICT COURT,

SOUTHERN DISTRICT OF FLORIDA (721

WA PEE 4 cere osc eee eels een App. 48

OPINION OF THE DISTRICT COURT,

SOUTHERN DISTRICT OF FLORIDA (734

Fe < kv ceeakee ees 405s Cues cueew App. 83

ORDER OF THE ELEVENTH CIRCUIT

COURT OF APPEALS DENYING

REHEARING ..............00eccecceeeeeee: App. 91

TABLE OF AUTHORITIES

CASES

Adickes v. S. H. Kress & Co., 398 U.S. 144 (1970)..... 6

Anderson v. Liberty Lobby, Inc., 477 U.S. 242

6 Pee rT ee Tre ree ner em hy Pan ee 6

Batchelor v. Oak Hill Medical Group, 870 F.2d

ROGS COUR SR: SE 64 5 hone ees eke ceedawabenkasess 21

Benvenuto v. Schneider, 678 F.Supp. 51

4 Ot a eR rrr rr nn ety «eee 21

Blankenship v. Boyle, 329 F.Supp. 1089 (D.D.C.

BG EP sv kus civ wk UAE AE REA Oak eee a ae 25

Booth v. Security Mutual Life Ins. Co., 115

P.Sape. TOG CI. TCR vas vc vcsacccnecantccses 25

Brock v. Gerace, 635 F.Supp. 563 (D.N.J. 1986).. 14, 21

Brock v. Hendershott, 840 F.2d 339 (6th Cir.

BEG) ic Kad cdc udceanbaanddeCeen ce reteae eee 20

Cannon v. University of Chicago, 441 U.S. 677

Bg MP ert Bap Ue lr ely 19

Central States, Southeast & Southwest Areas

Pension Fund v. Central Transport, Inc. 472

oh SP Fe | RO er eee 18, 22

Chevron U.S.A., Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837 (1984) ...... 19

Cort v. Ash, 422 U.S. 66 (1975).......... i, 10, 12, 13

Diduck v. Kaszycki & Sons Contractors, Inc., 737

Fame. THe (BEI. oe BOD Kk d sd viscunncescucens 20

Dole v. Compton, 753 F.Supp. 563 (E.D.Pa. 1990) 19, 20

Vil

TABLE OF AUTHORITIES - Continued

Page

Donovan v. Bryans, 566 F.Supp. 1258 (E.D.Pa.

RR ee Sete eit ware ary mrs Sara mee Ey 21

Donovan v. Daugherty, 550 F.Supp. 390

LAW errr ee rer er rer rr rere 21

Donovan v. Schmoutey, 592 F.Supp. 1361 (D.Nev.

NR nen akics easter eee Eee Rhee See eee 21

Eaves v. Penn, 587 F.2d 453 (10th Cir. 1978)..20, 23

Fink v. National Savings & Trust Co., 772 F.2d

RR a | errr errr Ter rere 20

Firestone Tire & Rubber Co. v. Bruch, 489 U.S.

Deen CED ova cake ca eke taene toner iv, 22, 24, 25

Foltz v. U.S. News & World Report, Inc., 627

Pie. LEGG CT. BOG) vive esse tras sevnkaess 21

Framingham Union Hospital, Inc. v. Travelers

Ins. Co., 744 F.Supp. 29 (D.Mass. 1990)......... 21

Freund v. Marshall & Ilsley Bank, 485 F.Supp.

fe Sth RD eee eer err 19, 21

Howard v. Parisian, Inc., 807 F.2d 1560 (11th

Se I hie catia Sle aed ceeds See on 26

Ingersoll-Rand Co. v. McClendon, __ U.S. __,

boge fs Se | ere 13, 14, 19, 20

Katchen v. Landy, 382 U.S. 323 (1966)............. 15

Lowen v. Tower Asset Management, Inc., 829

Pie Te Ce Ge CE Pk hnn a bao d eds de caasacias 20

Massachusetts Mutual Life Ins. Co. v. Russell,

ys Gok Me Fe | eer 10, 12, 19, 22, 23

Massachusetts v. Morash, 490 U.S. 107 (1989)..... 15

Vili

TABLE OF AUTHORITIES —- Continued

Page

McClendon v. Ingersoll-Rand Co., 779 S.W.2d 69

oak crs awacee CuN eS On wed ene mnene aaa 6 13

Mertens v. Hewitt Associates, 948 F.2d 607 (9th

See SES ee Us nny CUS rated i peak ensoutekwe chess 21

Mitchell v. Robert DeMario Jewelry, Inc., 361

oF ee oF GE rr en ee ere 15

Nedd v. United Mine Workers of America, 556

fo Bg kg | er err re 25

Nieto v. Ecker, 845 F.2d 868 (9th Cir. 1988)....... 21

Pension Benefit Guaranty Corp. v. Ross, 733

F.Supp. 1005 (M.D.N.C. 1990) ................... 20

Pension Fund — Mid Jersey Trucking Industry —

Local 701 v. Omni Funding Group, 731

Pea. BOE CPG: BOR cas c rns ccevessevsss 18, 21

Peyton v. Rowe, 391 U.S. 54 (1968)................ 14

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987) ....22

Porter v. Warner Holding Co., 328 U.S. 395

CRS Fas cae cae nae e OR RRR ease eRe ken 15

Rettig v. Pension Benefit Guaranty Corp., 744

ed oe rere ee reer err cee 14

Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983).. 24, 26

Smith v. CMTA-IAM Pension Trust, 746 F.2d 587

BS eS rr er ae ene 14

Tcherepnin v. Knight, 389 U.S. 332 (1967)......... 14

Thompson v. Thompson, 484 U.S. 174 (1988)....... 12

Thornton v. Evans, 692 F.2d 1064 (7th Cir.

SET cnuiveicet ee ee cekaekorrancueseerrtbuee 15, 20

; 1

TABLE OF AUTHORITIES — Continued

Page

United States v. Lake Misere Land Co., 412 U.S.

Pe SE 6a ap RONG Gand one eked aah eNER SEES 16

Whitfield v. Lindemann, 853 F.2d 1298 (5th Cir.

1988), cert. denied sub nom. Klepak v. Dole,

oo i | ee ry re 20

STATUTES:

Se ee, eR oy ive sek vaeakecees eh earns 2

ee eee: Pc eh ek hah bnn Oo eRe Ra ee aan 6

Re | rer rer rr er rrr ee ry re 18

| Ee reer er rr or re 9

EO eins cack Cons rn aueenaraee arenes 18

eR ee ee eee re ern ray rn 18

Re NRE ny rar are ee ay 9

Ps hia cdo Rees DERE Lh Oe 2, 10

ee Mee ik oc a heeds ab eaeeee ee passii.:

29 U.S.C. § 1132(aX2) ............. 16, 17, 19, 20, 21

29 U.S.C. § 1132(aX3)......... 16, 17, 18, 19, 20, 21

et Seas ok ce recodetiaceedineneen 16, 17

ee FM Bee eee err ee Hy)

a A Pr re rr 3, 16, 17, 20

TABLE OF AUTHORITIES —- Continued

Page

OTHER AUTHORITIES:

4 A. Scott, The Law of Trusts §§ 282, 326 (W.

Pe ee I inn 6.b06.6sc0ncnsececavawns 24

G. G. Bogert & G. T. Bogert, The Law of Trusts

and Trustees §§ 861, 868, 901 (Rev. 2d ed.

RR UB AF eae edi ty lap 4X i GM 24

H.R. Rep. No. 247, 10lst Cong. list Sess. 56,

reprinted in 1989 U.S. Code Cong. & Admin.

SN I cc cuusuepuaadaneheheuaseaceks 22

H.R. Conf. Rep. 386, 101st Cong. 1st Sess. 433,

reprinted in 1989 U.S. Code Cong. & Admin.

Sy MI 6 0k sn <seek coca eameab ances 18, 23

Restatement (Second) of Trusts §§ 205, 297, 326

SE bs bck eee aks koe hekads kaeee eacdeeeaneu 24

In The

Supreme Court of the United States

October Term, 1991

NEIL A. USEDEN, AS TRUSTEE OF THE

AIR FLORIDA SYSTEM, INC., PROFIT SHARING

PLAN AND TRUST,

Petitioner,

GREENBERG TRAURIG HOFFMAN LIPOFF

ROSEN & QUENTEL, SUN BANK, INC.,

AND SUN BANK OF MIAMI, INC.,

Respondents.

Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Eleventh Circuit

PETITION FOR A WRIT OF CERTIORARI

The petitioner, Neil A. Useden, Trustee, on behalf

of the ERISA plan as a whole, respectfully requests

that a writ of certiorari issue to review the judgment

and opinion of the United States Court of Appeals for

the Eleventh Circuit entered in the above-styled pro-

ceeding on December 11, 1991.

OPINIONS BELOW

The opinion of the Court of Appeals for the Elev-

enth Circuit, reported at 947 F.2d 1563, is reprinted in

the Appendix at App. 1.

The first opinion of the United States District

Court for the Southern District of Florida, reported at

721 F.Supp. 1233, is reprinted in the Appendix at App.

48.

The second opinion of the United States District

Court for the Southern District of Florida, reported at

734 F.Supp. 978, is reprinted in the Appendix at App.

83.

JURISDICTION

The judgment of the Court of Appeals for the Elev-

enth Circuit was entered on December 11, 1991. The

petitioner’s timely motion for rehearing and suggestion

for rehearing en banc, was denied on March 4, 1992.

The jurisdiction of this Court is invoked under 28

U.S.C. § 1254(1).

STATUTES INVOLVED

ERISA § 409 (29 U.S.C. § 1109):

(a) Any person who is a fiduciary with

respect to a plan who breaches any of the

responsibilities, obligations, or duties imposed

upon fiduciaries by this subchapter shall be

personally liable to make good to such plan

any losses to the plan resulting from each such

breach, and to restore to such plan any profits

of such fiduciary which have been made

through use of assets of the plan by the fiduci-

ary, and shall be subject to such other equita-

ble or remedial relief as the court may deem

appropriate, including removal of such fiduci-

ary. A fiduciary may also be removed for a

violation of section 1111 of this title.

ERISA § 502(a),(/) (29 U.S.C. § 1132 (a),(1)):

(a) Persons empowered to bring a civil

action

A civil action may be brought -

(1) by a participant. or beneficiary —

(A) for the relief provided for in sub-

section (c) of this section, or

(B) to recover benefits due to him

under the terms of his plan, to enforce his

rights under the terms of the plan, or to

clarify his rights to future benefits under

the terms of the plan;

(2) by the Secretary, or by a participant,

beneficiary or fiduciary for appropriate relief

under section 1109 of this title;

fiduciary (A) to enjoin any act or practice

which violates any provision of this subchapter

or the terms of the plan, or (B) to obtain other

appropriate equitable relief (i) to redress such

violations or (ii) to enforce any provisions of

this subchapter or the terms of the plan;

(3) by a participant, beneficiary, or

(5) except as otherwise provided in sub-

section (b) of this section, by the Secretary (A)

to enjoin any act or practice hich violates any

provision of this subchapter, or (B) to obtain

other appropriate equitable relief (i) to redress

such violation or (ii) to enforce any provision of

this subchapter; or

(6) by the Secretary to collect any civil

penalty under subsection (c)2) or (i) or (1) of

this section.

(1) Civil penalties on violations by

fiduciaries

(1) In the case of —

(A) any breach of fiduciary respon-

sibility under (or other violation of) part 4

by a fiduciary, or

(B) any knowing participation in

such a breach or violation by any other

person,

the Secretary shall assess a civil penalty

against such fiduciary or other person in an

amount equal to 20 percent of the applicable

recovery amount.

(2) For purposes of paragraph (1), the

term “applicable recovery amount” means any

amount which is recovered from a fiduciary or

other person with respect to a breach or viola-

tion described in paragraph (1) -

lL.

(A) pursuant to any settlement

agreement with the Secretary, or

(B) ordered by a court to be paid by

such fiduciary or other person to a plan or

its participants and beneficiaries in a judi-

cial proceeding instituted by the Secretary

under subsection (a)(2) or (aX5) of this

section.

(3) The Secretary may, in the Secretary’s

sole discretion, waive or reduce the penalty

under paragraph (1) if the Secretary deter-

mines in writing that —

(A) the fiduciary or other person

acted reasonably and in good faith, or

(B) itis reasonable to expect that the

fiduciary or other person will not be able

to restore all losses to the plan without

severe financial hardship unless such

waiver or reduction is granted.

(4) The penalty imposed on a fiduciary or

other person under this subsection with

respect to any transaction shall be reduced by

the amount of any penalty or tax imposed on

such fiduciary or other person with respect to

such transaction under subsection (i) of this

section and section 4975 of Title 26.

STATEMENT OF THE CASE

Jurisdiction

The jurisdiction of the district court was invoked

under 29 U.S.C. § 1132(e) and (f) of ERISA which

empowers district courts to award the relief provided

for in 29 U.S.C. § 1132(a). The appellate jurisdiction of

the circuit court was invoked under 28 U.S.C. § 1292(b),

which grants courts of appeal jurisdiction over inter-

locutory decisions of the district courts certified under

Fed.R.Civ.P. 54(b) (App. 13-17, 90).

2. Petitioner’s Factual Contentions Concerning

Greenberg Traurig’s and Sun Bank’s Knowing

Participation in the Plan Fiduciary’s Breaches

of Trust}!

The Air Florida System, Inc., Profit Sharing Plan

and Trust was established in 1977 as an ERISA Plan.

Respondent Greenberg Traurig as counsel to Air Flor-

ida since the early 1970’s, drafted the Plan, represented

it from its inception, and arranged for Eli Timoner, the

President of Air Florida, to be the Plan’s initial, sole

trustee. Greenberg Traurig and Timoner, the record

suggests, thereafter participated in activities designed

to further the illusion that Air Florida was solvent and

1 The case arrived in the circuit court as a summary

judgment in the respondents’ favor. The circuit court, how-

ever, never reached the question of whether the petitioner

had demonstrated that triable issues of fact existed because

it concluded that ERISA did not provide petitioner with a

monetary cause of action against nonfiduciaries. Thus, the

facts and reasonable inferences which follow have been

stated in a light most favorable to the petitioner. Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (“The evidence

of the nonmovant is to be believed, and all justifiable infer-

ences are to be drawn in his favor.”); Adickes v. S. H. Kress &

Co., 398 U.S. 144, 157, 158-159 (1970).

that all its stock was marketable, but which impru-

dently and illegally tied the Plan’s financial integrity to

Air Florida’s declining fortunes.

In June 1981, the Plan borrowed $1.6 million from

respondent Sun Bank to purchase a large block of Air

Florida restricted stock which it then pledged, along

with substantially all the unrestricted shares of Air

Florida stock it owned, as collateral for the loan. Green-

berg Traurig conducted a business prudency analysis of

the stock purchase for the trustee and recommended

the purchase. Greenberg Traurig, the evidence sug-

gests, could not perform a disinterested business pru-

dency analysis because of its primary loyalty to Air

Florida. The trustee should not have purchased, and

Greenberg Traurig should not have recommended the

purchase of so much restricted Air Florida stock at a

time Air Florida was insolvent, the airline business was

volatile, and a decline in stock value, which was then a

likely possibility, would have ruined the Plan.

In January 1982, as a result of business reversals

suffered by Air Florida and the declining value of Air

Florida’s stock, Sun Bank demanded additional collat-

eral and assurances from Air Florida which had begun

to make the loan payments for the Plan. Timoner asked

Greenberg Traurig whether Air Florida could collateral-

ize and guaranty Sun Bank’s loan to the Plan. Green-

berg Traurig advised Timoner that Air Florida could

not, under ERISA, guaranty a loan to a profit sharing

Plan but could guaranty the loan if the Plan was

changed to an Employee Stock Ownership Plan

(“ESOP”). Greenberg Traurig began the changeover

process but discontinued its efforts after it discovered

that the Plan could not legally be converted to an ESOP.

Air Florida nevertheless guarantied Sun Bank’s loan;

and Greenberg Traurig counselled Timoner and his suc-

cessor, Donald Lloyd-Jones — who, like Timoner, owed

conflicting loyalties as Plan fiduciary and Chief Execu-

tive Officer of Air Florida — to continue their dealings

with Sun Bank, as though the Plan was an ESOP, as

though Air Florida was solvent, and as though Air

Florida’s steadily declining stock was a suitable invest-

ment for an ERISA plan.

When Sun Bank finally called its loan to the Plan

and Air Florida’s guaranty, in August 1982, Greenberg

Traurig negotiated a redocumentation of the loan which

it advised Lloyd-Jones to accept even though, as the

circuit court concluded, the law firm “knew or should

have known that the redocumentation (involving the

reincorporation of the January pledge of corporate

assets to secure the loan) offended applicable ERISA

principles.” (App. 10). Greenberg Traurig also knew or

should have known that the redocumentation of the

loan was in Air Florida’s but not the Plan’s economic

interests, because the redocumentation saved Air Flor-

ida from having to honor its guaranty; and that Lloyd-

Jones was breaching his fiduciary duty to the Plan by

thus preferring Air Florida over the Plan with respect

to the Sun Bank loan.

Sun Bank, the evidence suggests, likewise knew,

prior to the August 1982 loan redocumentation, that

the Plan was a profit sharing plan not an ESOP, that

Air Florida could not guaranty the loan, and that Lloyd-

Jones should not have participated in the redocumenta-

tion unless the Plan was an ESOP. The Bank neverthe-

less demanded and received from Air Florida, whom the

Bank also knew to be insolvent, a guaranty that the

Bank was not legally able to receive under ERISA.

When the Plan was unable to pay loan installments

after August 1982, and Air Florida, because of its deep-

ening insolvency, chose neither to fund the Plan nor

honor its guaranty, Sun Bank liquidated the Plan’s

collateralized stock. As a result of the decline in value

of Air Florida stock and the liquidation of collateral, by

the time Sun Bank’s loan was satisfied in 1983 the

assets of the 2000-member Plan, which stood at

$3,340,000 in June 1981 had been, to use the circuit

court’s term, “dissipated,” to $35,000 (App. 8).

