United States Court of Appeals, Seventh Circuit
Employee Benefits – ERISA — revenue-sharing — fiduciary
Summary judgment for an insurance company that offers investment, record-keeping, and other administrative services to 401(k) plans alleging improper revenue-sharing was appropriate because the company is not acting as a functional fiduciary for purposes of 29 U.S.C. § 1002(21)(A) when it makes decisions about, or engages in, revenue sharing.
“In crafting its menu of investment options, AUL decides which mutual funds to include and which share classes of those funds to select. In making both these decisions, AUL is also setting the stage for any revenue sharing in which it wishes to engage. These product-design decisions shape the disposition of Plan assets: they limit the universe of funds, as well as the share classes within those funds, in which Plan assets are invested. Leimkuehler urges that this suffices to make AUL a fiduciary under the terms of Section 1002(21)(A)(i). The problem with this theory is that it is functionally indistinguishable from the one this court rejected in Hecker v. Deere & Co., 556 F.3d 575 (7th Cir. 2009). …
“Leimkuehler’s claims focus on share-class selection and revenue sharing, and AUL’s maintenance of the separate account involves neither. As we noted earlier and as Leimkuehler concedes, AUL selects share classes and decides how much it will receive in revenue sharing when it designs its investment-options menu. Those steps occur well before a Plan participant deposits her contributions in the separate account and directs AUL where to invest those contributions. Because the actions Leimkuehler complains of do not implicate AUL’s control over the separate account, the separate account does not render AUL a fiduciary under the circumstances of this case. …
“In contrast to a named fiduciary, a functional fiduciary under Section 1002(21)(A) owes a duty to a plan through its actions, regardless of whether it chose to assume fiduciary responsibilities or even anticipated that such responsibilities might arise. Section 1002(21)(A)’s ‘reach is limited to circumstances where the individual actually exercises some authority,’ Trustees of the Graphic Commc’ns Int’l Union Upper Midwest Local 1M Health & Welfare Plan v. Bjorkedal, 516 F.3d 719, 733 (8th Cir. 2008), and ‘people may be fiduciaries when they do certain things but be entitled to act in their own interests when they do others,’ Johnson v. Georgia-Pacific Corp., 19 F.3d 1184, 1188 (7th Cir. 1994). We agree with the Eighth Circuit that ‘[a]n act of omission fails to satisfy the requirement that the individual exercise discretionary authority over plan assets.’ Bjorkedal, 516 F.3d at 733. This means that AUL’s decision not to exercise its contractual right to substitute different (less expensive) funds for the Leimkuehler Plan does not make it a fiduciary.”
Southern District of Indiana, Indianapolis Division, Magnus-Stinson, J., Wood, J.