United States Court of Appeals: For The First Circuit
United States Court of Appeals: For The First Circuit
Before
Thompson, Circuit Judge,
Souter, Associate Justice,*
and Kayatta, Circuit Judge.
and
one
plan
administrator.
They
claim
that
We affirm.
I
As preface, we mention two cases that we decided in 2014,
to which this one bears partial resemblance.
beneficiaries
of
life-insurance
plans
In each of them,
covered
by
ERISA
filed
Vander Luitgaren v.
Sun Life Assur. Co. of Can., 765 F.3d 59 (1st Cir. 2014); Merrimon
v. Unum Life Ins. Co. of Am., 758 F.3d 46 (1st Cir. 2014).
The
brought those two suits, the participants who bring this one claim
no direct stake in the plan assets that they say are being
improperly used and no consequential loss personal to them.
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They
Instead,
they
bring
claims
on
behalf
of
the
plans
assets.
Given
participants
are
administrator.
defendants'
this
joined
posture,
as
it
plaintiffs
is
by
notable
only
that
one
the
plan
actions,
the
concern
apparently
is
shared
only
collectively
retirement
represent
plans.1
eight
Under
401(k)
ERISA,
defined"'defined
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29 U.S.C. 1002(34).
beneficiaries.3
functioned,
in
effect,
as
Among
an
other
intermediary.
things,
It
Fidelity
opened
and
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shares.
each trading day, the redemption occurred the day after the
withdrawal request, when the mutual fund transferred cash to a
redemption bank account owned by and registered to Fidelity.
It
from
account
the
redemption
to
"FICASH,"
an
interest-bearing
The
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This
process
may
appear
unnecessarily
elaborate.
not
contest)
transactions,
the
that,
in
fund's
own
ordinary
transfer
"retail"
agent
alone
mutual-fund
makes
the
accounts
and
the
one-night
stay
in
FICASH
do
not,
fiduciary
within
the
meaning
of
ERISA.
Under
section
or
disposition
1002(21)(A)(i).
of
its
assets."
29
U.S.C.
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29 U.S.C. 1104(a)(1).
allege
that
Fidelity
breached
these
two
fiduciary duties by using certain plan assets other than for the
benefit of the plans, in its treatment of "float": interest earned
on the cash paid out by the mutual funds.5
As mentioned before,
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Fidelity used float to defray bank expenses and, if there was any
remainder, distributed it to the investment fund from which the
principal
came.
Plaintiffs
maintain
that
ERISA's
fiduciary
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It is, moreover, a
We . . .
And if that
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redemption does not go, and is not intended to go, to the plan
itself.
support the proposition that the same cash becomes a plan asset
simply
because
it
moves,
not
directly
from
the
fund
to
the
participant, but from the fund through Fidelity on its way to the
participant.
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plan.
But
this
relationship,
standing
alone,
is
not
Now, if the
cash were ultimately destined for the plan itself and Fidelity
acted as an intermediary agent to receive the cash for deposit
with the plan, plaintiffs' position would have some intuitive
appeal.
But,
for
the
purpose
of
understanding
Fidelity's
"ERISA's
principal
function
is
to
protect
Fidelity and the plans, cited in the complaint and attached to the
motion to dismiss, confirm the foregoing analysis that Fidelity's
duty is to make a distribution by a route incapable of providing
any benefit to the plan from temporary use of the cash:
Fidelity
shall
distribute
withdrawals
directly to each [p]articipant based upon the
address of record unless distribution is
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in
the
traveling
cash.
There
is
no
indication,
for
instance, that the plan bears the risk if the cash is lost after
the redemption but before its receipt by the participant.
Indeed,
Id. at 109-
available
documents
to
which
Fidelity
directs
us
and
the
and
Merrimon.
Both
were
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brought
to
challenge
RAA had a positive balance, the insurer retained the credited funds
in its general account and continued to collect a return on them.
The insurer would pay the beneficiary some interest on the value
of the RAA but at a rate allegedly lower than the return the
insurer was receiving.
alleged that, by retaining and investing RAA funds for its own
enrichment, the insurer violated both the ERISA section 404(a)
duty of loyalty and the 406(b) prohibition against self-dealing.
Vander Luitgaren, 765 F.3d at 61-62; Merrimon, 758 F.3d at 51.
Much as plaintiffs in this case acknowledge that, prior
to a redemption, the cash is an asset of the mutual fund (not the
plan), so too the beneficiaries in Merrimon conceded that, prior
to the creation of an RAA, funds held in the insurer's general
account were not plan assets.
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that, upon redemption, the cash becomes a plan asset, so too the
beneficiaries there posited that, "when a death benefit . . . is
redeemed by means of the establishment of an RAA, the RAA funds
become plan assets."
We rejected the
that the cash should be treated as a plan asset for the purpose of
enforcing fiduciary responsibilities under ERISA.
It is not that we fail to recognize a distinction between
the insurance cases and this one.
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both the investment vehicle and the distribution agent, paid the
beneficiary without assistance from an intermediate fiduciary.
Here, by contrast, the investment vehicle (the mutual fund) pays
the participant through an intermediary selected by the plan to
serve as the distribution agent (Fidelity).
of the fund payouts does not include the plans, which apparently
would be barred from holding the cash as they previously held the
shares, plaintiffs have given no good reason why this distinction
should make a difference to the plan-asset analysis of float for
purposes of applying ERISA.7
In emphasizing the contours of our holding today, we
should mention one other feature that we take to be common to this
case and the insurance cases.
Vander
Here,
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the
absence
of
any
timely
argument
of
the
sort
because
Fidelity
failed
to
seek
and
obtain
the
plans'
however, would take us beyond this case, since the causes of action
pleaded in plaintiffs' complaint necessarily depend on float being
a plan asset.
See
We have
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deemed
waived."
(citations
and
internal
quotation
marks
amicus . . . .
issues
raised
for
the
first
time
by
[an]
(citations,
this
[c]ourt
determines
that
plaintiffs
have
waived
any
agreement
about
float,
has
engaged
in
prohibited
Indeed,
at
340
(footnote,
alterations,
emphasis,
and
internal
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III
The district court's judgment is AFFIRMED.
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