ERISA-Fifth Circuit Rules That Investment Advisor, Who Allegedly Made Misrepresentations About A Proposed Investment, Is Not An ERISA Fiduciary And Thus Is Not Liable For the Statements

In Tiblier v. Dlabal, No. 13-50344 (5th Cir. 2014), a pension plan (the “Plan”) of a small cardiology practice had invested in the bonds of an oil and gas company. After the company stopped making interest payments on the bonds, the plaintiffs filed suit alleging violations of ERISA against the investment advisor, Paul Dlabal (“Dlabal”). The plaintiffs claimed Dlabal had made multiple oral misrepresentations to plaintiffs about investment in the oil and gas company in violation of his ERISA fiduciary duties. The district court granted summary judgment in favor of Dlabal. The plaintiffs appeal. The question for the Fifth Circuit Court of Appeals is whether Dlabal is an ERISA fiduciary of the Plan.

In analyzing the case, the Court concluded that Dlabal is not a fiduciary as defined by ERISA. The Court said that, in order for Dlabal to be liable for his advice regarding the oil and gas company, he must first be such a fiduciary of the Plan. Under ERISA, Dlabal is only a fiduciary: to the extent (i) he exercises any discretionary authority or discretionary control respecting management of the Plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of the Plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of the Plan. 29 U.S.C. § 1002(21)(A). The Court said that it is not enough for the plaintiffs to show that Dlabal acted in a general fiduciary capacity. Rather, the plaintiffs must establish that Dlabal acted as a fiduciary with regard to the specific transaction about which they complain: the investment in the oil and gas company.

With regard to this transaction, the Court continued, Dlabal is not a fiduciary under any of the three categories. Dlabal is not a fiduciary under (i) because he did not exercise discretionary authority or control over the oil and gas investment, as he did not cause the Plan’s trustees to relinquish their independent discretion in investing the Plan’s funds and to instead follow the course that he prescribed. Dlabal is not a fiduciary under (ii) because he did not receive a fee from the Plan in connection with the oil and gas company investment; he received a fee only from a third party. The plaintiffs concede that (iii) does not apply, as Dlabal played no part in the administration of the Plan.

Since it concluded that Dlabal is not an ERISA fiduciary, the Court affirmed the district court’s judgment.

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