3. The Opinions Below

The district court granted Greenberg Traurig’s and

Sun Bank’s motions for summary judgment on the

grounds, among others not relevant here, that ERISA

does not provide a cause of action against non-fiduci-

aries who are not parties in interest,” for participation

in a fiduciary’s breach of duty (App. 75-79); and that, in

2 Petitioner alleged that Sun Bank and Greenberg Trau-

rig were also liable as “fiduciaries,” as well as non-fiduciary

“parties in interest” under 29 U.S.C. § 1002(14) who engaged

in “prohibited transactions” with a fiduciary under 29 U.S.C.

§ 1106. Although petitioner disagrees with the lower courts’

legal and factual analyses, the courts’ rulings on these mat-

ters are not the subject of this petition.

any event, the record was devoid of evidence that Sun

Bank or Greenberg Traurig participated in any breach

of duty by the Plan fiduciary (App. 77-79). The circuit

court affirmed, holding that no cause of action exists

“for monetary damages under ERISA sections 409(a)

(29 U.S.C. § 1109] or 502(a) [29 U.S.C. § 1132(a)] for the

participation of a non-fiduciary in a fiduciary breach.”

(App. 45). The circuit court, however, did not reach the

issue of whether the record contained factual support

for such a cause of action.

Relying primarily on Massachusetts Mutual Life

Ins. Co. v. Russell, 473 U.S. 134 (1985), for the theory

that this Court “has unambiguously .. . restrain[ed] the

grafting of novel remedies onto [ERISA]” (App. 38), the

circuit court concluded that nothing in the “text” of

ERISA suggests that Congress intended to allow a mon-

etary remedy against non-fiduciaries. (App. 39-40).

ERISA, the court stated, incorporates “a tailored law of

trusts,” which not only adopts and supplements “famil-

iar trust principles” but “exempts from its reach certain

parties and activities that may have been amenable to

suit under traditional trust law.” (App. 42).

Implicitly eschewing reliance on this Court’s cus-

tomary tests for determining whether Congress

intended to imply a cause of action in a statute silent on

the question, contained in cases such as Cort v. Ash,

422 U.S. 66 (1975), the circuit court formulated its own

test to avoid “the unselective incorporation of trust law

rules into ERISA.” (App. 42-43): “[A] court should only

incorporate a given trust law principle if the statute’s

text negates an inference that the principle was omit-

ted deliberately from the statute.” (App. 43). Since, the

court reasoned, the carefully crafted text of ERISA pro-

vides for certain remedies against nonfiduciaries, but

does not include monetary damages among them, the

inference that Congress intentionally omitted that rem-

edy was not negated. The petitioner, therefore, had no

cause of action for monetary losses to the Plan against

Greenberg Traurig and Sun Bank® (App. 45).

REASONS FOR GRANTING THE WRIT

THE CIRCUIT COURT’S WHOLLY TEXTUAL

ANALYSIS TO DETERMINE WHETHER ERISA

INCORPORATES A CAUSE OF ACTION AGAINST

NON-FIDUCIARIES CONFLICTS WITH THE

DECISIONS OF THIS COURT WHICH REQUIRE A

WIDE-RANGING INQUIRY INTO CONGRES-

SIONAL INTENT AND PURPOSE AS WELL AS AN

ANALYSIS OF THE STATUTE’S TEXT.

The circuit court believed that a given trust law

remedy is incorporated into ERISA only when ERISA’s

3 Petitioner’s motion to amend his complaint to add a

cause of action against Sun Bank for knowing participation

in a fiduciary breach was denied by the district court. The

district court nevertheless chose to address the issue of Sun

Bank’s non-fiduciary liability in its opinion (App. 66 & n. 6).

The circuit court similarly assumed, for purposes of its opin-

ion, that the issue of Sun Bank’s non-fiduciary liability was

properly in the case (App. 37 & n. 20), but, in light of its

conclusion that ERISA did not provide a cause of action,

never reached petitioner’s argument that the district court

abused its discretion in denying him leave to amend (App.

47).

“text negates an inference that the principle was omit-

ted deliberately from the statute” (App. 43) (emphasis

supplied). Conspicuous among the significant shortcom-

ings of this test is the fact that it is totally at variance

with controlling decisions of this Court.

Cort v. Ash, 422 U.S. 66, 78 (1975) has long

required a four-part analysis when determining

“whether a private remedy is implicit in a statute not

expressly providing one.”* Even though the second fac-

tor in Cort — legislative intent — is now recognized as

the most important of the four, the determination of

congressional intent and purpose is precisely the

inquiry that the circuit court’s test ignores. See

Thompson v. Thompson, 484 U.S. 174, 179 (1988) (In

determining whether a remedy exists, “our focal point

is Congress’ intent in enacting the statute. As guides to

discerning that intent, we have relied on the four fac-

tors set out in Cort v. Ash... along with other tools of

statutory construction.”).

Massachusetts Mutual Life Ins. Co. v. Russell, 473

U.S. 134 (1985), on which the circuit court heavily

relies, provides no support for the court’s novel theory

of statutory interpretation. Massachusetts Mutual,

4 “First, is the plaintiff one of the class for whose espe-

cial benefit the statute was enacted, ...? Second, is there

any indication of legislative intent, explicit or implicit,

either to create such a remedy or to deny one?... Third, is it

consistent with the underlying purposes of the legislative

scheme to imply such a remedy for the plaintiff? .. . And

finally, . . . would it be inappropriate to infer a cause of

action based solely on federal law?” [citations omitted] 422

U.S. at 78.

) iat

473 U.S. at 140 n. 8, 144, 145-146, cites extensively to

ERISA’s legislative history as well as to Cort v. Ash in

concluding that the text of ERISA, the structure of the

statute “and its legislative history all support the con-

clusion that .. . Congress did not provide, and did not

intend the judiciary to imply,” a particular cause of

action. Id. 473 U.S. at 148 (emphasis supplied). Noth-

ing in Massachusetts Mutual suggests that the deter-

mination of congressional intent and purpose and the

study of legislative history are no longer relevant in an

ERISA analysis, or that every ERISA analysis must

begin with the virtually insurmountable inference that

a remedy not specifically mentioned in ERISA was

deliberately omitted.

Indeed, in Ingersoll-Rand Co. v. McClendon, __

U.S. __, 111 S.Ct. 478 (1990), this Court specifically

rejects the precise assumption on which the circuit

court’s ‘negative inference’ test rests — that an omitted

ERISA remedy in a silent statute is presumed to have

been omitted deliberately. There, the Texas Supreme

Court reasoned that because ERISA did not specifically

subsume the remedies of lost future wages, mental

anguish and punitive damages which the plaintiff

sought for his wrongful discharge, his state law cause of

action was not preempted. McClendon v. Ingersoll-Rand

Co., 779 S.W.2d 69, 71 n.3 (Tex. 1989).

This Court disagreed stating that 29 U.S.C.

§ 1132(a) provided the exclusive remedy for McClen-

don’s wrongful termination claims and the extra-

contractual remedies he sought:

Not only is § 502(a) [§ 1132(a)] the exclusive

remedy for vindicating § 510 [§ 1140]-pro-

tected rights, there is no basis in § 502(a)’s

language for limiting ERISA actions to only

those which seek “pension benefits.” It is clear

that the relief requested here is well within

the power of federal courts to provide.

Ingersoll-Rand Co. v. McClendon, 111 S.Ct. at 486.

Ingersoll-Rand thus illustrates how causes of action

and remeaies, including monetary remedies, not speci-

fically set forth or described in ERISA will nevertheless

be implied to afford complete relief under the Act.

The Circuit Court’s Decision Conflicts With Deci-

sions of this Court Which Define the Basic Rules

of Statutory Construction Applicable to Remedial

and Equitable Legislation Like ERISA.

Overarching every textual analysis of ERISA must

be an awareness that ERISA is quintessentially reme-

dial legislation. Smith v. CMTA-IAM Pension Trust, 746

F.2d 587, 589 (9th Cir. 1985); Rettig v. Pension Benefit

Guaranty Corp., 744 F.2d 133, 155 n. 54 (D.C.Cir. 1984);

Brock v. Gerace, 635 F.Supp. 563, 566 (D.N.J. 1986).

Remedial legislation must be construed “liberally,”

Peyton v. Rowe, 391 U.S. 54, 65 (1968), and “broadly to

effectuate its purposes.” Tcherepnin v. Knight, 389 U.S.

332, 336 (1967). The Eleventh Circuit’s test, which sad-

dies ERISA participants and beneficiaries with the

onerous burden of disproving, from ERISA’s text aicne,

the inference that a remedy was intentionally omitted,

is anything but liberal and remedial-minded.

An equally important starting point in every

ERISA analysis is an awareness that in applying

ERISA’s law of trusts, a federal court sits primarily as a

court of equity. Because equitable jurisdiction is inher-

ently flexible in order to shape the remedy to the

wrong, “Unless a statute in so many words, or by a

necessary and inescapable inference, restricts the

court’s jurisdiction in equity, the full scope of that juris-

diction is to be recognized and applied.” Porter v.

Warner Holding Co., 328 U.S. 395, 398 (1946). See

Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288,

291-292 (1960) (“When Congress entrusts to an equity

court the enforcement of prohibitions contained in a

regulatory enactment, it must be taken to have acted

cognizant of the historic power of equity to provide

complete relief in light of the statutory purposes.”);

Katchen v. Landy, 382 U.S. 323, 338 (1966) (“[E]quity

courts have power to decree complete relief and for that

purpose may accord what would otherwise be legal

remedies.”) The Eleventh Circuit’s highly restrictive

negative inference test is fundamentally inconsistent

with these well-settled principles for interpreting the

remedial scope of a court’s equitable jurisdiction.

Congress “obviously did not expressly address all

the issues that might arise” under ERISA, Thornton v.

Evans, 692 F.2d 1064, 1079 (7th Cir. 1982); Massa-

chusetts v. Morash, 490 U.S. 107, 113 (1989) (“The

precise coverage of ERISA is not clearly set forth in the

Act.”). The circuit court ignored this Court’s precedents,

Congress’ intent, and the “inevitable incompleteness

presented by all legislation,” United States v. Lake Mis-

ere Land Co., 412 U.S. 580, 593 (1973), by formulating

a rule of statutory construction that is incapable of

implementing ERISA’s equitable and remedial scheme.

THE CIRCUIT COURT MISREAD THE TEXT OF

ERISA WHICH ALLOWS A MONETARY CAUSE OF

ACTION AGAINST NON-FIDUCIARIES UNDER

SUBSECTIONS 1132(a)(2), OR (a)(3), OR BOTH.

With the addition of 29 U.S.C. § 1132(/) by the 1989

Omnibus Budget Reconciliation Act amendments, P.L.

101-239, Congress’ assumption that ERISA has always

afforded a monetary remedy against non-fiduciaries

became readily apparent. Section 1132(/1)(B) provides

that where a non-fiduciary knowingly participates in a

fiduciary’s breach or violation, the Secretary of Labor

shall assess a civil penalty against the non-fiduciary in

an amount equal to 20 percent of the “applicable recov-

ery amount.” The term “applicable recovery amount” is

defined in § 1132(/)2) to mean any “amount” recovered

from a non-fiduciary pursuant to a settlement agree-

ment with the Secretary or “ordered by a court to be

paid by such [non-fiduciary] to a plan or its participants

and beneficiaries in a judicial proceeding instituted by

the Secretary under subsection (a)(2) or (a)(5) of this

section.”

Section 1132(/) clearly does not create a monetary

cause of action against non-fiduciaries in subsections

1132(a)(2) or (a)(5). Congress obviously believed that

such a cause of action already existed and simply

authorized an additional administrative penalty or sur-

charge on any monetary award or settlement the Secre-

tary might independently recover under those

subsections from a non-fiduciary.

Since a “participant, beneficiary or fiduciary,” as

well as the Secretary, may bring an action for “appro-

priate relief” under § 1132(a)(2), Congress’ assumption

that the Secretary had a preexisting cause of action

against non-fiduciaries under § 1132(a)2), necessarily

means that participants, beneficiaries and fiduciaries

possess the same cause of action under that subsection.

Nothing in § 1132(a)(2) suggests that participants, ben-

eficiaries and fiduciaries have fewer trust remedies

under that subsection than the Secretary.

Furthermore, since Congress assumed that the Sec-

retary already possessed a monetary remedy against

non-fiduciaries under § 1132(a)(2) and under

§ 1132(a\(5), and the essential text of subsection (a)(5)

is identical to that of subsection (a)(3), it follows that

any monetary remedy available to the Secretary

against non-fiduciaries under subsection 1132(a)(5) is

necessarily available to participants, beneficiaries and

fiduciaries under subsection 1132(a\3), as well.® See

5 Even before the addition of Section 1132(/) confirmed a

cause of action against non-fiduciaries in subsection

1132(a)(2), subsection 1132(a)(3) was sufficiently broad to

encompass a monetary remedy against non-fiduciaries under

its provision for “other appropriate equitable relief. . . (ii) to

enforce any provisions of this subchapter.” The provisions

(Continued on following page)

Pension Fund — Mid Jersey Trucking Industry — Local

701 v. Omni Funding Group, 731 F.Supp. 161, 178 n. 11

(D.N.J. 1990) (The phrase “other appropriate equitable

relief” in subsections 1132(aX3) and (aX5) should be

accorded the same meaning whether the Secretary or a

private party brings the enforcement action).

Nothing in ERISA’s legislative history, either, sug-

gests that only the Secretary of Labor should possess a

cause of action against non-fiduciaries. Indeed, in H.R.

Conf. Rep. 386, 432-433, reprinted in 1989 U.S. Code

Cong. & Admin. News 3018, 3035-3036, the conferees,

noting the limited resources of the Secretary of Labor to

monitor the vast numbers of ERISA plans and the

Labor Department’s growing emphasis on deterrence

rather than enforcement, state: “[We] believe that the

need for strengthened enforcement and deterrence of

violations of ERISA applies not only to the Department

of Labor, but to judicial oversight of private rights of

action affecting employee benefit plans.” See Central

(Continued from previous page)

that a monetary remedy against non-fiduciaries under sub-

section 1132(a)(3) would enforce include among others, (a)

Congress’ declarations of policy in § 1001(b), “providing for

appropriate remedies, sanctions, and ready access to the

Federal courts” to assure the “financial soundness” of ERISA

plans under § 1001(a); (b) the provisions of § 1103(a) requir-

ing all plan assets to remain under the trustee’s control; (c)

the provisions of § 1103(c)(1) requiring plan assets to be

“held for the exclusive purposes of providing benefits to

participants ... and their beneficiaries”; and (d) the provi-

sions of § 1104 requiring a fiduciary to “discharge his duties

with respect to a plan solely in the interest of the partici-

pants and beneficiaries.”

States, Pension Fund v. Central Transport, 472 U.S. at

578 (“[Tjhe structure of ERISA makes clear that Con-

gress did not intend for Government enforcement

powers to lessen the responsibilities of plan fiduci-

aries”).6

The Eleventh Circuit’s general reliance on Massa-

chusetts Mutual Life Ins. Co. v. Russell for its deter-

mination that the text of §§ 1132(a)(2) and (aX3) does

not support a monetary remedy against non-fiduciaries

has been thoroughly undercut by Ingersoll-Rand uv.

McClendon, 111 S.Ct. at 486. Ingersoll-Rand, although

speaking of monetary remedies under § 1132(a) gener-

ally, had to be referring to § 1132(a)(3), which was the

only possible section under which McClendon could

have (a) sued his employer for wrongful termination

and (b) recovered more than simply benefits under the

terms of his plan. Thus, the Eleventh Circuit’s conclu-

sion that the phrase “other appropriate equitable relief”

in § 1132(a)(3) bars a monetary remedy is not only

6 That the Department of Labor, from Freund v. Mar-

shall & Ilsley Bank, 485 F.Supp. 629 (W.D.Wisc. 1979) — a

lawsuit initiated by the Secretary of Labor in 1976 — to Dole

vu. Compton, 753 F.Supp. 563 (E.D.Pa. 1990), and beyond,

continuously prosecuted, and recovered monetary damages

from, participating non-fiduciaries, shows a consistent and

reasonable administrative interpretation of ERISA to which

the Eleventh Circuit should have deferred. Chevron U.S.A.,

Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837,

843-844 (1984). Congress’ failure to legislatively negate the

Department’s assumption that it possessed a monetary cause

of action against non-fiduciaries is “evidence that Congress

at least acquiesces in, and apparently affirms that assump-

tion.” Cannon v. University of Chicago, 441 U.S. 677, 687 &

n.8, 702-703 (1979).

inconsistent with traditional trust law, but is now sus-

pect under the statutory law of ERISA as well. Inger-

soll-Rand’s gloss on § 1132(a), coupled with the

persuasive implications of § 1132(l), clearly demon-

strate that a monetary cause of action against non-

fiduciaries is available under ERISA.

The Circuit Court’s ERISA Analysis Conflicts With

the Vast Majority of Courts Which Have Allowed

or Would Allow a Monetary Remedy Against a

Non-fiduciary Who Knowingly Participates in a

Fiduciary’s Breach.

Virtually every court to consider the issue of non-

fiduciary liability has concluded from its review of

ERISA’s legislative history and Congress’ purpose in

enacting ERISA that a federal court has the power

under subsections 1132(a)(2), or (a)(3), or both, to

impose monetary and restitutionary remedies against

culpable non-fiduciaries. See, e.g. Whitfield v. Lin-

demann, 853 F.2d 1298, 1303 (5th Cir. 1988), cert.

denied sub nom. Klepak v. Dole, 490 U.S. 1089 (1989);

Brock v. Hendershott, 840 F.2d 339, 342 (6th Cir. 1988);

Lowen v. Tower Asset Management, Inc., 829 F.2d 1209,

1220-1221 (2nd Cir. 1987); Fink v. National Savings &

Trust Co., 772 F.2d 951, 958 (D.C. Cir. 1985); Thornton

v. Evans, 692 F.2d at 1078-1080; Eaves v. Penn, 587

F.2d at 462-463; Dole v. Compton, 753 F.Supp. 563,

568-569 (E.D.Pa. 1990); Diduck v. Kaszycki & Sons

Contractors, Inc., 737 F.Supp. 792, 804 (S.D.N.Y. 1990);

Pension Benefit Guaranty Corp. v. Ross, 733 F.Supp.

