USCA1 Opinion

UNITED STATES COURT OF APPEALS

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT

_________________________

No. 97-1666

JAMES J. BEDDALL, ET AL.,

Plaintiffs, Appellants,

v.

STATE STREET BANK AND TRUST COMPANY,

Defendant, Appellee.

_________________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Mark L. Wolf, U.S. District Judge]

___________________

_________________________

Before

Selya, Circuit Judge,

_____________

Coffin, Senior Circuit Judge,

____________________

and Shadur,* Senior District Judge.

_____________________

_________________________

James S. Ray,
____________
and

with whom William G. Bell,

_______________

Abrams, Roberts, Klickstein & Levy

_____________________________________

appellants.

were

Barry Klickstein,
________________
on

brief,

for

Henry C. Dinger, with whom

________________
Gouin,
_____

and

Henry C. Dinger, P.C.,

_____________________

Goodwin, Procter & Hoar LLP

______________________________

were on

Dori C.
_______

brief,

for

appellee.

_________________________

February 27, 1998

_________________________

__________
*Of the Northern District of Illinois, sitting by designation.

SELYA, Circuit
SELYA, Circuit

Judge.
Judge.

A cadre

of former

pilots for

______________

Eastern

Airlines, Inc.

(Eastern) brought

an

action under

Employee Retirement Income Security Act (ERISA), 29 U.S.C.

et seq. (1994),
__ ____

retirement

against the trustee of the

plan.

The district

the

1001

failed air carrier's

court dismissed the

suit after

reviewing the trust agreement and concluding that the trustee was

not subject to ERISA liability

respect to the harms alleged.

I.
I.

as a fiduciary or co-fiduciary in

The plaintiffs appeal.

We affirm.

BACKGROUND
BACKGROUND

We

draw the facts

the trust agreement.

its pilots

complaint and

In 1958, Eastern and the union representing

established

(the Plan) designed

from the plaintiffs'

a defined

contribution retirement

to provide retirees with a

plan

range of pension

options.

Almost

quarter-century

later,

the

Plan's

administrative committee (the TAC) retained State Street Bank and

Trust

Company (the

Bank) to

manage them as directed, and

that

the

TAC,

calculating

inter
_____

annuity

hold the

in trust,

periodically report their value (so

alia,
____

and

Plan's assets

could

lump-sum

effectuate

retirement

the

Plan

benefits).

by

The

parties spelled out the Bank's duties and obligations qua trustee
___

in a trust agreement (the Agreement).

As time

estate.

relied on

went

by, the

In reporting the

Plan invested

heavily in

value of these investments,

information obtained

from Hawthorne

real

the Bank

Associates, Inc.

(Hawthorne), the Plan's principal investment manager, in the form

of periodic appraisals prepared by Blake, a consultant engaged by

Hawthorne.

Despite

subsequent decline

in

the real

estate

market, Blake assigned consistently high valuations to the Plan's

properties and the

Bank parroted those valuations in its reports

to the TAC.

In the summer of 1991, the Bank expressed concern anent

the

figures

supplied

by

Hawthorne.

Eventually,

it

hired

Spaulding

Blake's

& Slye (S&S), an independent appraisal firm, to review

handiwork.

Upon

encountering

difficulty

in

access to the necessary information, the Bank wrote to

gaining

Hawthorne

stating that:

Our appraiser is prepared to begin his review

on Monday, October 7.
to

If he is not permitted

begin his review by Friday, October 11 on

the basis of full access to the documents, we

believe

that we have no recourse but to seek

the advice of

the Department of Labor

as to

our concerns about Hawthorne's instructing us

to

continue

values

to report

supplied by

the

real

Hawthorne as

estate at
investment

manager.

In short

order, Hawthorne

relented and

an unencumbered

review

proceeded.

S&S thereafter

issued a report that criticized Blake's

valuations and recommended that new appraisals

be secured from a

new appraiser.

November 8, 1991.

The Bank submitted the S&S

One week later,

report to the TAC on

the Bank wrote to

the TAC's

attorney expressing concern that, according to S&S, "many of

appraisals

flaws."

carry

are

incomplete

and/or

suffer

The Bank declared that it was

these valuations

on its

light of the[se] concerns."

books

from

the

methodological

"unwilling to continue to

without qualification

in

Within a matter of weeks, Hawthorne

informed the

Bank that

certain properties.

it had lowered

The Bank

the appraised

accepted the new

values of

figures without

further investigation.

The TAC eventually retained an independent appraiser to

assess the Plan's real estate holdings.

in

a substantial

point,

the

reported values.

At

that

it became evident that Blake's exaggerated valuations had

skewed the Plan's

had

reduction of

This exercise culminated

been

finances:

carried on

the

because inflated

Plan's

books

appraisal figures

for nearly

decade,

retiring pilots who opted for lump-sum retirement benefits during

that

period

received

a windfall,

whereas

the

remaining Plan

participants were left holding an unduly depleted bag.

