ERISA-Ninth Circuit Reviews Claims Under ERISA Sections 404 (Breach Of Fiduciary Duty) and 510 (Unlawful Retaliation)

In Acosta v. Brain, Nos. 16-56529, 16-56532 (9th Cir. 2018), a panel of the Ninth Circuit Court of Appeals (the “Panel”) affirmed in part, reversed in part, and vacated in part the district court’s judgment in a civil enforcement action brought by the Secretary of the Department of Labor against Scott Brain, a former trustee of the Cement Masons Southern California Trust Funds (the “Trust Funds”), and Melissa Cook and Melissa W. Cook & Associates, PC (collectively, the Cook Defendants), former counsel to the Trust Funds, alleging violations of the ERISA.

The action alleged violations of two sections of ERISA — unlawful retaliation in violation of ERISA section 510, and breach of fiduciary duty in violation of ERISA section 404.

The Panel held that the district court did not err in concluding that Brain violated ERISA section 510 by retaliating against whistleblower Cheryle Robbins, the Director of the Trust Funds’ internal Audit and Collections Department.  The Panel held that Robbins’s participation in the Department of Labor (“DOL”) investigation of Brain was unmistakably protected activity under ERISA, and constituted an independently sufficient ground for the district court’s conclusion.  The Panel noted that there was a circuit split on the issue of whether “unsolicited internal complaints” constituted protected activity within the meaning of ERISA section 510, but concluded that the issue of Robbins’s letter-writing being protected activity was immaterial where Robbins’s cooperation with the DOL investigation provided an independent basis for the section 510 claim.

The Panel held that the district court did not err in concluding that Robbins’s protected activity was the but-for cause of Robbins being placed on leave.  The Panel assumed, without deciding, that the higher but-for causation standard applied.  The Panel held that the fact that Brain was not the ultimate decision maker-where a group of trustees were the ones voting to place Robbins on leave-did not immunize him under a “cat’s paw” theory of liability given that Brain was the one who set the vote into motion.  The Panel affirmed the district court’s holding that Brain had violated section 510.

The Panel held that the district court erred in concluding that Brain breached his fiduciary duty in violation of ERISA section 404 by placing Robbins on administrative leave.  The panel held that the district court erred by not addressing the threshold “two-hat” inquiry of whether Brain was wearing his ERISA fiduciary hat when he took the action alleged in the Secretary of DOL’s complaint.  The Panel further held that the Secretary’s overbroad use of the phrase “management and administration”-to argue that Brain was acting as an ERISA fiduciary when he caused Robbins to be placed on leave-contravened Supreme Court authority.  The Panel held that it necessarily followed that the district court erred in concluding that the Cook Defendants violated section 404 by knowingly aiding Brain in violating section 404.  Thus, the Panel reversed and vacation the district court’s decision on the section 404 issues.

The Panel held that the district court erred in basing the permanent injunction on ERISA section 409.  The Panel held that because section 409 required a breach of fiduciary duty, and because the Secretary did not prove that there was a breach of fiduciary duty in this case, the permanent injunction was vacated in its entirety as to Brain and the Cook Defendants.  The Panel held that ERISA section 502(a)(5) did not provide an alternative basis for the district court’s permanent injunction where no aspect of the district court’s injunction redressed or enforced a violation of ERISA section 510.

The Panel held that the district court did not err in determining that the Cook Defendants were not immune under the attorney immunity doctrine.  The Panel further held that the Cook Defendants’ remaining arguments were meritless.

 

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