1005, 1007-1008 (M.D.N.C. 1990); Pension Fund-Mid

Jersey Trucking Industry-Local 701 v. Omni Funding

Group, 731 F.Supp. at 176-179; Benvenuto v. Schneider,

678 F.Supp. 51, 54-55 (E.D.N.Y. 1988); Brock v. Gerace,

635 F.Supp. at 566-567; Foltz v. U.S. News & World

Report, Inc., 627 F.Supp. 1143, 1167-1168 (D.D.C.

1986); Donovan v. Schmoutey, 592 F.Supp. 1361,

1395-1396 (D.Nev. 1984); Donovan v. Bryans, 566

F.Supp. 1258, 1266-1267 (E.D.Pa. 1983); Donovan uv.

Daugherty, 550 F.Supp. 390, 410-411 (S.D.Ala. 1982);

Freund v. Marshall & Ilsley Bank, 485 F.Supp. 629,

641-643 (W.D.Wisc. 1979).

In sharp contrast to these cases, and others with

similar holdings, are the decision below, the opinion in

Framingham Union Hospital, Inc. v. Travelers Ins. Co.,

744 F.Supp. 29 (D.Mass. 1990), and a series of cases in

the Ninth Circuit typified by Mertens v. Hewitt Associ-

ates, 948 F.2d 607 (9th Cir. 1991),7 Batchelor v. Oak

Hill Medical Group, 870 F.2d 1446 (9th Cir. 1989) and

Nieto v. Ecker, 845 F.2d 868 (9th Cir. 1988). The Ninth

Circuit cases, like the present case, misconstrue the

7 A petition for certiorari, Case No. 91-1671, was filed in

this Court in Mertens v. Hewitt Associates, on April 14, 1992.

The “Question Presented” in Mertens — “Does ERISA

§ 502(a)(2) and/or (a)(3), 29 U.S.C. § 1132(a)(2) and (3), allow

pension plan participants and beneficiaries to bring an

action on behalf of a retirement plan for recovery of mone-

tary losses against a non-fiduciary service provider who

knowingly participates in breaches of fiduciary duty commit-

ted by an ERISA fiduciary?” — will also be dispositive of the

first question presented in this case.

text of ERISA itself as shown in Point II, supra, misap-

ply Massachusetts Mutual v. Russell, and ignore per-

suasive indications in ERISA’s legislative history of

Congress’ intent to incorporate into ERISA any trust

remedy that will prevent losses to plans and benefici-

aries.

Iil.

THE CIRCUIT COURT FAILED TO DETERMINE

OR IMPLEMENT CONGRESS’ INTENT AND PUR-

POSE IN ENACTING ERISA WHICH WAS TO

BROADLY FEDERALIZE REMEDIES TRADI-

TIONALLY AVAILABLE UNDER THE LAW OF

TRUSTS FOR THE PROTECTION OF ERISA

PLANS AND BENEFICIARIES.

The legislative history of ERISA demonstrates that

Congress intended through ERISA to codify principles

and remedies from the law of trusts in order to fully

protect plan participants and beneficiaries from

breaches of trust by Plan fiduciaries. Firestone Tire &

Rubber Co. v. Bruch, 489 U.S. 101, 109-110 (1989); Pilot

Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987); Central

States, Southeast & Southwest Areas Pension Fund uv.

Central Transport, Inc. 472 U.S. 559, 570, 572 (1985).

As recently as 1989, a House Committee reporting on

the ERISA amendments in the Omnibus Budget Recon-

ciliation Act in H. R. Rep. No. 247, 101st Cong. 1st Sess.

56, reprinted in 1989 U.S. Code Cong. & Admin. News

1906, 1948, stated:

The Committee reaffirms the authority of the

Federal courts to shape legal and equitable

remedies to fit the facts and circumstances of

‘

the cases before them, even though those

remedies may not be specifically mentioned in

ERISA itself.

The House Conference Report, H.R. Conf. Rep. 386,

101st Cong. 1st Sess. 433, 1989 U.S. Code Cong. &

Admin. News at 3036, likewise concluded that:

It remains the intent of Congress that the

courts use their power of [sic] fashion legal

and equitable remedies that not only protect

participants and beneficiaries but deter viola-

tions of the law as well. The conferees expect

that the executive agencies and the courts will

use their substantial authority to achieve

these goals and to safeguard the rights of plan

litigants.

Thus, unlike Massachusetts Mutual v. Russell, 473 U.S.

at 145, where a voluminous legislative history “contra-

dicted] respondent’s assertion” that ERISA provided a

particular remedy, here ERISA’s legislative history is

consistent with a monetary remedy against a non-

fiduciary who causes losses to plan participants and

beneficiaries.®

Traditional trust law “provides for broad and flex-

ible equitable remedies in cases involving breaches of

fiduciary duty.” Eaves v. Penn, 587 F.2d at 462. The

liability of a non-fiduciary who participates in a fiduci-

ary’s breach of trust is well-settled in the law of trusts.

A non-fiduciary who knows or should know that he is

8 See, e.g., the legislative history of the 1974 Act dis-

cussed in Eaves v. Penn, 587 F.2d 453 (10th Cir. 1978).

furthering or aiding a breach of trust is individually

liable, as well as jointly liable with the fiduciary, to the

beneficiaries of the trust. The non-fiduciary’s liability,

like the trustee’s liability, extends to all losses and

damages caused by the breach of trust and has never

been limited to non-monetary remedies. The traditional

flexibility of equitable remedies is intended precisely to

allow a beneficiary to be restored to the position, finan-

cial and otherwise, he would have been in had the

breach of trust not occurred. See Restatement (Second)

of Trusts §§ 205, 297, 326 (1959); 4 A. Scott, The Law of

Trusts §§ 282, 326 (W. Fratcher 4th ed. 1989); G. G.

Bogert & G. T. Bogert, The Law of Trusts and Trustees

§§ 861, 868, 901 (Rev. 2d ed. 1982).

The Circuit Court’s Decision Conflicts With Fire-

stone Tire & Rubber Co. v. Bruch Which Requires

ERISA to Provide Beneficiaries With Trust

Remedies That Are Not Less Favorable to Them

Than the Remedies They Would Have Enjoyed

Before ERISA.

ERISA was enacted “to promote the interests of

employees and their beneficiaries in employee benefit

plans.” Shaw v. Delta Airlines, Inc., 463 U.S. 85, 90

(1083). The Eleventh Circuit’s interpretation of ERISA,

which denies plan beneficiaries a monetary remedy

against non-fiduciaries who aid the fiduciary in harm-

ing the plan, not only fails to “promote” their interests,

but strips them of their pre-ERISA trust remedies.

ERISA, as this Court concluded in Firestone Tire &

Rubber Co. v. Bruch, 489 U.S. at 112, should not oper-

ate in this fashion. In Firestone the Court justified its

incorporation of a principle of trust law by observing

that adoption of the principle would be “consistent with

the judicial interpretation of employee benefit plans

prior to the enactment of ERISA.” In rejecting Fire-

stone’s argument for an alternative principle, the Court

likewise stated that Firestone’s theory “would afford

less protection to employees and their beneficiaries

than they enjoyed before ERISA was enacted.” Id. at

114.

Before ERISA was enacted pension and welfare

plan beneficiaries had an unquestioned right to sue

non-fiduciaries who participated in fiduciaries’

breaches of trust for monetary losses to their plans.

See, e.g., Nedd v. United Mine Workers of America, 556

F.2d 190, 209 (3rd Cir. 1977), cert. denied, 434 U.S.

1013 (1978) (“The concept of liability for knowing par-

ticipation in a breach of trust is well recognized”); Blan-

kenship v. Boyle, 329 F.Supp. 1089, 1099, 1110 (D.D.C.

1971), later case, 337 F.Supp. 296 (D.D.C. 1972); Booth

v. Security Mutual Life Ins. Co., 115 F.Supp. 755,

761-762 (D.N.J. 1957). The Eleventh Circuit’s conclu-

sion that ERISA offers trust beneficiaries less protec-

tion against non-fiduciaries than they possessed before

ERISA is thus an illogically regressive, and therefore

incorrect, reading of that highly remedial statute, and

of this Court’s decision in Firestone.

THE IMPORTANCE OF A RESOLUTION OF THE

NON-FIDUCIARY LIABILITY ISSUE IN THIS

CASE TO THE EFFECTIVE ENFORCEMENT OF

ERISA JUSTIFIES THIS COURT’S EXERCISE OF

JURISDICTION.

ERISA has become such an all-encompassing and

preemptive presence in the law of employee welfare and

pension plans that any exclusion from the Act’s reme-

dial reach must be closely scrutinized for its consis-

tency with Congress’ iutent and purpose. Courts must

be sensitive to the problem of creating unnecessary

gaps in ERISA’s remedial scheme for plaintiffs, like the

present petitioner, caught between ERISA’s preemption

clause? and a narrow judicial reading of ERISA’s

remedies. Here, the Eleventh Circuit’s interpretation of

§ 1132(a) has deprived the petitioner, an ERISA plan

trustee, of a remedy that he cannot assert in another

forum, and that he may well need -— if the fiduciaries

prove insolvent or unavailable —- to make the plan

whole.

Non-fiduciary monetary liability is not a vestigial

appendage to ERISA, but embodies the full measure of

ERISA’s prohibitions against fiduciary wrongdoing.

Errant non-fiduciaries are virtually always the partners,

9 In the Eleventh Circuit, for example, ERISA would

undoubtedly have preempted the petitioner’s state law tort

or breach of trust claims against the respondents. See, e.g.,

Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983); Howard v.

Parisian, Inc., 807 F.2d 1560 (11th Cir. 1987).

mae b. <

advisors, or transferees of errant fiduciaries. It simply

makes no sense, as traditional trust law has long recog-

nized, to provide monetary remedies against the unfaithful

fiduciary but not against his aiders and abettors without

whose participation the fiduciary breach and the monetary

loss to the beneficiaries would not or could not have

occurred.

The Eleventh Circuit has created an anomalous gap in

ERISA’s remedial scheme, where Congress did not intend

one to exist, by absolving non-fiduciaries from monetary

liability for their participation in fiduciary breaches. This

Court should take jurisdiction to correct the Eleventh Cir-

cuit’s mistaken and harmful interpretation of ERISA and

resolve the conflict among the circuits.

CONCLUSION

For the foregoing reasons, this petition for cer-

tiorari should be granted.

Respectfully submitted,

Ropert A. SHUPACK ApvaM H. LAWRENCE

2250 International Place 100 North Biscayne

100 Southeast 2nd Street Boulevard

Miami, Florida 33131 21st Floor

otal Miami, Florida 33132

(305) 358-3371

Epward A. KaurMaN Counsel of Record

4650 S. E. Financial Center

200 South Biscayne

Boulevard

Miami, Florida 33131

Counsel for Petitioner

APPENDIX

Opinion of the Eleventh Circuit Court of

Appeals in Useden v. Acker, 947 F.2d 1563 ..App. 1

Opinion of the District Court, Southern District

of Florida, in Useden v. Acker. 721 F.Supp.

snp al PEL TEER ETT PERT EC Tony ere as App. 48

Opinion of the District Court, Southern District

of Florida, in Useden v. Acker, 734 F.Supp.

MR eaRctiagcantns Catcoce ure (ieekwieaehe App. 83

Order of the Eleventh Circuit Court of Appeals

in Useden v. Acker, denying rehearing and

suggestion of rehearing en banc........... App. 91

App. 1

Neil A. USEDEN, As Trustee of the Air

Florida System, Inc., Profit Sharing

Plan & Trust, Plaintiff-Appellant,

C. Edward ACKER, et al., Defendants,

Greenberg, Traurig, Hoffman, Lipoff,

Rosen & Quentel, P.A., Sun Bank of Miami,

N.A. and Sun Bank, Inc., Defendants-Appellees.

No. 90-5445.

United States Court of Appeals,

Eleventh Circuit.

Dec. 11, 1991.

Before HATCHETT and BIRCH, Circuit Judges,

and RONEY, Senior Circuit Judge.

BIRCH, Circuit Judge:

In this appeal we decide whether the conduct of a

bank and a law firm renders those entities fiduciaries

under the Employee Retirement Income Security Act of

1974, 29 U.S.C. §§ 1001-1461 (1988) (“ERISA” or “Act”).

We also decide whether ERISA provides a right of

action for monetary damages against non-fiduciaries

who knowingly participate in a breach by a fiduciary.

Plaintiff-appellant Neil A. Useden, as trustee to a

profit sharing plan and trust (the “Plan”) governed by

ERISA, appeals the grant of summary judgment by the

United States District Court for the Southern District

of Florida in favor of defendant-appellees Sun Bank and

Greenberg, Traurig. In his Order on Motions for Sum-

mary Judgment, Judge Kenneth L. Ryskamp deter-

mined that, on the undisputed facts, neither Sun Bank

App. 2

as a lender to the Plan nor the law firm of Greenberg,

Traurig as attorneys for the Plan were fiduciaries of the

Plan within the meaning of ERISA. The court also

determined that no cause of action lay against defen-

dant Greenberg, Traurig as a non-fiduciary who know-

ingly participated in a breach by a fiduciary. Further,

Judge Ryskamp believed that the undisputed facts did

not support such non-fiduciary liability notwithstand-

ing the rejection of plaintiff’s legal theory.

In its appeal, the Plan additionally assigns error to

the district court’s denial of leave to amend the Plan’s

complaint to include a cause of action for non-fiduciary

liability against Sun Bank, the court’s striking of the

untimely affidavit of a former trustee to the Plan, the

court’s finding that extracontractual and punitive dam-

ages were unavailable under the ERISA theories

asserted, and finaily, the court’s conclusion that Regu-

lation U, 12 C.F.R. § 221 (1990) (pertaining to the

Federal Reserve Board’s “margin rules”), did not pro-

vide a borrower with a private right of action for dam-

ages. We agree with the district court’s finding that the

conduct of these defendants did not make them fiduci-

aries. We also hold that the plain meaning of ERISA

does not impose liability on non-fiduciaries for acting

with fiduciaries who breach fiduciary duties. Finding

no error with respect to the remaining issues, we

AFFIRM.

I. FACTUAL AND PROCEDURAL BACKGROUND

Air Florida System, Inc. and Air Florida, Inc. (col-

lectively “Air Florida”) established the Air Florida

App. 3

System, Inc. Profit Sharing Plan and Trust in 1977 as

an “eligible individual account plan” under ERISA. The

Plan’s mission was to absorb contributions made by Air

Florida as an employer, to invest exclusively in the

securities of Air Florida, and to distribute these securi-

ties to eligible Plan participants. Useden, the current

named trustee of the Plan, was appointed in May 1984.

Useden instituted the present action in January 1985

after determining that the Plan’s assets had been dissi-

pated through a series of financial transactions entered

into by his predecessors. These transactions involved

Sun Bank and Greenberg, Traurig in their respective

capacities as a lending bank and attorneys to the com-

pany and the Plan.

Because Useden’s predecessors were also officers of

Air Florida, they not only presided over the financial

decline of the Plan, they also over-saw the demise of the

airline. The trustee of the Plan from creation to July

1982 was Eli Timoner, who was Air Florida’s President

and Chief Operating Officer and later its Chief Execu-

tive Officer and Chairman of the Board. Timoner’s suc-

cessor, Donald Lloyd-Jones, assumed his duties as

trustee of the Plan some time after Timoner suffered a

debilitating stroke in July 1982. Lloyd-Jones also

assumed all of Timoner’s corporate duties upon Tim-

oner’s stroke.!

By the time Useden became Plan trustee in May

1984, Air Florida was in protracted state of financial

1 The record discloses some dispute, however, as to

exactly when Lloyd-Jones actually stepped into the position

of Plan trustee that was left vacant by Timoner’s stroke.

App. 4

distress. A number of events precipitated the airline’s

crisis. The August 1981 departure of Chief Executive

Officer and Chairman of the Board Edward Acker, a

recognized industry personality who brought clout and

expertise to the fledgling airline, was a highly adverse

development. The August 1981 strike of the Profes-

sional Air Traffic Controllers and the attendant reduc-

tions in operating levels also had its costly effects.

During 1981, in addition, Pan American World Airways

waged a fare war on Air Florida’s crucial New York to

Miami route. Also damaging was the public relations

disaster that ensued when an Air Florida aircraft

crashed on takeoff from National Airport in January

1982. In July 1984, Air Florida filed for bankruptcy.

Within the context of the adverse events of the

early 1980’s and the accompanying financial decline of

Air Florida, the Plan’s investments in Air Florida secu-

rities also deteriorated. For their part in the transac-

tions underlying these investments, Sun Bank and

Greenberg, Traurig are now sued by the Plan under

ERISA and related legal theories. The chief theories

upon which Useden proceeds are conceptually unified

insofar as they all require a determination that the

defendants’ professional functions so penetrated the

governance of the Plan that they should share the

potential liability of the Plan’s named fiduciaries.

1. Sun Bank

During the period relevant to this litigation, Sun

Bank was in a commercial lending relationship with

App. 5

both the Plan and Air Florida. Sun Bank’s first perti-

nent involvement with the Plan revolved around a nine-

month, short term loan of $1.6 million issued in June

1981. The Plan used the loan to purchase 76,000 dis-

counted shares of Air Florida stock from Great Ameri-

can Life Insurance Company (“GALIC”). Because

GALIC was then presently in the process of disposing of

the greater part of its substantial holdings in Air Flor-

ida, the Plan was able to acquire GALIC’s restricted

(but preferred) shares at the same discounted price that

GALIC had made available to another buyer. The Plan

intended to repay the loan with the Air Florida contri-

butions to the Plan earmarked to be made in early

1982. The collateral pledged to secure the loan was

comprised of the 76,000 purchased shares plus 40,000

shares of common Air Florida stock already owned by

the Plan.

At closing, Sun Bank took possession of the stock

collateral. At that time, certain powers governed by the

terms of the loan and banking industry custom vested

in Sun Bank. First, the loan documents, in addition to

the promissory note and related documents, included

an agreement between Plan sponsor Air Florida and

Sun Bank whereby the company would, in the event of

a default on the loan, produce an S-16 registration

statement as required under applicable securities laws.

This statement would enable Sun Bank to sell the stock

held as collateral; absent such registration, the loan

collateral would be subject to a two-year holding period.

Second, the bank gained authority to require additional

collateral and to convert the preferred shares into

App. 6

common in the event of a monetary default.2 The bank

implemented these insecurity provisions within the

framework of a 70% margin call, a convention in com-

mercial lending whereby the Plan could be required to

furnish additional collateral should the value of the

collateral stock fall below 130% of the loan balance.?

