Santomenno v. Transamerica Life Insurance Co., No. 16-56418 (9th Cir. 2018)
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A plan administrator is not an Employee Retirement Income Security Act (ERISA) fiduciary when negotiating its compensation with a prospective customer. The Ninth Circuit reversed the district court's order denying defendants' motion to dismiss an action alleging breach of fiduciary duties in connection with a retirement plan. The panel held that defendant was not a fiduciary with respect to its receipt of revenue sharing payments from investment managers because the payments were fully disclosed before the provider agreements were signed and
did not come from plan assets. The panel agreed with other circuits and held that defendant also was not a fiduciary with respect to its withdrawal of preset fees from plan funds. The panel explained that when a service provider's definitively calculable and nondiscretionary compensation was clearly set forth in a contract with the fiduciary-employer, collection of fees out of plan funds in strict adherence to that contractual term was not a breach of the provider’s fiduciary duty. The panel vacated class certification orders and remanded with instructions to dismiss the complaint.
Court Description: Employee Retirement Income Security Act The panel (1) reversed the district court’s order denying defendants’ motion to dismiss an ERISA case alleging breach of fiduciary duties in connection with a retirement plan, and (2) vacated the district court’s subsequent class certification orders. The district court held that a plan service provider breached its fiduciary duties to plan beneficiaries first when negotiating with an employer about providing services to the plan and later when withdrawing predetermined fees from plan funds. An employer that forms an ERISA plan is a statutory fiduciary, and a plan service provider becomes a functional fiduciary under certain circumstances.
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