# Petition for Writ of Certiorari — Useden v. Greenberg

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1993
- **Citation:** 508 U.S. 959

## Text

“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

J

Ww
——_

ly

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”?

il

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.

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

20

22

24

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

vi

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
ix

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

x

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
e

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.

10

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

11

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

I

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).

12

“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.

13

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:

14

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.

A.

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,

15

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

16

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.

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 (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

17

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)

18

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.”

19

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).

20

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.

A.

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.

21

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.

22

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

‘
j
!
4

23

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).

24

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).

A.

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 &

25

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.

26

IV

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).

ee

mae b. <

27

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,

v.
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

a

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

i

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).

a

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-
ar

® 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

f

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).

r

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

i

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).

ee

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_0763%3A1. Public record. Not legal advice.