In January 1982, the value of the stock pledged as

collateral on the loan fell below the 130% inargin

requirement. Thus, in the same month that Air Florida

was greeted with news that one of its airplanes had

crashed on takeoff in Washington, D.C., the Plan was

informed by Sun Bank that the contemporaneous

decline in the market value of Air Florida stock necessi-

tated additional collateral under the margin require-

ments of the loan. Due to this shortfall in collateral,

Plan sponsor Air Florida undertook to guaranty the

loan to the Plan.

2 These powers were embodied in two clauses of the

agreement: an “additional collateral” clause, enabling the

bank to require additional collateral when it deemed exis-

ting collateral to be unsatisfactory, and an “insecurity

clause,” giving the bank the power to declare a default when

it deemed itself insecure.

3 There is some dispute as to whether the 70% margin

call trigger for Sun Bank’s powers under the “insecurity

clause” was the subject of an oral agreement between the

parties, or rather was a banking convention that Sun Bank

simply assumed to be in effect and later unilaterally

imposed. For purposes of Useden’s appeal from summary

judgment in favor of the defendants, we must accept

Useden’s version — that the 70% margin call was unilaterally

imposed by the bank. Bishop v. Wood, 426 U.S. 341, 347 & n.

11, 96 S.Ct. 2074, 2079 & n. 11, 48 L.Ed.2d 684 (1976).

App. 7

| In the opinion of the Plan attorneys, Greenberg,

| Traurig, ERISA prohibited the guaranty of a loan to a

| profit sharing plan by that plan’s sponsor.‘ Air Florida,

therefore, passed a resolution to effect the conversion of

the existing profit sharing plan into an Employee Stock

Ownership Plan (“ESOP”). Presumably, with the Plan

structured as an ESOP, the guaranty by Air Florida

would be permissible. Air Florida then guaranteed the

$1.6 million loan. Due to the continuing decrease in the

value of the stock originally pledged as collateral and

the persistent out-of-margin status of the loan, both the

Plan and Air Florida pledged additional collateral at

various times during the first half of 1982.

Hopes for timely repayment of the outstanding loan

obligation were finally dashed in early March 1982,

when Air Florida informed Sun Bank that the airline

would forego the contribution to the Plan slated for

early 1982, manifestly rendering the Plan unable to

satisfy its obligation on the loan before the passing of

the March 26 maturity date. Sun Bank, following nego-

tiations with the Plan, renewed the underlying prom-

issory note in June 1982 and set a due date of March

31, 1983. As a result of the negotiations that continued

through this time, some $297,000 of cash collateral

then being held was applied to reduce the outstanding

loan balance of $1.6 million.

Sun Bank’s insecurity persisted. As a result, in

August 1982 Sun Bank demanded full payment on the

4 See ERISA section 406, 29 U.S.C. § 1106(a)(1)(B)

(1988).

App. 8

principal loan balance. Negotiations that ensued

between the bank and the Plan cumulated in an amend-

ment and redocumentation of the loan, with satisfac-

tion of the outstanding balance set to be due, once

again, on March 31, 1983. In the fall of 1982, Sun Bank

exercised its power to sell stock held as collateral in

order to reduce the outstanding balance. Again, in July

1983, Sun Bank liquidated collateral after the Plan

defaulted on the loan by failing to satisfy the full bal-

ance on March 31. The unsold collateral, in the form of

Air Florida preferred and common stock, was then

returned to the Plan.

The decline in the value of Air Florida stock and

Sun Bank’s liquidation of collateral consumed the Plan

economically. By year end 1983, net available assets

held by the Plan had been dissipated from a June 1981

level of $3,340,000 to $35,000.

2. Greenberg, Traurig

Like Sun Bank, Greenberg, Traurig rendered ser-

vices to both the Plan and to Air Florida itself. Green-

berg, Traurig drafted the plan and provided legal

services to it from its inception until December 1982;

the firm also provided services to Air Florida from the

early 1970’s until August 1982. Even though Green-

berg, Traurig acted as independent outside counsel and

performed services primarily on an as-requested basis,

the law firm’s involvement with the Plan was substan-

tial. For example, at least partly on its own initiative,

Greenberg, Traurig prepared several Plan amendments

between 1977 and 1980. These amendments related to

EERE

App. 9

calculating and determining employer contributions,

discerning types of investments permitted under the

Plan, and including an Air Florida Subsidiary as a

sponsor.

Greenberg, Traurig became involved in the events

directly relevant to this litigation when Eli Timoner

contacted the firm about the prospective purchase of

GALIC-owned Air Florida stock. Caesar Alvarez, the

Plan’s contact at Greenberg, Traurig, advised the Plan

that the transaction would comply with the Plan docu-

ments and with applicable ERISA provisions. The firm

accordingly provided legal services associated with the

loan from Sun Bank and the acquisition of GALIC

shares. Incident to formulating its opinion that the

transaction was permissible, Greenberg, Traurig

needed to determine whether the trustee to the Plan

had considered the prudency of the investment as

required by ERISA. See 29 U.S.C. § 1104(ay(1)(c)

(1988). The record leaves unclear the extent to which

Greenberg, Traurig itself commented independently on

the business or financial prudency of the purchase.

In September 1981, during a period of sharp decline

in the value of Air Florida stock, Timoner asked the

Plan’s securities brokerage about the possibility of dis-

posing of the Plan’s holdings in Air Florida. The broker-

age advised that although such a gale was possible,

public disclosure would be required under the applica-

ble securities laws. In this connection, Greenberg,

Traurig told the Plan that this opinion concerning pub-

lic disclosure of the transaction was correct. Timoner

then determined that such a disposition, coupled with

App. 10

the required public disclosure, would collapse the mar-

ket value of the shares — an outcome certainly detri-

mental to the company, and harmful to the Plan as well

because the balance of any shares remaining with the

Plan would bring significantly lower value.

Through the fall of 1981, the price of Air Florida

stock continued to decline, prompting Sun Bank’s first

demand for additional! security. Greenberg, Traurig was

consulted in connection with the permissibility, under

ERISA, of Air Florida guaranteeing the Plan’s loan and

advised that the company could not guaranty the Plan’s

debt in compliance with ERISA, but proposed that such

a guaranty would be permissible if the existing profit

sharing plan were converted into an ESOP. Accordingly,

a resolution was passed to so transform the Plan, and

Air Florida guaranteed the loan. The documentation

needed to complete the conversion from profit sharing

plan to ESOP, however, was never completed. Neverthe-

less, in transactions after January, Sun Bank and Air

Florida repeatedly referred to the plan as an ESOP or

stock ownership plan without consulting Greenberg,

Traurig.

When Sun Bank called the loan in August 1982,

Greenberg, Traurig prepared a response letter and

assisted in negotiations with the bank. Attorneys at

Greenberg, Traurig, advised that the Plan had no

choice but to sign the letter agreement produced by the

negotiations. There is evidence suggesting that attor-

neys at the firm knew or should have known that the

redocumentation (involving the reincorporation of the

January pledge of corporate assets to secure the loan)

offended applicable ERISA principles. An attorney from

the firm wrote to Air Florida in December 1982, setting

App. 11

forth the available options — specifically, the completion

of the conversion to an ESOP or a Department of Labor

administrative exemption — for avoiding a violation of

ERISA in light of the company’s guaranty of the loan

earlier that year. This letter did not receive a response.

During the fall of 1982 and 1983, Greenberg, Trau-

rig’s role in the facts relevant to this appeal gradually

diminished. Incoming trustee and corporate officer

Lloyd-Jones replaced the firm as Air Florida’s counsel

with Debevoise & Plimpton in August 1982. He would

also replace Greenberg, Traurig as counsel to the Plan

in the summer of 1983.

3. Proceedings Below

Appellant filed suit against Sun Bank and others

on January 2, 1985, amending the complaint as of right

® days later. The Plan was granted leave to amend a

second time in March 1987, and its Second Amended

Complaint named Greenberg, Traurig as a defendant.

The district court denied a motion to amend the com-

plaint a third time in July 1987.

In November 1988, the parties to this appeal moved

for summary judgment. The hearing on these motions

was set for December 15, and took place on December

15 and 16. Although the discovery deadline was October

15 pursuant to the order of the district court, appellant

filed an affidavit taken from Donald Lloyd-Jones on

December 14 at 4:49 p.m. in support of its memoranda

in opposition to the appellees’ motions for summary

judgment. At the hearing the next day, appellant moved

ore tenus to amend the Second Amended Complaint to

include a count against Sun Bank alleging liability as a

App. 12

non-fiduciary knowingly participating in a fiduciary

breach.

On March 30, 1989, the district court docketed its

Order on Motions for Summary Judgment (“March 30

order”), striking the Lloyd-Jones affidavit as untimely,

denying appellant’s ore tenus motion to amend, and

granting summary judgment to Sun Bank and Green-

berg, Traurig on the issues of fiduciary and non-fiduci-

ary liability. Useden v. Acker, 721 F.Supp. 1233 (S.D.

Fla. 1989). On appellant’s motion, the district court

certified the March 30 order for appeal pursuant to

Fed.R.Civ.P. 54(b) on May 16. To this, appellees

responded that several issues remained unadjudicated

by the March 30 order, specifically, appellant’s action

for violations of Regulation U and the possible applica-

tion of the statute of limitations. On July 28, 1989, this

court dismissed appellant’s notice of appeal as prema-

ture. Accordingly, on September 8, 1989, the district

court issued a Second Order specifically adjudicating

the remaining issues, vacating its earlier Rule 54(b)

certification, and recertifying the case for appeal.

Useden v. Acker, 734 F.Supp. 978 (S.D. Fla. 1989).

Appellant does not appeal the district court’s denial of

its own motion for summary judgment.

II. DISCUSSION

1. Jurisdiction

Appellees argue that this court lacks jurisdiction to

decide some of the issues pursued in this appeal on

grounds related to the fact that the district court issued

two different summary judgment orders. In essence,

appellees urge us to ignore the issues of substantive

ieee ce seiner iain ix rnd

App. 13

rights raised in this litigation due to an alleged techni-

cal filing defect.

Specifically, they note that appellant filed his first

notice of appeal from the March 30 order simul-

taneously with his motion for certification for appeal

under Rule 54(b). This notice of appeal, therefore, was

filed prior to the district court’s Rule 54(b) certification

of the order on May 16, 1989.5 Appellant, moreover,

failed to correct the mistake by noticing a new appeal

within 30 days following the May 16 certification, as

required by Fed.R.App.P. 4(a)(1).6 See McLaughlin v.

City of LaGrange, 662 F.2d 1385, 1387 (11th Cir.1981)

(per curiam), cert. denied, 456 U.S. 979, 102 S.Ct. 2249,

72 L.Ed.2d 856 (1982). The filing of a timely notice of

appeal under Rule 4(a\1) is a jurisdictional prerequi-

site. Burnam v. Amoco Container Co., 738 F.2d 1230,

1231 (11th Cir.1984) (per curiam). Indeed, this court

dismissed appellant’s first appeal as premature in its

July 28, 1989 order:

® Under Rule 54(b), an order which fails to determine

the rights and liabilities of all the parties to an action is not

an appealable final order unless the district court deter-

mines that there is no just reason for delay according to

54(b) standards and directs entry of judgment.

® Rule 4(a)(1) provides in pertinent part:

In a civil case in which an appeal is permitted

by law as of right from a district court to a court of

appeals the notice of appeal .. . shall be filed with

the clerk of the district court within 30 days after

the date of entry of the judgment or order appealed

from. . .

r: ey ae Se

App. 14

The district court’s March 30, 1989 order was

not final and appealable because it did not

dispose of all the claims of all the parties to

the action. This appeal filed prior to the entry

of the district court’s Rule 54(b) certification

was premature and ineffective. The district

court’s Rule 54(b) certification did not cure the

premature appeal; a new notice of appeal fol-

lowing the certification order is necessary to

perfect an appeal from the summary judgment

order.

Order of the Eleventh Circuit, No. 5416, July 28, 1989,

R54-1401 (citations omitted). As a result, appellees

argue, appellant has lost his ability to appeal the rul-

ings encompassed in the March 30 order. Therefore,

appellees urge that our review be restricted to the

content of the September 8 order of the district court,

which admittedly was timely appealed.

Our resolution of this issue requires us to examine

the district court’s circumvention of Rule 4(a)(1) for an

abuse of discretion. In order to permit a timely appeal

of all issues notwithstanding the lapse of the 4(a)(1)

time limit, the trial court vacated the May 16 Rule

54(b) certification and reentered a new certification on

September 8, 1989; this move initiated a fresh 30-day

time limit for filing a notice of appeal.” For our pur-

poses, the effect of the Second Order of September 8 is

best characterized as a relief from final judgment under

7 The time for filing notice of appeal was subsequently

tolled by Sun Bank’s motion for reconsideration under

Fed.R.Civ.P. 59(e). Appellant timely noticed appeal on May

11, 1990.

App. 15

Fed.R.Civ.P. 60(b).8 Rule 60, though, does not sanction

the use of this tactic for the naked purpose of enabling

the filing of a timely appeal. Tucker v. Commonwealth

Land Title Ins. Co., 800 F.2d 1054, 1056 (11th Cir.1986)

(per curiam). Moreover, the clear meaning of

Fed.R.Civ.P. 77(d) precludes appellant from relying on

mere lack of notice as grounds for Rule 60(b) relief.9

This circuit has recognized, however, that Rule

60(b) is an appropriate escape valve when counsel has

acted diligently and in reliance upon statements of the

trial court. Harnish v. Manatee County, 783 F.2d 1535,

1538 (11th Cir.1986). The instant case presents just

such a scenario. From a review of the proceedings

below, it is evident that counsel for appellant was, toa

Significant extent, induced by the conduct of the trial

court to forego the filing of a new notice of appeal

following the May 16 certification order. Most impor-

tantly, the district court decided on May 18 to hold a

hearing on May 25 concerning the possible nonfinality

® Rule 60(b) provides in pertinent part:

On motion and upon such terms as are just, the

court may relieve a party or a party’s legal repre-

sentative from a final judgment, order, or proceed-

® Fed.R.Civ.P. 77(d) provides in pertinent part:

Lack of notice of the entry [of a judgment or order]

by the clerk does not affect the time to appeal or

relieve or authorize the court to relieve a party for

failure to appeal within the time allowed, except as

permitted in Rule 4(a) of the Federal Rules of

Appellate Procedure.

App. 16

of its March 30 summary judgment order. This inquiry

into the character of the order was prompted by Sun

Bank’s Response in Opposition to Plaintiff’s Motion for

54(b) Certification, wherein Sun Bank had first

asserted that there remained unresolved claims that

rendered the 54(b) certification premature. Thus, in

close temporal proximity with the entry of the May 16

Rule 54(b) order (docketed May 22), the district court

cast doubt on that same order by inviting arguments

regarding the nonfinality of the underlying March 30

order.

At the May 25 hearing, the court acknowledged

that certain issues were left unresolved by the March

30 order and expressed a firm intention to remedy the

procedural posture of the case:

[T)his is not a final order and there are other

issues, and as I contemplated it, I said let’s get

all the other issues resolved and then I will

certify those and the [Circuit] Court can con-

sider the whole thing.

* * *

I might as well give them every issue to rule

upon as long as they are going to have it.

* * *

Let’s hear all these issues so we can at least

give the Court of Appeal everything to con-

sider.

Transcript of May 25, 1989, R62-1072-3-9. The district

court’s apparent realization of the nonfinal character of

the March 30 order, coupled with the judge’s express

intention to somehow posture the case for a comprehen-

sive appeal, plausibly indicated an intention to alter or

App. 17

amend the 54(b) certification.!° In light of the suspect

status of the May 16 certification order, appellant’s

failure to file a second notice of appeal was understand-

able, especially considering that this court had not yet

ruled on the prematurity of the March 30 Notice of

Appeal.

Through the procedural mechanism of vacating the

earlier, premature Rule 54(b) certification, “the court

avoided the manifest injustice worked by a rigid appli-

cation of the provisions of Rule 77(d) to the above-

recited facts.” Harnish, 783 F.2d at 1539. We therefore

hold that the district court acted within its discretion in

vacating its earlier orders on summary judgment and

Rule 54(b) certification. Accordingly, we take jurisdic-

tion to decide all the issues adjudicated below and

argued by the parties on appeal.

2. The Lloyd-Jones Affidavit

In its March 30 Order on Motions for Summary

Judgment, the district court struck the affidavit of

Donald Lloyd-Jones, filed literally on the eve of the

hearing on motions for summary judgment, as

untimely. We will not consider the document in our

review of this case unless the district judge abused his

10 This intention to alter the certification was clearly

within the realm of procedural possibility. Fed.R.Civ.P. 59(e)

provides for motions to alter or amend a judgment within 10

days after entry of the judgment; a court may effect a sua

sponte 59(e) motion within the same time period. See

Burnam, 738 F.2d at 1232. A Rule 59(e) motion tolls the time

for filing the notice of appeal.

App. 18

discretion in striking the affidavit. Clinkscales v. Chev-

ron U.S.A., Inc., 831 F.2d 1565, 1568 (11th Cir.1987). In

Clinkscales, this court ruled that the district court

judge did not abuse his discretion in refusing to accept

an affidavit untimely filed under the local rules. We

stated: “Absent an affirmative showing by the non-

moving party of excusable neglect according to

Fed.R.Civ.P. 6(b), a court does not abuse its discretion

in refusing to accept out-of-time affidavits.” Id. (foot-

note omitted).!!

In the instant case, appellant Useden procured the

affidavit in issue from a key witness — a former Plan

trustee — incident to a last-minute settlement with that

witness. Appellant then sought to file the affidavit well

after both the deadline imposed by the local rule and

the already-enlarged deadline of the district court

(October 15, 1988). See S.D.Fla. Local Rule 10 C & J

(affidavits in opposition to a motion for summary judg-

ment are to be filed along with the memorandum of law,

due ten days after service of the motion).

The content of the affidavit was not newly discov-

ered evidence extracted from a previously missing

source. The affiant was available to the appellant

11 Fed.R.Civ.P. 6(b) provides:

When by these rules or by a notice given there-

under or by order of court an act is required or.

allowed to be done at or within a specified time,

the court for cause shown may at any time in its

discretion ... upon motion made after the expira-

tion of the specified period permit the act to be

done where the failure to act was the result of

excusable neglect... .

mms

App. 19

throughout the course of discovery and in fact provided

extensive deposition testimony apart from the affidavit.

That the affidavit could only be obtained upon a com-

promise settlement did not earn it an exemption from

the district court’s discovery cutoff. We decline to hold

that the late hour of the settlement deal was by itself

sufficient to establish “excusable neglect” under Rule

6(b). The district court, we therefore find, was well

within its discretion in striking the untimely affidavit.

See Clinkscales, 831 F.2d at 1568-69.

3. Fiduciary Status Under ERISA

a. Standard of Review

Useden appeals from the district court’s order

granting summary judgment in favor of Sun Bank and

Greenberg, Traurig. On appeal, parties seeking affir-

mance of summary judgment bear the exacting burden

of demonstrating that no genuine dispute exists as to

any material fact in the case. Adickes v. S.H. Kress &

Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d

142 (1970); see also Fed.R.Civ.P. 56(c). In assessing

whether the movants have met this burden, we review

the evidence and all factual inferences arising from the

evidence in the light most favorable to the non-moving

party. Adickes, 398 U.S. at 157, 90 S.Ct. at 1608. A

district court’s order granting summary judgment is

Subject to de novo review by this court, Thompson v.

Metropolitan Multi-List, Inc., 934 F.2d 1566, 1570 (11th

Cir.1991), and we apply the same legal standards that

control the district court in determining whether sum-

mary judgment is appropriate. Buxton v. City of Plant

City, 871 F.2d 1037, 1040 (11th Cir.1989).

App. 20

Appellees, proposing something of a departure from

these standards, urge us to adopt a relaxed standard of

review for all cases in which the district court judge,

rather than a jury, would be the ultimate trier of fact

were the action to proceed to trial. In this case, Judge

Ryskamp would be the finder of fact at trial,!2 and he

has already considered a comprehensive body of affi-

davits, depositions and other matters of record. These

circumstances may suggest that the judge is in an

enhanced position to draw inferences and resolve the

action without resorting to the expense of trial. As this

court’s predecessor has explained:

If decision is to be reached by the court, and

there are no issues of witness credibility, the

court may conclude on the basis of the affi-

davits, depositions, and stipulations before it,

that there are no genuine issues of material

fact, even though decision may depend on

inferences to be drawn from what has been

incontrovertibly proved. ... A trial on the

merits would reveal no additional data.

... The judge, as trier of fact, is in a position

to and ought to draw his inferences without

resort to the expense of trial.

Nunez v. Superior Oil Co., 572 F.2d 1119, 1123-24 (5th

Cir.1978). Cf. Coats & Clark, Inc. v. Gay, 755 F.2d 1506,

1509 (11th Cir.), cert. denied, 474 U.S. 903, 106 S.Ct.

231, 88 L.Ed.2d 230 (1985) (emphasizing that Nunez

entreats caution, especially where a jury trial would be

12 The ERISA claims in the present case do not entitle

plaintiff to a jury trial. Calamia v. Spivey, 632 F.2d 1235,

1237 (5th Cir.1980).

App. 21

pretermitted by summary judgment). Relying on Nunez,

appellees assert that a “clearly erroneous” standard of

review is appropriate in this case. Cf. Fed.R.Civ.P. 52.

While “[s]lummary judgment procedure is [not]

properly regarded as a disfavored procedural shortcut,”

Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct.

2548, 2555, 91 L.Ed.2d 265 (1986), this circuit’s prede-

cessor has acknowledged that it is nonetheless “a

‘lethal weapon’ capable of ‘overkill.’ ” Nunez, 572 F.2d

at 1123 (quoting Brunswick v. Vineberg, 370 F.2d 605,

612 (5th Cir.1959)). An understanding of these consid-

erations guided this court Hiram Walker & Sons, Inc. v.

Kirk Line, 877 F.2d 1508 (11th Cir.1989). There, this

court addressed and rejected the same argument for

applying the clearly erroneous test as that advanced by

the present appellees. We concluded it would not be

prudent to accord a presumption of correctness to the

district court’s findings of fact when it had disregarded

contradictory evidence and drawn inferences against

the non-movant. Jd. at 1513 n. 4. We decline in this case

to depart from Hiram Walker.

This position benefits from an accurate assessment

of the scope of the Nunez holding. Nunez addressed

whether the trial Judge should draw inferences from

uncontroverted facts at the summary judgment stage.

It therefore speaks only to the appropriate stage of trial

at which inferences from undisputed facts may be

drawn, not the level of deference to be accorded those

App. 22

inferences on appeal.’ An ERISA case, Phillips uv.

Amoco Oil Co., 614 F.Supp. 694 (N.D.Ala. 1985), aff’d,

799 F.2d 1464 (llth Cir.1986), cert. denied, 481 U.S.

1016, 107 S.Ct. 1893, 95 L.Ed.2d 500 (1987), erro-

neously relied upon by appellees, is illustrative of this

distinction. There, the trial court cited Nunez and Coats

in holding that questions of intent or motive are appro-

priate for summary judgment if the underlying facts

are not disputed and the central! question in the case is

whether, as a matter of law, the alleged conduct violates

ERISA. Phillips, 614 F.Supp. at 723 n. 35. On appeal,

this court praised the “comprehensive, thorough, and

well reasoned” opinion of the district court, but did not

opt to subject the lower court’s grant of summary judg-

ment to merely a “clearly erroneous” test. Phillips, 799

F.2d 1467-68. In this case, as in Phillips, 799 F.2d

1467-68. In this case, as in Phillips, the wisdoa of the

Nunez opinion informs the conduct of the trial court in

drawing its inferences from the evidence, not the stan-

dard of review adopted by this court of appeal. We

therefore decline as this court did in Hiram Walker to

13 The Nunez opinion illuminates this nuance by setting

apart in a footnote the question of standards governing

appellate review. Nunez, 572 F.2d at 1124 n. 6. The opinion

therein cites cases in which courts reviewed issues that had

been tried to juries, on the one hand, and to the court, on the

other, and notes that the standard of review for each type of

trial differs. Only in that footnoted passage does the Nunez

court deal with the level of deference paid to the conclusions

of the trial court on appeal. The main portion of the opinion,

then, clearly addresses the propriety of granting summary

judgment and does not disturb the settled principle that

appellate courts review such dispositions de novo.

ies

App. 23

pioneer the application of a relaxed test in reviewing

the grant of summary judgment.!4 We examine the con-

clusions reached below de novo.

6. Sun Bank

Appellant’s fiduciary claims against Sun Bank turn

primarily on the theory that the bank acquired fiduci-

ary status when it exercised its powers under the inse-

curity provisions of the 1981 loan of $1.6 million.

ERISA Section 502(aX2), 29 U.S.C. § 1132(aX2) (1988),

empowers a plan fiduciary to bring a civil action for

'4 Hiram Walker also involved an appeal from a sum-

mary judgment order issued by Judge Ryskamp. There, as

here, parties on both sides had moved for summary judg-

ment. The court of appeal noted in that case that Judge

Ryskamp may have incorrectly assumed that no facts were

in dispute merely because all parties had moved for sum-

mary judgment. The record in the present case discloses

Judge Ryskamp’s acknowledgment that contested issues of

fact might yet remain, but also evidences an eagerness to

dispense with the case at the summary judgment stage for

the same reasons articulated in Nunez: “I think that every

facet of this case has been fully explored and the court has

been considerably enlightened as to the details of this entire

transaction. .. . It is also apparent that this court would

have to sit as the trier of fact to hear this case, and it is quite

different when you hear a summary judgment knowing the

case will go to a jury and when a case is going to be tried by

the court.” Transcript of Decision, December 16, 1988,

R59-961-2. While the judge’s willingness to draw inferences

from the facts was consistent with Nunez on appeal our

review will be unaffected by any inferential conclusions

below.

App. 24

relief under Section 409 against a breaching fiduciary.

Section 409 provides:

Any person who is a fiduciary with respect to a

plan who breaches any of the responsibilities,

obligations, or duties imposed upon fiduciaries

by this subchapter shall be personally liable to

make good to such plan any losses to the plan

resulting from each such breach, and to

restore to such plan any profits of such fiduci-

ary which have been made through use of

assets of the plan by the fiduciary, and shall be

subject to such other equitable or remedial

relief as the court may deem appropriate... .

29 U.S.C. § 1109(a) (1988). Appellant proceeds under

this liability provision in seeking monetary damages

against Sun Bank, alleging that the bank’s actions

against the Plan under the loan terms amounted to an

exercise of discretionary authority or control over Plan

assets such that it acquired fiduciary status.

ERISA Section 3(21)(A) defines a fiduciary not sim-

ply in terms of certain designated offices, but also more

flexibly, with reference to the functions performed by a

person:

[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 invest-

ment advice for a fee or other compensation,

direct or indirect, with respect to any monies

or other property of such plan, or has any

authority or responsibility to do so, or (iii) he

App. 25

has any discretionary authority or discretion-

ary responsibility in the administration of

such plan.

29 U.S.C. § 1002(21)(A) (1988). 15 Thus, ERISA contem-

plates that fiduciary responsibility will be reposed

automatically in a party that assumes a discretionary

role. Owing to the statute’s definitional approach, it is

legally possible that a party whose business touches on

the disposition of plan assets, even if only a lending

bank, could assume fiduciary status with respect to a

plan and become liable for fiduciary breaches. Nonethe-

less, the discretionary role needed to support fiduciary

status must amount to more than a theoretical contriv-

ance. As one commentator has recently noted:

A secretary toa fiduciary may have discretion

as to some mundane matters of plan manage-

ment, but secretaries are not thereby made

fiduciaries — not even limited ones. In princi-

ple, they could be, but experience and common

sense suggests that a minimum level of discre-

tion should be fixed, below which a person has

no fi luciary responsibility at all.

Jay Conison, The Federal Common Law of ERISA Plan

Attorneys, 41 Syracuse L.Rev. 1049, 1073 (1990). The

issue with respect to Sun Bank is whether its powers as

a secured commercial lender realistically gave rise to

the discretionary control of the nature contemplated by

ERISA.

15 The term “named fiduciary” is collaterally defined in

ERISA Section 402(a)(2), 29 U.S.C. § 1102(a)(2) (1988), asa

fiduciary named in the plan instrument.

App. 26

At the outset, we must determine waether the

terms of the loan agreement consummated in 1981 con-

ferred fiduciary status on Sun Bank. Because the loan

was secured by stock collateral, the loan necessarily

conferred on the bank certain rights against the Plan

that involved the disposition of Plan assets. For exam-

ple, the bank was empowered to demand additional

collateral. It was also ernpowered to liquidate the col-

lateral pledged by the Plan and to compel the Plan to

produce the S-15 registration (converting restricted

shares to freely negotiable shares) that might be

needed to effect the liquidation. While these rights

indeed created an “authority” over the Plan assets that

were pledged on the loan, they were remedies in the

form of those commonly reserved to commercial lenders

and were limited by a fixed framework — the statutory

and common law, the loan’s own terms, and the dictates

of banking industry custom. The undisputed facts

establish that the facially broad insecurity and liquida-

tion provisions were typical of arm’s length commercial

loan agreements. As under ordinary debtor-creditor

agreements, then, these powers were specifically lim-

ited.

An entity which assumes discretionary authority or

control over plan assets will not be considered a fiduci-

ary if that discretion is sufficiently limited by a pre-

existing framework of policies, practices and pro-

cedures. See Munoz v. Prudential Ins. Co., 633 F.Supp.

564, 568 (D.Colo. 1986) (“[I]t is a person’s ability to

make policy decisions outside of a pre-existing or sepa-

rate framework of policies, practices and procedures

App. 27

which saddles that person with Erisa fiduciary lia-

bility.”); see also Gelardi v. Pertec Computer Corp., 761

F.2d 1323, 1325 (9th Cir.1985) (per curiam) (holding

that administrative actions within a framework of poli-

cies established by others do not constitute the exercise

of fiduciary responsibility). Here, clear standards cir-

cumscribed Sun Bank’s discretion with respect to the

Plan. Florida’s UCC good faith requirement, for exam-

ple, limited the power of the bank to deem itself inse-

cure. See Fla.Stat. § 671.203 (1990). The liquidation

powers of the bank were also limited by clear stan-

dards, inasmuch as the promissory note provided that

Sun Bank would be entitled to convert the preferred

stock into common stock only in the event of the Plan’s

failure to make payments when due. The collateral

pledged was deemed unsatisfactory only in accordance

with the 70% margin call, which is commonly the objec-

tive standard used in commercial loans.'® In light of

this web of legal and contractual standards, we cannot

hold that the conversion terms of the 1981 loan agree-

ment conferred fiduciary status on Sun Bank.

‘6 Useden’s contention that the 70% margin call was not

an initial part of the loan agreement is of no avail. The

underlying custom provides some objective, if not absolute,

limitation on the bank’s powers. Coupled with the bank’s

ultimate adherence to this objective standard, this custom

Provides uncontroverted evidence that the bank’s powers

under the loan agreement were meaningfully limited and not

later exceeded. A dispute as to a fact of insufficient probative

value will not preclude summary judgment. Anderson v. Lib-

erty Lobby, Inc., 477 U.S. 242, 246-50, 106 S.Ct. 2505, 2511,

91 L.Ed.2d 202 (1986).

App. 28

Having rejected the loan documents as a textual

source of fiduciary status, we must further address

whether the bank’s exercise of its rights and remedies

triggered the attachment of fiduciary status. In the

interest of consistency, we are reluctant to hold that the

creation of legal rights in the bank failed to give rise to

fiduciary status, but the exercise of those rights in

conformity with the loan agreement did so nonetheless.

In this case, the record shows that Sun Bank repeatedly

found itself insecure due to the declining value of Air

Florida stock, demanded additional collateral from the

Plan, applied cash collateral and liquidated stock to

reduce the outstanding balance, accepted a guaranty of

the debt by the Plan sponsor and ultimately satisfied

the full balance by liquidating collateral after default

on the already renewed promissory note. At no point

did Sun Bank’s extraction of these remedies amount to

management of the Plan itself. We cannot agree with

appellant’s claim the bank’s mere exercise of its con-

tractual rights made the bank an alter ego of the named

Plan fiduciaries. Although the bank’s actions may have

prompted the named fiduciaries to take steps detrimen-

tal to the Plan, Sun Bank is not equally responsible for

this alleged mismanagement of the Plan assets.

To accept appellant’s theory would subject any com-

mercial lender acting within ordinary commercial cus-

tom to inconsistent obligations. On the one hand, a

bank’s duty to its own shareholders and depositors

would demand that it enter into only those loan agree-

= ments which accord it sufficiently exacting security

rights. On the other hand, a bank’s resulting fiduciary

duty to the plan-borrower would irreconcilably preclude

App. 29

its exercise of those crucial rights. Consistent with the

fundamental purposes of ERISA, we decline appellant’s

invitation to impose a regime subjecting lenders to

irreconcilable obligations and in so doing make it diffi-

cult or impossible for pension plans to persuade lenders

to enter into arm’s length, commercial loan transac-

tions.

Our review of the case law ratifies our reluctance to

confer fiduciary status on a bank merely because it

legally converted plan assets held in its possession or

exercised other ordinary powers under a lender-bor-

rower relationship. Relevant cases have even rejected

ERISA fiduciary status when the lender acted improp-

erly or outside its legal rights. In O’Toole v. Arlington

Trust Co., 681 F.2d 94 (1st Cir.1982), the court held that

it lacked jurisdiction over an action against a bank in

which pension funds were deposited because the bank

was not a fiduciary within the meaning of ERISA. See

id. at 96. Even though the bank in O’Toole had improp-

erly converted assets of the plan by using deposited

funds to offset debts of the plan sponsor, the court

refused to hold

that the bank is a fiduciary within the mean-

ing of the statute. .. . [The bank’s] respon-

sibilities as the depository for the funds do not

include the discretionary, advisory activities

described by the statute —- activities which in

fact were performed by [the trustees]. In the

absence of these activities, it would be unfair

to impose on [the bank] the responsibilities

and liabilities created by the statute for fiduci-

aries.

Id.

App. 30

Also instructive is Robbins v. First American Bank

of Virginia, 514 F.Supp. 1183 (N.D.II1.1981). There, the

district court addressed the ERISA ramifications of a

loan participation agreement between the defendant-

bank and the trustees of an ERISA plan, whereby the

plan offered 90% of the loan proceeds to a certain defen-

dant-borrower. Dismissing an action brought against

the bank after the borrower defaulted, the court held:

The bank was never itself involved with the

administration or management of the fund

itself or in making its investment policies and

decisions. . . . The fixed terms of the loan [to

the third party borrower] and commercial

nature of the transaction belie the plaintiff’s

allegations of sufficient discretionary respon-

sibility to come within the terms of the Act.

Id. at 1190-91; see also Brandt v. Grounds, 687 F.2d

895, 898 (7th Cir.1982) (holding that a bank is not a

fiduciary liable for monies improperly converted by a

trustee merely because it performed its depository func-

tion in the withdrawal transactions); American Sav. &

Loan Ass’n/Home Sav. Ass’n. Dep’t Labor Op. No.

79-10A, at 3-4, 6 (Feb. 12, 1979) (stating that a savings

and loan association’s depository relationship with an

ERISA plan does not render the association a fiduciary

under ERISA); Hibernia Bank v. International Bhd. of

Teamsters, 411 F.Supp. 478, 488-90 (N.D.Cal.1976) (rul-

ing that a bank cannot obtain fiduciary status by virtue

of its agency and depository relationships with an

ERISA plan). Neither the appellant nor this court can

locate a case in which fiduciary status was conferred on

a bank due to its ordinary commercial lending relation-

ship with an ERISA plan.

arene een aimee

App. 31

Accordingly, we agree with the district court in

holding that there is no issue as to any material fact in

the record to preclude Summary judgment as to Sun

Bank’s fiduciary liability. 17

17 Appellant also asserts that Sun Bank was a fiduciary

to the Plan by virtue of its preparation of Federal Reserve

Form U-1 incident to the 1981 loan; a lender must complete

Form U-1 pursuant to 12 C.F.R. § 221-3(b) (1990). (The form

pertains to the valuation of stock collateral under Regula-

tion U, 12 C.F.R. § 221 (1990)). This contention is without

legal merit. Appellant relies on Northern Cal. Retail Clerks

Union v. Jumbo Markets, Inc., 906 F.2d 1371 (9th Cir. 1990),

an irrelevant case holding that an employer must “faithfully

and punctiliously” fill out reports on hours worked by

employees when such reports are required by the terms of

the employee pension plan. Jd. at 1373. Form U-1 is neither

related to the Plan at issue here nor relevant to ERISA. It is

prepared for the benefit not of the borrower, but of the

Federal Reserve Board. First Ala. Bancshares, Inc. v. Low-

der, [1981 Transfer Binder] Fed.Sec.L.Rep. (CCH) 7 98,015,

at 91,252, 1981 WL 1638 (N.D.Ala. May 1, 1981).

Appellant alleges that Sun Bank overvalued the collat-

eral (i.e., restricted stock) reported on the form. Assuming,

in appellant’s favor, that this error was a breach of some

duty owing to the borrower, the ministerial preparation of

Form U-1 clearly does not confer fiduciary status needed to

bring that breach within the proscription of ERISA. See 29

C.F.R. § 2509.75-5 (1991) (persons performing the minis-

terial duty of preparing reports required by government

agencies are not fiduciaries). Regardless, the record is devoid

of facts indicating that any erroneous entry on the form —

even if Sun Bank’s underlying overvaluation of the stock in

some way harmed the Plan - can be causally linked to any

damages suffered by the Plan. “[A] causal connection is

required between the breach of fiduciary duty and the losses

incurred by the- plan.” Brandt, 687 F.2d at 898.

App. 32

c. Greenberg, Traurig

Consistent with the functional definition of fiduci-

ary status enshrined in ERISA, our determination con-

cerning the fiduciary status of Greenberg, Traurig

demands a functional examination of the law firm’s

conduct in connection with the Plan. Our inquiry,

understood correctly, is not into the law firm’s fiduciary

duties under general laws applicable to the attorney-

client relationship, but instead into fiduciary status

within the precise meaning of ERISA. Accordingly, we

focus on the firm’s discretionary control or manage-

ment, if any, over the Plan and its assets.

Department of Labor regulations provide elaborate

guidance as to when an attorney or other consultant to

a plan will be considered a fiduciary:

[While attorneys, accountants, actuaries and

consultants performing their usual profes-

sional functions will ordinarily not be consid-

ered fiduciaries, if the factual situation in a

particular case falls within one of the catego-

ries described in clauses (a) through

(d)...such persons would be considered to be

fiduciaries within the meaning of section 3(21)

of the Act. [Clauses (a) through (d) provide:) a

consultant (a) exercises discretionary author-

ity or discretionary control respecting the

management of the plan, (b) exercises author-

ity or control respecting management or dispo-

sition of the plan’s assets, (c) renders

investment advice for a fee, direct or indirect,

with respect to the assets of the plan, or has

any authority or responsibility to do so, or (d)

App. 33

has any discretionary authority or discretion-

ary responsibility in the administration of the

plan.]

29 C.F.R. § 2509.75-5 (1991). Applying these regula-

tions, the court in Yaseta v. Baima, 837 F.2d 380 (9th

Cir.1988), held that an attorney who “reviewed |an

ERISA plan] and its compliance with the law” and did

not control the plan “in a manner other than by usual

professional functions” was not a fiduciary under

ERISA. Id. at 385. Our review of the facts, likewise, is

focused on departures by Greenberg, Traurig from

usual professional functions.

The operative facts concern the extent to which

Greenberg, Traurig acted outside the usual professional

function of attorneys by (1) counseling the Plan as to

the business or financial prudency of the June 198]

loan and acquisition of GALIC stock, (2) rendering

investment advice with respect to those same transac-

tions, and (3) rendering legal services in connection

with the August 1982 redocumentation of the loan and

uncompleted conversion of the Plan into an ESOP In its

brief, appellant paints a portrait of a law firm deeply

penetrating the governance of the Plan, noting, for

example, the firm’s drafting of amendments to the Plan

on its own initiative, the Plan’s heightened reliance on

the firm immediately following Timoner’s stroke in

1982, the move of one of the firm’s attorneys over to the

Plan itself during 1982, and the hybrid business-lega]l

character of much of the advice rendered through the

relevant timespan. Even adopting all of the factual

inferences relied on by appellant to project this por-

trait, we nevertheless find no basis in law to hold that

App. 34

Greenberg, Traurig departed from the usual functions

of a law firm or otherwise effectively or realistically

controlled the Plan.

We think it imprudent and counter to the thrust of

the ERISA scheme to hold that the commingling of legal

advice with incidental business observations, especially

when this advice is proffered to business-persons of

some sophistication, will automatically confer fiduciary

status on attorneys and thus expose them to ERISA

liability. It cannot plausibly be considered consonant

with the clear purpose of ERISA to deprive ERISA

plans of access to ordinary legal advice, which not infre-

quently balances legal conclusions with some discus-

sion of attendant business implications. Equally

chilling would be a rule equating a law firm’s advice in

favor of a transaction with the named fiduciaries’

actual decision to enter the transaction. Nevertheless,

it is exactly this proposition that appellant advances in

arguing that Greenberg, Traurig’s advice in favor of a

given course of action constituted effective control over

the actions of the Plan.!8 In short, ERISA

18 In accordance with legislative history, we do not reject

absolutely the proposition that consultants and advisors can,

under some circumstances, assume fiduciary control.

While the ordinary functions of consuitants and

advisors to employee benefit plans (other than

investment advisers) may not be considered as

fiduciary functions, it must be recognized that

there will be situations where such consultants

and advisers may because of their special exper-

tise, in effect, be exercising discretionary authority

(Continued on following page)

App. 35

does not contemplate an allocation of liability that will

deter consultants such as attorneys from assisting

plans. Accordingly, we reject appellant’s arguments to

the effect that the law firm’s attentiveness to

(Continued from previous page)

or control with respect to the management or

administration of such plan or some authority or

control regarding its assets.

H.R.Conf. Rep. No. 1280, 93rd Cong., 2d Sess. 32B, reprinted

tn 1974 U.S.C.C.A.N. 4639, 5038, 5103.

Inquiring into the de facto control of a stock broker over

an ERISA plan, the district court in Stanton v. Shearson

Lehman/American Express, Inc., 631 F.Supp. 100

(N.D.Ga.1986) similarly suggested that the dominant exper-

tise of the consultant may be relevant: -

Even though a client may have the final word on

how his or her assets wil] be traded and is, thus,

technically in control of the assets, it is the stock

broker who is effectively and realistically in control

of the assets when, for whatever reason, the client

merely “rubber stamps” — follows automatically or

without consideration — the investment recommen-

dations of the broker.

Id. at 103 (emphasis in original). This passage may some-

what overstate the principle sought to be adopted by the

district court. It is Significant, though, that the Stanton

court was construing a regulation pertaining to stock bro-

kers; that regulation is formulated so as to readily confer

fiduciary status when the broker goes beyond acting on the

clear instructions of the plan. See 29 C.FR. 8 2510.3-21(d)

(1991). Any preference for such purely ministerial conduct

would be misplaced in regard to the judgment-intensive ser-

vices of legal counsel.

App. 36

business prudency or its occasional rendering of advice

touching on an investment conferred fiduciary status

on the law firm.!9

Relevant cases support our reading of ERISA and

the applicable regulations. The court in Nieto v. Ecker,

845 F.2d 868 (9th Cir.1988), held that an attorney who

failed to collect delinquent employer contributions was

not a fiduciary. Jd. at 870-71. The Ninth Circuit per-

suasively articulated the fallacy of equating the perfor-

mance of legal services with the exercise of fiduciary

authority:

Plaintiffs contend . . . that [the defendant-

attorney] exercised such authority because the

employer contributions he failed to collect

were plan assets under his discretionary con-

trol. ... This argument proves far teo much.

Under this rationale anyone performing ser-

vices for an ERISA plan — be it an attorney, an

accountant, a security guard or a janitor —

would be rendered a fiduciary insofar as he

exercised some control over trust assets... .

Id. at 870. See also, Yaseta, 837 F.2d at 385; Anoka

Orthopaedic Associates, P.A. v. Mutschler, 709 F.Supp.

1475, 1483 (D.Minn.1989) (“Applying [Department of

Labor regulations pertaining to investment advice to

the attorney’s] activities, even if the Court assumes

that he gave the investment advice... , such rendering

19 Investment advice must be rendered by one having

“discretionary authority or control . .. with respect to pur-

chasing or selling securities” or be rendered on a “regular

basis” in order to give rise to fiduciary status. 29 C.F.R.

§ 2510.3-21(c)(1)(1991).

App. 37

of advice would not cause him to become a fiduciary.

(The attorney] neither had ‘discretionary authority or

control with respect to purchasing or selling securities’

for the Plans, nor did he render advice ‘on a regular

basis.’” (citations omitted)), aff'd, 910 F.2d 514 (8th

Cir.1990).

Finding that the undisputed facts support sum-

mary judgment on the issue of Greenberg, Traurig’s

fiduciary status, we affirm the grant of summary judg-

ment below.

4. Non-Fiduciary Liability Under ERISA

As an alternative to fiduciary liability, appellant

argues that Sun Bank and Greenberg, Traurig are lia-

ble as non-fiduciaries who knowingly participated in a

breach committed by an ERISA fiduciary.2° This theory

derives its framework from cases imposing liability

where a non-fiduciary party commits an act or omission

furthering or completing the breach of a fiduciary, and

has actual or constructive knowledge that the act or

omission constitutes a breach of trust.

The district court opinion in Freund v. Marshall &

Ilsley Bank, 485 F.Supp. 629 (W.D.Wis.1979), was a

progenitor of cases recognizing a cause of action against

20 Appellee [sic] omitted to include such a claim against

Sun Bank in its complaint. On appeal, it asserts that the

district court should have a permitted an amendment to

include such a claim, and advances the legal theory against

both appellees in its brief. For purposes of this discussion,

we assume that the theory is properly argued against both

Greenberg, Traurig and Sun Bank.

App. 38

non-fiduciaries who conspire with an ERISA fiduciary.

See id. at 641-42 (“[A court] is fully empowered to

award the relief available in traditional trust law

against non-fiduciaries who knowingly participa-

te ...ina breach of trust.”); accord Thornton v. Evans,

692 F.2d 1064, 1078 (7th Cir.1982). From the premise

that Congress intended ERISA to federalize the com-

mon law of trusts with respect to employee benefit

plans, the Freund court proceeded to extend the reach

of ERISA to third parties who, under traditional trust

law, could be held liable for assisting a trustee in a

breach of trust. Freund, 485 F.Supp. at 642. Cases since

have made reference to specific textual provisions of

ERISA, asserting either that the equivalent of fiduciary

liability (established in section 409(a)) reaches non-

fiduciaries due to the incorporation of trust law into

ERISA, see, e.g., Fremont v. McGraw-Edison Co., 606

F.2d 752, 758-59 (7th Cir.1979) (discussing liability of

third parties pursuant to a § 409 claim), cert. denied,

445 U.S. 951, 100 S.Ct. 1599, 63 L.Ed.2d 786 (1980), or

that section 502(aX3)’s reference to “appropriate equi-

table relief” encompasses the award of monetary dam-

ages against non-fiduciaries. See, e.g., Lowen v. Tower

Asset Management, Inc., 829 F.2d 1209, 1220 (2d Cir.

1987) (recognizing basis for recovery against non-

fiduciaries under both trust law and § 502(a)(3)’s reme-

dial provisions).

Since Freund and many of the opinions relying on

its holding were decided, the Supreme Court has unam-

biguously intervened to restrain the grafting of novel

remedies onto the statute. The Court’s decision in Mas-

sachusetts Mutual Life Insurance Co. v. Russell, 473

App. 39

U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985), collided

with the reasoning of these cases by instructing that “

‘where a statute [such as ERISA] expressly provides a

particular remedy or remedies, a court must be chary of

reading others into it.’” Id. at 147, 105 S.Ct. at 3093

(quoting Transamerica Mortgage Advisors, Inc. v.

Lewis, 444 U.S. 11, 19, 100 S.Ct. 242, 246-47, 62

L.Ed.2d 146 (1979)). Since Russell, the only circuit

court decision to devote due attention to the Court’s

reasoning in that case has been Nieto v. Ecker, 845 F.2d

868 (9th Cir.1988), in which the Ninth Circuit rejected

pre-Russell theories of non-fiduciary liability by hold-

ing that a non-fiduciary plan attorney could not be held

liable for a fiduciary breach. See id. at 872-73. As a

result of the circuits’ selective attention to Russell, a

split in authorities has arisen. Compare Nieto, 845 F.2d

at 872-73 (rejecting non-fiduciary liability) with Pappas

v. Buck Consultants, Inc., 923 F.2d 531, 541 (7th

Cir.1991) (accepting non-fiduciary liability) and Brock

v. Hendershott, 840 F.2d 339, 342 (6th Cir.1988) (same)

and Lowen, 829 F.2d at 1220 (same) and Fink v.

National Sav. and Trust Co., 772 F.2d 951, 958

(D.C.Cir.1985) (citing Freund in dicta for non-fiduciary

liability principle). Carefully considering the rationales

in these and other cases, we conclude that no cause of

action exists under ERISA section 409(a) or 502(a)(3)

for monetary damages against a non-fiduciary.

At the threshold of our inquiry, it is appropriate to

search ERISA’s text for any language plainly extending

liability to non-fiduciaries. ERISA’s monetary damages

provision, section 409(a), by its own terms pertains only

to fiduciaries. “The plain- language of section 409(a)

App. 40

limits its coverage to fiduciaries, and nothing in the

statute provides any support for holding others liable

under that section.” Nieto, 845 F.2d at 871. See also,

Kevin B. Bogucki et al., Comment, Nieto v. Ecker: The

Propriety of Non-Fiduciary Liability Under Section 409,

64 Notre Dame L.Rev. 271, 281 (1989). The question

whether monetary damages are subsumed under the

section 502(a)(3) concept of “equitable relief” is also

plainly answered by the text of the statute, when con-

sidered as a coherent whole. We agree with the Nieto

court’s reminder that “[p]ermitting recovery of damages

under section 502(aX3) would render section 409(a)

superfluous, a result contrary to a fundamental canon

of statutory construction.” Nieto, 845 F.2d at 873.

Accordingly, we, like the Ninth Circuit, decline to so

broadly interpret an isolated section of the statute as to

render it inconsistent with the ERISA scheme as a

whole.

Our accord with the holding in Nieto does not indi-

cate a wholesale adoption of that decision’s rationale.

The most important reason for our departure from

Nieto is that we now decide this question with the

benefit of the Supreme Court’s opinion in Firestone Tire

and Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948,

103 L.Ed.2d 80 (1989), in which Justice O’Connor

explicitly authorized the development of a federal com-

mon law under ERISA drawing upon the traditional

law of trusts. Citing the trust law principle whereby

courts construe trust agreements without deference to

the interpretation of either party, the Court held in

Firestone that the fiduciary’s termination of benefits to

a participant was subject to de novo review. Laying the

App. 41

groundwork for the incorporation of this procedural

rule into ERISA, the Court explained:

ERISA abounds with the language and termi-

nology of trust law. ERISA’s legislative history

confirms that the Act’s fiduciary responsibility

provisions “codifly] and mak[e] applicable to

[ERISA] fiduciaries certain principles devel-

oped in the evolution of the law of trusts.”

Given this language and history, we have held

that courts are to develop a “federal common

law of rights and obligations under ERISA-

regulated plans.”

Id. at 110, 109 S.Ct. at 954 (quoting H.R.Rep. No. 533,

93rd Cong., 2d Sess. 11, reprinted in 1974 U.S.C.C.A.N.

4639, 4649; Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41,

56, 107 S.Ct. 1549, 1558, 95 L.Ed.2d 39 (1987)) (other

citations omitted).

The Nieto court proceeded without the benefit of

the Firestone opinion and its invitation to the incor-

poration of procedural trust law principles; not sur-

prisingly, then, Nieto emphasized the restrictive strains

of the earlier Supreme Court opinion in Russell. In

Russell, the Court addressed an action by a beneficiary

for extracontractual damages who alleged that she had

been damaged by a wrongful termination of payments,

even after retroactive benefits were paid to her in full.

Finding no express authority in the text of ERISA sec-

tion 409 for extracontractual damages, as well as no

indication of Congressional intent supporting an

implied right of action for such relief, the Court was

reluctant to tamper with an enforcement

scheme crafted with such evident care as the

App. 42

one in ERISA... . “The presumption that a

remedy was deliberately omitted from a stat-

ute is strongest when Congress has enacted a

comprehensive legislative scheme including an

integrated system of procedures for enforce-

ment.”

Russell, 473 U.S. at 147, 105 S.Ct. at 3093 (quoting

Northwest Airlines, Inc. v. Transport Workers, 451 U.S.

77, 97, 101 S.Ct. 1571, 1583, 67 L.Ed.2d 750 (1981)).

The Nieto court acknowledged the legislative history

supporting the application of certain trust law princi-

ples to fiduciaries as defined by ERISA, but, evidently

emboldened by the teachings of Russell, declared that

legislative history “does not support the broad[ ] propo-

sition that ERISA meant to adopt the entire body of

state trust law lock, stock, and barrel.” Nieto, 845 F.2d

at 872 n. 2. While we agree with the Nieto court’s

interpretation of ERISA’s text, we strive in our analysis

to better elaborate the lessons of both Russell and Fire-

stone.

Accordingly, we interpret ERISA to embody a tai-

lored law of trusts — a legal fabric which not only adopts

familiar trust principles, but also supplements these

principles with more exacting standards, and exempts

from its reach certain parties and activities that may

have been amenable to suit under traditional trust law.

See Eaves v. Penn, 587 F.2d 453, 457 (10th Cir.1978).

Thus, while it is obvious that ERISA is informed by

trust law, the statute is, in its contours, meaningfully

distinct from the body of the common law of trusts. A

method of interpretation consonant with this realiza-

tion will reject the unselective incorporation of trust

App. 43

law rules into ERISA. Rather, a court should only incor-

porate a given trust law principle if the statute’s text

negates an inference that the principle was omitted

deliberately from the statute. ERISA is a “comprehen-

sive and reticulated statute.” Nachman Corp. v. Pen-

ston Benefit Guar. Corp., 446 U.S. 359, 361, 100 S.Ct.

1723, 1726, 64 L.Ed.2d 354 (1980), bearing the marks of

circumspect drafters; courts should proceed with com-

mensurate circumspection before concluding that a

prominent feature of trust law was omitted from the

Statute merely through inadvertence. As the Court

taught in City of Milwaukee v. Illinois, 451 U.S. 304,

101 S.Ct. 1784, 68 L.Ed.2d 114 (1981):

The establishment of ... a self-consciously

comprehensive program by Congress ...

strongly suggests that there is no room for

courts to attempt to improve on that program

with federal common law.

Id. at 319, 101 S.Ct. at 1793.

A recent Second Circuit case, Chemung Canal Trust

Co. v. Sovran Bank/Maryland, 939 F.2d 12 (2d

Cir.1991), petition for cert. filed, 60 U.S.L.W. 3411 (U.S.

Oct. 22, 1991) (No. 91-681), illustrates this approach in

operation. There, the court recognized an unenume-

rated cause of action under ERISA for contribution or

indemnity by a breaching fiduciary against a co-fiduci-

ary. Notably, it did not automatically incorporate the

indemnity rights recognized in the common law of

trusts. Instead, its rationale focused specifically on

what was contemplated by the statute’s drafters:

Congress’s failure to include enforcement pro-

visions to address the relationships among

App. 44

fiduciaries does not necessarily mean that con-

gress intended to preclude such remedies.

ERISA was designed specifically to provide

redress for plaintiffs — the plan’s participants

and beneficiaries. Its remedies do not purport

to deal with allocating joint liabilities among

fiduciaries. .. .

Id. at 18 (citation omitted).

In the present case, appellant would have us ignore

the obvious care with which ERISA’s remedial provi-

sions are formulated, instead requiring us to supple-

ment the statute with a substantive right against a

party that Congress readily could have chosen to reach.

Congress clearly contemplated the involvement of non-

fiduciary parties with employee benefit plans when it

drafted provisions of ERISA. For example, ERISA sec-

tions 502(aX3) and 502(a\X5) authorize suits to enjoin or

ebtain other equitable relief for “any act or practice”

violating either the statute or the terms of a plan,

without restricting the types of parties who may be so

sued. 29 U.S.C. §§ 1132(aX(3), 1132(aX5) (1988). ERISA

section 3(14XB), moreover, broadly defines the “parties

in interest” with whom plans are prohibited to enter

into certain transactions under section 406(a). 29

U.S.C. §§ 1002(14XB), 1106(a) (1988). Significantly,

however, Congress expressly limited the scope of sec-

tions 502(a)(3) and 502(a)(5) to equitable remedies, and

likewise limited section 409(a) to provide a right of

action only against fiduciaries. It is telling that, despite

textual treatment of non-fiduciaries in various other

parts of the ERISA scheme, provisions relevant to

appellant’s theory contain no textual support for a

App. 45

claim for monetary damages against nonfiduciaries. We

cannot infer that Congress’s silence igs accidental in an

area where Congress has already said so much out loud.

We recognize that federal courts may be authorized

in certain areas to borrow procedural devices and prin-

ciples from trust law. Nonetheless, we must conclude

that, just as “(t]he six carefully integrated civil enforce-

ment provisions found in § 502(a) of the statute

- provide strong evidence that Congress did not

intend to authorize other remedies that it simply forgot

to incorporate expressly,” Russell, 473 U.S. at 146, 105

S.Ct. at 3092 (emphasis in original), neither do relevant

provisions imply a cause of action for monetary dam-

ages against a party excluded by — but clearly within

the contemplation of — Congress at the time it formu-

lated the ERISA scheme.

The district court correctly concluded that there is

no cause of action for monetary damages under ERISA

sections 409(a) or 502(a) for the participation of a non-

fiduciary in a fiduciary breach. Therefore, its grant of

summary judgment for Sun Bank and Greenberg, Trau-

rig was appropriate.

5. Regulation U

Appellant also asserts a private cause of action

implied under Regulation U, 12 C.F.R. § 221 (1990).

Regulation U, promulgated under section 7 of the Secu-

rities Exchange Act of 1934, 15 U.S.C. § 78g (1988),

imposes credit restrictions on banks that issue loans

secured by certain stock. In short, appellant alleges

that Sun Bank violated Regulation U’s “margin rules”

App. 46

by its method of valuing the stock pledged as collateral

on the June 1981 loan.

On this theory, appellant clearly fails. Cort v. Ash,

422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), sets

forth an analysis for determining the existence of an

implied right of action under a federal statute. The Cort

factors ask, inter alia, whether the plaintiff is a mem-

ber of the class for whose benefit the statute was

enacted, and whether there is any indication of congres-

sional intent to provide the remedy sought. Jd. at 78, 95

S.Ct. at 2088. Regulation U is clearly not targeted to

serve the especial benefit of borrowers, as lenders and

borrowers are equally culpable under the applicable

regulations; significantly, Regulation X makes it a vio-

lation on the part of the borrower to accept credit in

violation of the margin rules. See 12 C.F.R. § 224 (1990)

(promulgated under 15 U.S.C. § 78g(f)).2! This reciproc-

ity of culpability also negates the Cort factor that looks

to possible congressional intent to create the remedy

sought by a private party. The clear intention is that

both lender and borrower should simply conform their

conduct to the margin rules, not sue one another for

violations. In sum, there is no indication that Congress

intended to create a private cause of action under Regu-

lation U. See generally Bennett v. U.S. Trust Co., 770

F.2d 308, 313 (2d Cir.1985), (“[WJe agree with the unan-

imous view of the circuit courts [which] hold that there

21 Appellant’s reliance on Congress’s especial concern

for employee retirement plans under ERISA, in connection

with an implied cause under Regulation U, is simply myste-

rious.

App. 47

is no implied cause of action for violations of [Regula-

tion U]”), cert. denied, 474 U.S. 1058, 106 S.Ct. 800, 88

L.Ed.2d 776 (1986).

As the Regulation U theory fails legally, summary

judgment for the appellees as to appellant’s Regulation

U-based cause of action is appropriate.

6. Remaining Issues

Appellant argues on appeal that the district court

abused its discretion in denying its ore tenus motion to

amend its complaint to include a cause of action against

Sun Bank as a non-fiduciary knowingly participating in

a fiduciary breach. Because we have rejected this the-

ory of liability, we need not address any abuse of discre-

tion committed by the court in denying appellant’s

motion to add this claim to its complaint.

We also find it unnecessary to reach the issue of the

availability to the Plan of extracontractual and puni-

tive damages under ERISA section 409, 29 U.S.C.

§ 1109(a) (1988). Noting that the Supreme Court

expressly left open the issue in Russell, 473 U.S. at 144

n. 12, 105 S.Ct. at 3091 n. 12, we defer consideration of

this issue to a day when a plaintiff proceeding under

section 409 has successfully asserted a theory of lia-

bility.

Ill. CONCLUSION

Based on the foregoing, we hereby AFFIRM the order

of the district court granting summary judgment in favor

of defendants Sun Bank and Greenberg, Traurig.

App. 48

Neil A. USEDEN,

Plaintiff,

C. Edward ACKER, et. al.

Defendants,

No. 85-0002-Civ.

United States District Court,

S.D. Florida.

March 29, 1989.

ORDER ON MOTIONS FOR

SUMMARY JUDGMENT

RYSKAMP, District Judge.

This cause was before the court on defendants, Sun

Bank of Miami, N.A.’s, Sun Bank, Inc.’s (collectively

“Sun Bank”) Greenberg, Traurig, Askew, Hoffman,

Lipoff, Rosen & Quentel’s (“Greenberg, Traurig”)

motions for final summary judgment, Eli Timoner’s

(“Timoner”) and Cesar Alvarez’s (“Alvarez”) motions for

partial summary judgment, and Sanders Campbell’s

(“Campbell”) motion for final summary judgment. In

addition, plaintiff, Neil A. Useden, As Trustee for the

Air Florida System, Inc. Profit Sharing Plan and Trust’s

(“Useden”) partial motion for summary judgment

against the above defendants, Oliver Kimberly and

Donald Lloyd-Jones was before this Court.

For the reasons set forth below, this Court deter-

mines that defendants, Sun Bank’s and Greenberg,

Traurig’s motions for final summary judgment are

ine 6 ieee srcniars eeu sr ameeton acne

App. 49

granted. In addition, Alvarez’s motion for partial sum-

mary judgment with respect to the issue of punitive

damages is granted. The Court reserves ruling on the

motions for partial summary judgment on the issue of

the statute of limitations.1 Plaintiff’s motion for partial

Summary judgment and defendant, Campbell’s motion

for final summary judgment are denied. Finally, plain-

tiff’s supplement to rule 10J statement of material and

disputed facts and the affidavit of Donald Lloyd-Jones,

served on Greenberg, Traurig on December 14, 1988 are

hereby stricken from the record and plaintiff’s motion

for continuance or extension of time for filing affidavits

and ore tenus motion to amend the complaint as to Sun

Bank are hereby denied.

UNDISPUTED FACTS

1. The Air Florida System, Inc. Profit Sharing

Plan and Trust (“Plan”) was established by Air Florida

Systems, Inc. and Air Florida, Inc. (collectively “Air

Florida”) on September 12, 1977.2 The Plan was

amended five times, with the last amendment effective

on August 1, 1980.

2. Greenberg, Traurig, was at all times material,

and is, a law firm practicing in Dade County, Florida.

Greenberg, Traurig provided legal services to the Plan

1 Defendants Eli Timoner and Greenberg, Traurig,

moved for summary judgment on the issue of the statute of

limitations. Alvarez adopted Timoner’s motion.

2 The Plan was made retroactively effective to August 1,

1976.

App. 50

from its inception until December, 1982 and to Air

Florida from the early 1970’s until August, 1982.

3. Greenberg, Traurig drafted the Plan, which was

patterned after a similar profit sharing plan instituted

by Southwest Airlines. The characteristic feature of the

Plan was that it was an eligible individual account

plan, as defined by ERISA, and it was to invest exclu-

sively in employer securities — that is stock of Air

Florida or its affiliates. The employer securities

acquired by the Plan were to be held by the Plan for

extended periods of time and distributed to Plan partic-

ipants entitled to receive benefits pursuant to the terms

of the Plan.

4. Timoner was the named trustee of the Plan

from its inception through July 10, 1982, when Timoner

suffered a debilitating stroke, at which time Donald

Lloyd-Jones (“Lloyd-Jones”) assumed Timoner’s respon-

sibilities with regard to the Plan. Under the terms of

the Plan, the Trustee of the Plan was authorized to

borrow or raise money for the purposes of the Plan and

was authorized to pledge all or any part of Plan assets

to secure the repayment of such a borrowing.

5. Timoner was also the Chief Executive Officer

and Chairman of the Board of Air Florida from July

1971 through July 1977 and President and Chief Oper-

ating Officer of Air Florida from August 1977 through

September 1981. From August 1977 to September 1981,

C. Edward Acker (“Acker”) was the Chief Executive

Officer and Chairman of the Board of Air Florida. Acker

left Air Florida in September 1981, at which time Tim-

oner reassumed the positions of Chief Executive Officer

App. 51

and Chairman of the Board of Directors. In June 1982,

Lloyd-Jones joined Air Florida and was appointed Chief

Executive Officer and President. After Timoner’s

stroke, Lloyd-Jones assumed Timoner’s corporate

duties.

6. In November 1977, Neil A. Useden Associates,

Inc. (“Useden Associates”) entered into a Plan Service

Agreement with Air Florida, where Useden Associates

agreed to render certain services to the Plan. On May 8,

1984, plaintiff was appointed Trustee of the Plan. On

January 2, 1985, plaintiff instituted this action. Green-

berg, Traurig, Sanders Campbell and Oliver Kimberly

were not named as defendants until September 1986.

7. Sun Bank of Miami, N.A. is, and at all times

material was, a national banking association perfor-

ming banking functions in Dade County, Florida.

8. Sun Bank, Ine. is located in Orlando, Florida

and is a bank holding company which owns all of the

outstanding shares of stock of Sun Bank of Miami, N.A.

Sun Bank, Inc. has a separate board or directors and

separate officers from Sun Bank of Miami, N.A. and did

not make the loan that is the subject of this litigation.

9. Sun Bank was one of several banks that pro-

vided commercial banking services to Air Florida

between 1977 and 1984. Beginning in early 1980, Sun

Bank developed a commercial lending relationship with

Air Florida and made several loans to Air Florida to

enable it to purchase aircraft.

App. 52

10. Edmund C. Timberlake (“Timberlake”) was

the commercial banking officer at Sun Bank who main-

tained contact with Air Florida with regard to its out-

standing commercial loans and its commercial banking

relationship. Pursuant to his role as commercial lend-

ing officer for the Air Florida account Timberlake con-

tinuously monitored Air Florida’s financial status.

11. On November 11, 1977, Air Florida contrib-

uted 50,000 shares of Air Florida common stock to the

Plan. On December 30, 1979, the Plan purchased

22,400 shares of Air Florida Series A Preferred Stock.

At all times material, the Air Florida common stock did

not pay either a cash or stock dividend. The series A

Preferred Stock, convertible into 2% shares of common

stock, paid a $.90 annual dividend per share. In addi-

tion, the preferred stock carried a “cheap stock” privi-

lege, meaning that a preferred stock owner could

purchase % of a share of common stock in exchange for

$.50 of the $.90 dividend. Thus, subsequent to the

December 31, 1979 purchase of Series A Preferred

Stock, the Plan acquired 2,800 additional shares of Air

Florida common stock through conversion of the Series

A Preferred Stock dividends. As of May 1981, the Plan

also had approximately $700,000.00 in cash as a result

of cash contributions from Air Florida.

12. In late 1980 to early 1981, Great American

Life Insurance Company (“GALIC”) began to dispose of

its substantial holdings of Air Florida stock. A signifi-

cant number of shares were sold by GALIC to Solomon

Brothers at a discount from the market price, and later

resold by Solomon Brothers in the market. By late May

App. 53

1981, GALIC’s holdings were less than 10% of the out-

standing shares of Air Florida stock.

13. In early 1981, Acker and Timoner became

aware of GALIC’s desire to dispose of certain Air Flor-

ida shares of preferred stock and convinced GALIC to

sell those shares of stock to the Plan at the same

discounted price of the sale of shares to Solomon

Brothers.

14. Thus, the Plan purchased 76,000 shares of

Series A Preferred stock from GALIC, which was the

equivalent of 190,000 shares of common stock. The pur-

chase price for the 76,000 shares of preferred stock was

calculated based on the common share equivalent of

100,000 shares at $8.795 per share and 90,000 shares

at $12.70 per share for a total purchase price of

$2,022,500, averaging $10.65 per share.3

15. The purchase of the stock by the Plan occurred

shortly after a public offering of Air Florida common

stock in May 1981. In this public offering, Air Florida

initially offered 2,000,000 shares. The offering was

increased to 3,000,000 shares as a result of market

demand. The offering sold at $13.50 per share. More-

over, additional stock owned by GALIC was sold in a

public offering pursuant to demand registration rights

owned by GALIC. In this offering, GALIC sold

1,900,000 shares. Thus, in the early part of 1981,

3 Pursuant to Article V. Section<5.1 of the Plan, Plan

participants entitled to receive benefits esuld be issued com-

mon stock free and clear of any restrictions. SEC Release No.

33-6188.

App. 54

4,906,000 shares of Air Florida common stock were sold

to the public.

16. The Plan paid for 76,000 shares of Series A

Preferred Stock with existing cash and with the pro-

ceeds of a nine-month, short-term loan from Sun Bank

in the amount of $1.6 million (the “Loan”). The Loan

was originally secured by the 76,000 shares of preferred

stock purchased, and 40,000 shares of Air Florida com-

mon stock owned by the Plan.

17. At the time the decision to purchase the stock

was made, senior management of Air Florida, including

Timoner, anticipated making a substantial cash contri-

bution to the Plan in the first quarter of 1982 for the

fiscal year ending December 31, 1981. The anticipated

contribution, based upon Air Florida’s expected year

end profits, would have been more than sufficient to

satisfy the Plan’s indebtedness to Sun Bank.

18. Sun Bank’s evaluation of the Plan’s ability to

repay the Loan (and Air Florida’s ability to make the

year-end contribution to the Plan) was based upon

financial information contained in reports filed with

the Securities and Exchange Commission; Sun Bank’s

financial analysis of the past and projected growth of

Air Florida; other banks’ assessments of Air Florida;

Timberlake’s own analysis based upon his ongoing rela-

tionship with Air Florida as a commercial lender; and

the market value of Air Florida stock. Upon the evalua-

tion of these factors Sun Bank determined that it was

likely that the Plan would receive a substantial contri-

bution from Air Florida thereby permitting it to satisfy

the loan obligation.

App. 55

19. Prior to making the Loan, Sun Bank speci-

fically evaluated particular aspects of this Loan.

Accordingly, in a memorandum from Timberlake to the

Credit File dated May 11, 1981, Timberlake outlined

four areas of concern to be resolved by Sun Bank before

the Loan could be made to the Plan. The four areas of

concern were: (i) the applicability of Regulation U of the

Federal Reserve Board to the Loan; (ii) the effect of

Rule 144 of the Securities and Exchange Commission

on the ability to sell the stock collateral; (iii) the legal-

ity of the Loan under ERISA; and (iv) the effect of S-16

demand registration rights on the ability to sell the

stock collateral.

20. In a memorandum from Timberlake to the

Finance Committee dated May 20, 1981, Timberlake

demonstrated that each issue identified in the May 11,

1981 memo had been addressed and resolved. Thus,

Timberlake (i) ascertained that the Loan to the plan

would be subject to Regulation U, and accordingly, Sun

Bank could Loan the Plan up to 50% of the value of the

collateral pledged by the Plan to secure the Loan; (ii)

acknowledged that, absent registration, the shares of

stock pledged by the Plan to secure the Loan would be

subject to a two-year holding period mandated by Rule

144; (iii) was advised that ERISA did not prohibit the

Loan and that Sun Bank would receive a legal opinion

from the law firm of Greenberg, Traurig that the bor-

rowing did not violate ERISA, but concluded that under

ERISA, in consideration of earlier conversations with

officials of the Plan, Sun Bank would not be able to

become Trustee for the Plan as long as the Loan

remained outstanding; and (iv) was assured that Air

App. 56

Florida, the Plan sponsor, would provide S-16 demand

registration rights to Sun Bank so that the stock collat-

eral could be registered in approximately three days

enabling Sun Bank to exercise its rights with regard to

the stock collateral.

21. On June 26, 1981 the Loan from Sun Bank to

the Plan closed. The documents exchanged during the

loan closing included: (i) a promissory note dated June

26, 1981 by and between the Plan and Sun Bank (the

“Promissory Note”); (ii) an opinion letter from Green-

berg, Traurig to Sun Bank opining, inter alia, that

Timoner as the Plan Trustee had the power and author-

ity to borrow funds on behalf of the Plan and that the

Loan would not violate the Plan or ERISA; (iii) a Fed-

eral Reserve Form U-1 executed by Timoner and Tim-

berlake; and (iv) a letter from Air Florida to Sun Bank

indicating Air Florida’s agreement to provide an S-16

registration statement should it become necessary for

Sun Bank to sell the stock in the event of default. After

the Loan closed, Sun Bank took possession of the stock

collateral (76,000 shares of Series A preferred and

40,000 shares of common) along with stock powers

endorsed in blank.

22. The Promissory Note called for three quar-

terly interest payments with interest payable at the

prime rate. The principal balance was due on March 31,

1982. In addition, the Promissory Note contained, inter

alia, an “insecurity clause,” a clause permitting Sun

Bank to require additional co'lateral, and a typewritten

provision involving conversion of the preferred shares

to common in the event of a monetary default. In addi-

tion, the Plan and Sun Bank agreed that if the vaiue of

App. 57

the collateral pledged to secure the Loan fell below

130% of the outstanding Loan balance, additional col-

lateral would be furnished to Sun Bank to adequately

secure the Loan.4

23. In placing a value on the stock pledged to

secure the Loan for Regulation U purposes, Timberlake

multiplied the number of shares of Series A preferred

stock pledged to secure the Loan (76,000) by their com-

mon share equivalent of 2.5 and added that number

(190,000) to the 40,000 shares of common stock pledged,

to arrive at 230,000 equivalent shares of common stock.

Timberlake then multiplied the 230,000 common shares

by $16.00 per share — the traded market value of Air

Florida System, Inc. stock on June 26, 1981. Thus, tne

value of the collateral on the date of the Loan was

determined to be $3.68 million.

24. Prior to the purchase of the stock from GALIC,

Cesar Alvarez, a partner at Greenberg, Traurig in the

Corporate Securities Department, and the contact

between Greenberg, Traurig, Air Florida and the Plan,

was contacted by Timoner and was advised that the

Plan had an opportunity to buy stock from GALIC at a

Significant discount. Greenberg, Traurig was asked if

the purchase could be made. After researching the mat-

ter, Alvarez advised Timoner that the purchase of the

shares and the borrowing of funds would not be in

violation of the Plan documents or ERISA.

4 Such a loan to value relationship is commonly known

as a 70% margin call.

App. 58

25. Greenberg, Traurig, as counsel for the Plan

provided legal services in connection with the acquisi-

tion of the shares from GALIC and the borrowing from

Sun Bank.

26. In late August of 1981, Acker resigned his

position at Air Florida and joined Pan American World

Airways (“Pan Am”) as Chief Executive Officer. Pan Am

thereafter aggressively competed with Air Florida for

passengers on the New York to Miami Route. In the fall

of 1981, Acker disposed of his substantial holdings in

Air Florida. Acker’s resignation was considered to be a

serious setback for the continued high profitability of

Air Florida.

27. On August 3, 1981, a strike by the Profes-

sional Air Traffic Controllers (“PATCO”) caused severe

reductions in the operating levels of all U.S. based

airlines. The reduction in operating levels negatively

influenced operating revenues and profits of each air-

line, including Air Florida.

28. During the late summer and early fall of 1981

Pan Am began a fare war on the New York to Miami

route, a key route for Air Florida, thereby creating a

serious loss in revenues for Air Florida.

29. On September 1, 1981 Alvarez resigned from

Greenberg, Traurig and joined Air Florida as a full-time

employee. After September lst, upon becoming a full-

time employee at Air Florida, Alvarez was named

Senior Vice-President, and no longer had any affiliation

with the law firm.

App. 59

30. In September 1981, Timoner as Trustee,

inquired of Shearson, Lehman as to whether or not the

Plan could dispose of its holdings in Air Florida. Shear-

son, Lehman advised that the Plan could, but a public

disclosure would have to be made. Timoner consulted

with Alvarez and Greenberg, Traurig, and was advised

that Shearson, Lehman’s advice concerning public dis-

closure of such a disposition as required by the securi-

ties laws was correct.

31. During the period August 30, 1981 through

January 30, 1982, the price per share of the Air Florida

common stock fell from $13% to $6%.

32. On January 13, 1982, an Air Florida aircraft

crashed on takeoff after leaving National Airport in

Washington, D.C. This event caused a further depres-

sion in the revenues of Air Florida. The crash together

with the other negative influences on Air Florida’s reve-

nues and profits caused Sun Bank to review the status

of the Loan to the Plan.

33. By January, 1982 the value of the stock

pledged to Sun Bank as collateral for the Loan fel]

below the amount necessary to retain the agreed upon

margin requirements. Sun Bank communicated its con-

cerns over the value of the collateral to the Plan. At this

time, Greenberg, Traurig was contacted by Air Florida

on behalf of the Plan, and was advised that because of a

decline in the price of Air Florida stock in the market,

Sun Bank was requesting additional collateral. Green-

berg, Traurig was asked if Air Florida could guaranty

the loan to the Plan. The advice given by Greenberg,

App. 60

Traurig to Air Florida and the Plan was that Air Flor-

ida could not give a guaranty for a profit sharing plan,

however, if the Plan was converted to an Employee

Stock Ownership Plan (“ESOP”), then it could give such

a guaranty.

34. On January 22, 1982, by resolution, and unbe-

knownst to Greenberg, Traurig, the Executive Commit-

tee of the Board of Directors of Air Florida authorized

Air Florida to take the necessary steps to convert the

Plan into an ESOP and to guaranty up to $1.6 million of

the Loan to the Plan.

35. On January 28, 1982, Air Florida, Inc. guaran-

teed the Loan. The Guaranty was signed by Eli Tim-

oner, President of Air Florida. On February 3, 1982, Air

Florida, Inc. guaranteed the Loan a second time. The

February 3, 1982 guaranty was signed by Cesar L.

Alvarez, Senior Vice President of Air Florida.

36. During the first few days of February, 1982,

Florentino Gonzalez, Senior Vice President — Finance

and Senior Financial Officer of Air Florida

(“Gonzalez”), informed Timberlake that the Plan had

been converted to an ESOP. Accordingly, Timberlake

began referring to the Plan as an ESOP.

37. As a result of the decrease in the value of the

collateral pledged to secure the Loan, at various times

during the first six months of 1982, cash collateral (in

the form of repurchase agreements) was pledged to

provide additional security for the Loan. Moreover,

additional Air Florida stock owned by the Plan and

Western Airlines stock owned by Air Florida was

pledged to secure the Loan. At the time, Greenberg,

App. 61

Traurig was unaware of the pledges of additional collat-

eral.

38. During the early part of March, 1982,

Gonzalez informed Timberlake that Air Florida would

not be making a contribution to the Plan. Thus, the

Plan was not going to be in a position to satisfy the

outstanding Loan obligation on March 26, 1982, the

date the Loan was due.

39. On March 15, 1982, Timberlake recommended

to Sun Bank that the maturity date of the Loan be

extended for a period of 30 days, so that Sun Bank

could review the 1981 year-end financial statements for

Air Florida.

40. As a result of negotiations between Sun Bank

and the Plan, the Promissory Note was renewed, and a

renewal note (the “Renewal Note”) was purportedly

signed by Eli Timoner on June 24, 1982. The Renewal

Note was due on March 31, 1983. There is no evidence

that Greenberg, Traurig was consulted, advised or even

knew of this transaction.

41. Throughout early 1982, Timberlake was of the

opinion that Air Florida would survive the financial

hardship it was enduring and would continue to be

profitable.

42. On June 25, 1982, a member of the executive

loan committee of Sun Bank, transmitted a memoran-

dum to Timberlake indicating that he and the other

members of the loan committee were concerned about

the diminishing value of the collateral pledged to

App. 62

secure the Loan and of the persistent out-of-margin

status of the collateral for the Loan.

43. On July 10, 1982 Timoner suffered a disabling

stroke. His duties, both on behalf of Air Florida and on

behalf of the Plan were assumed by Lloyd-Jones, who at

that time and thereafter was authorized to act on

behalf of Air Florida and the Plan.

44. During the last week of July, 1982, as a result

of negotiations between Timberlake and Lloyd-Jones,

the sum of $297,441.96 which had been held as cash

collateral in a repurchase agreement was applied to

reduce the outstanding Loan balance of $1.6 million.

45. As a result of the financial difficulties of Air

Florida and the persistent out-of-margin status of the

collateral pledged to secure the Loan, Sun Bank deter-

mined that the prospect of payment of the Loan was

impaired. Accordingly, on August 4, 1982 Sun Bank

demanded payment of the outstanding principal Loan

balance. Payment was demanded by 2:00 p.m., Friday,

August 6, 1982. Upon receipt of the demand, Lloyd-

Jones referred the matter to Greenberg, Traurig to pre-

pare a response to the demand letters. Seth Joseph, an

attorney in Greenberg, Traurig’s Corporate Securities

Department prepared a response dated August 6, 1982.

On August 6, 1982 Sun Bank received the response to

its August 4, 1982 letter. In the response, Greenberg,

Traurig urged Sun Bank to reconsider its position and

threatened legal action if the Loan was foreclosed. On

August 9, 1982 counsel for Sun Bank renewed Sun

Bank’s demand for payment in full of the outstanding

Loan balance.

App. 63

46. After substantial negotiation between the

Plan and Sun Bank, on August 16, 1982 the Plan and

Sun Bank agreed to amend and redocument the Loan.

On August 30, 1982 the Loan was amended and redocu-

mented. The amended and redocumented note was due

on March 31, 1983. Lloyd-Jones executed the docu-

ments setting forth the redocumentation on behalf of

the Plan as Interim Trustee. Greenberg, Traurig repre-

sented the Plan and Air Florida in negotiating the legal

terms of the agreement with Sun Bank. The final re-

documentation, as is customery, required that if any

notices were sent from Sun Bank to Air Florida and the

Plan, a copy be sent to counsel — Greenberg, Traurig.

47. In October and November, 1982, after the

Loan fell out of margin pursuant to the Loan redocu-

mentation, Lloyd-Jones notified Sun Bank that the

Western Airlines stock pledged as collateral for the

Loan was to be sold, and the proceeds of the sale would

be used to partially satisfy the outstanding principal

balance of the Loan. Accordingly, on November 15,

1982, the outstanding principal balance was reduced to

$602,579.29.

48. During March through July, 1983, after the

Plan defaulted on the Loan by failing to pay interest

and principal when due, with the consent and coopera-

tion of Lloyd-Jones, Interim Trustee, a portion of the

remaining stock collateral was sold and the proceeds of

the sale were used to satisfy the outstanding principa!

Loan balance.

49. On July 28, 1983, Lloyd-Jones was informed

that the Loan had been satisfied and that 21,920 shares

App. 64

of Air Florida preferred stock and 22,140 shares of Air

Florida common stock were being returned to the Plan.

50. Commencing in June, 1982, corresponding to

the beginning of Lloyd-Jores’ tenure, Greenberg, Trau-

rig’s relationship as outside counsel to Air Florida

diminished and new counsel was retained. By the end of

August, 1982, Greenberg, Traurig was no longer coun-

sel to Air Florida. The law firm continued to provide

services to the Plan on an as-requested basis. Green-

berg, Traurig, pursuant to the notice requirements of

the redocumentation, continued to automatically

receive copies of correspondence directed to Air Florida

and the Plan. However, Lloyd-Jones did not request

Greenberg, Traurig to take any action in response to

Sun Bank’s correspondence.

51. In the last quarter of 1982, Steven Lapidus of

Greenburg, Traurig was made aware of the events that

had transpired. Though he had been informed during

the summer that Air Florida wished to convert the Plan

to an ESOP, and had begun to draft the ESOP docu-

ment, he was unaware of the various guaranties by Air

Florida, the pledge of additional collateral, or the

reduction of the principal amount of the Loan without a

corresponding reduction in collateral.

52. Lapidus, having learned of the Board resolu-

tion dated January 22, 1982 sent a letter dated Decem-

ber 23, 1982 setting forth a number of options for Air

Florida and the Plan to pursue to correct any violations

of ERISA which may have been inadvertently commit-

ted in Air Florida’s attempt to protect the Plan and

Plan participants. The options proposed by Lapidus,

App. 65

included converting to an ESOP and seeking adminis-

trative exemptions from the Department of Labor. Nei-

ther Air Florida nor the Plan ever responded to the

letter or ever again requested Greenberg, Traurig to

perform services.

53. In the summer of 1983, Lapidus learned that

Greenberg, Traurig had been replaced as counsel to the

Plan by Stanley Kuperstein.

54. Any of the findings of fact which constitute

conclusions of law are hereby adopted by the Court as

conclusions of law.

CONCLUSIONS OF LAW

1. Plaintiff in this action seeks relief against the

various defendants for alleged violations of the

Employee Retirement Income Security Act of 1974, PL.

93-406, 88 Stat. 829, as amended, 29 U.S.C. § 1001, et

seq. (“ERISA”),

2. Counts III, IV, V, VI, VII, VIII, X, XV and XVIII

of the second amended complaint (“complaint”) seek

relief against Sun Bank pursuant to ERISA, claiming

violations of Section 29 U.S.C. § 1104 (Fiduciary

duties); 29 U.S.C. § 1106 (Prohibited transactions); 29

U.S.C. § 1107 (Limitation with respect to acquisition

and holding of employer securities and employer real

property by certain plans); 29 U.S.C. § 1108 (Exemp-

tions from prohibited transactions); 29 U.S.C. § 1109

(Liability for breach of fiduciary duty); 29 U.S.C. § 1112

(Bonding).

App. 66

3. Counts IX and XX of the complaint seek relief

against Greenberg, Traurig pursuant to ERISA, claim-

ing violations of 29 U.S.C. § 1106 (Prohibited transac-

tions); 29 U.S.C. § 1104 (Fiduciary duties) and 29

U.S.C. § 1109 (Liability for breach of fiduciary duty).

4. Count VIII of the complaint seeks punitive

damages under ERISA, against Timoner, Alvarez,

Campbell, Kimberly, Sun Bank and others.5

5. Each of the counts alleging liability under

ERISA against Sun Bank and Greenberg, Traurig are

predicated upon the allegation that Sun Bank and

Greenberg, Traurig were, pursuant to 29 U.S.C.

§ 1002(21XA), fiduciaries of the Plan. In addition, with

regard to Greenberg, Traurig, the complaint alleges as

an alternative theory of liability, that Greenberg, Trau-

rig was a non-fiduciary knowingly participating, with a

plan fiduciary, in a breach of that fiduciary’s duty.®

6. As discussed below, the undisputed facts show

that as a matter of law, Sun Bank and Greenberg,

5 Plaintiff does not seek punitive damages from defen-

dant Greenberg, Traurig.

6 There is no count in the complaint that alleges that

Sun Bank is liable to Useden as a non-fiduciary knowingly

participating, with a plan fiduciary, in a breach of that

fiduciary’s duty. At the hearing on the pending motions for

summary judgment, plaintiff, ore tenus, moved that the com-

plaint be amended to permit a claim against Sun Bank for

non-fiduciary liability under ERISA. The request for such an

amendment is denied. Notwithstanding, this Court has

found that there is no evidence indicating that Sun Bank

knowingly participated in a breach of fiduciary duty.

App. 67

Traurig were not fiduciaries of the Plan. Moreover, the

record is devoid of any evidence indicating that Green-

berg, Traurig or Sun Bank knowingly Participated in

any breach of fiduciary duty owed by the plan fiduci-

aries.7

A. Standard For Granting A Motion for Summary

Judgment

7. A motion for Summary judgment is appro-

priately granted if the pleadings, depositions, answers

to interrogatories, and admissions on file, together with

affidavits, if any, show that there is no issue as to any

material fact, and the moving party is entitled to judg-

ment as a matter of law. Fed.R.Civ.P. 56(c). In addition,

a principal purpose of Rule 56 is to isolate and dispose

of claims that find no Support in the record, thereby

permitting their expeditious disposal. Celotex Corp. v.

Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265

(1986). Thus, the mere existence of a factual dispute

that lacks sufficient probative value will not defeat a

motion for Summary judgment. Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d

202 (1986).

7 Plaintiff also alleges that Sun Bank is a party in

interest. A party in interest involved in a prohibited transac-

tion with a plan may be liable to the plan for “correction” of

the prohibited transaction. 29 U.S.C. § 1106(a)(1) (1985): 29

C.F.R. § 2560.502i (1987). Plaintiff has conceded that the

only basis for his claim that Sun Bank is a party in interest

is his allegation that Sun Bank is a fiduciary. See Deposition

of Jeffrey Clayton at 426. Therefore, if Sun Bank is not a

fiduciary, it is not a party in interest.

ae, eee

App. 68

B. Claims for Breach of Fiduciary Duty Under ERISA

8. Plaintiff’s ERISA claims against Sun Bank and

Greenberg, Traurig allege that the Bank and the law

firm breached their statutory duties as ERISA fiduci-

aries. For the alleged violations of ERISA, plaintiff

attempts to recover damages pursuant to 29 U.S.C.

§ 1132(a)(2). Sun Bank and Greenberg, Traurig reason

that the plaintiff cannot maintain an action against

them under ERISA because they are not fiduciaries

under the Act.8

9. The Act defines 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 a plan or exercises any

authority or control respecting management or

disposition of its assets, (ii) he renders invest-

ment 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 respon-

sibility in the administration of such plan. 29

U.S.C. § 1002(21)XA).

10. With regard to Sun Bank, to determine

whether it is an ERISA fiduciary, the Court must exam-

ine whether the Bank had discretionary duties with

regard to the Plan. O’Toole v. Arlington Trust Co., 681

F.2d 94 (1st Cir.1982).

8 Neither Sun Bank or Greenberg, Traurig were named

trustees or fid

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