II.
II.

THE ENSUING LITIGATION

THE ENSUING LITIGATION

Eastern filed for bankruptcy

several quondam pilots

court against the

parties

brought an

action in

In due

course,

a Florida

federal

Plan, its sponsors, the TAC,

(not including

invoked ERISA and

in 1989.

the Bank).

and sundry other

The plaintiffs'

alleged myriad breaches

of fiduciary duty

connection with the investment of the Plan's assets.

v.

Eastern Air Lines, C.A. No.

_________________

I).
_

The Florida

See 28 U.S.C.
___

the Bank

in

See Beddall
___ _______

91-1865-CIV (S.D. Fla.) (Beddall

_______

court transferred

the case to

Massachusetts.

1404(a).

The Beddall I
_________

to add

complaint

as a

initiated a separate

plaintiffs moved to amend

defendant.

As a

the complaint

precaution, they

suit against the Bank in

also

the Massachusetts

federal court

(Beddall II).
__________

The complaint

in the

latter suit

charged

that the Bank

its failure

to

ensure

violated ERISA's fiduciary

that

the Plan's

holdings

provisions by

were

valued

appropriately.

Judge

Wolf

eventually

approved

class

action

settlement in Beddall I, see Beddall v. Eastern Airlines Variable

_________ ___ _______
_________________________

Benefit Retirement Plan for Pilots, No. 93-12074 (D.

___________________________________

7,

Mass. Nov.

1996) (order approving final settlement),1 and the plaintiffs

withdrew

the pending motion

to amend.

dismiss Beddall II
__________

for failure to

Civ. P.

The district

12(b)(6).

Beddall II, 1996 WL 74218 (D.

__________

concluded that, because

fiduciary

Plan's real

investment

state a claim.

See Fed.
___

court granted the motion.

the Agreement absolved

properties once

then moved to

Mass. Feb. 14, 1996).

responsibility for

manager in

The Bank

the

the TAC

respect to

engaged

those

See
___

Judge

Wolf

the Bank of

alleged overvaluation

any

of the

Hawthorne as

assets, the

R.

the

complaint

failed to state an actionable ERISA claim for breach of fiduciary

duty.

See id. at *1-*2.

___ ___

Then,

citing ERISA

405(d), 29 U.S.C.

1105(d), the judge

should

have

known

determined that, even if

of Hawthorne's

the Bank knew

indiscretions,

or

co-fiduciary

liability did not attach in the absence of an allegation that the

Bank had participated actively in, or concealed, the breach.

id. at *2.
___

III.
III.

See
___

This appeal ensued.

STANDARD OF REVIEW
STANDARD OF REVIEW

____________________

1Under

the settlement, the

more than $10,000,000.

Wolf

precluded the

Bank

named defendants paid

As a condition of
from impleading

defendants in the instant action.

the Plan

the settlement, Judge

any

of the

settling

We

resolution

afford

of

de

a motion

novo

to

review

to

dismiss.

district

See Garita Hotel Ltd.

___ ___________________

Partnership v. Ponce Fed. Bank, 958 F.2d 15, 17 (1st

___________
_______________

Like

the

court

below

we

must

accept

allegations of the complaint, construe all

therefrom in favor of

court's

as

true

Cir. 1992).

the

factual

reasonable inferences

the plaintiffs, and determine

whether the

complaint, so read, limns facts sufficient to justify recovery on

any

cognizable theory

of the

case.

See
___

Dartmouth Review
________________

Dartmouth College, 889 F.2d 13, 16 (1st Cir. 1989).

_________________

v.

This is familiar lore.

twist:

the court below

also the

neither

Agreement

appended

incorporated

posture

of

it

Here, however, there is an odd

scrutinized not only the

and it is

the

latter

therein

the case,

undisputed that

document

by an

the

explicit

lower court's

to

the

complaint but

the plaintiffs

complaint

reference.

nor

In this

consideration

of the

Agreement gives us pause.

We think

commonsense

substance.

length.

is a

parts

that this

approach

one

situation calls

that

does

for a

not elevate

practical,

form

over

The complaint discusses the Agreement at considerable

And, although it states conclusorily that

fiduciary of the Plan,"

of the Agreement

it then proceeds to

that, in

the plaintiffs'

"State Street

summarize the

view, justify

this characterization.

by filing a

the

The Bank responded to

Rule 12(b)(6) motion and

Agreement.

authenticity of

The

plaintiffs

the Agreement

these allegations

appending to it a

neither

nor moved to

copy of

challenged

strike it

the

from the

record.

Under these

circumstances, the Agreement

was properly

before

the

allegations

upon

court.

When,

as

are expressly linked

a document (the

now,

to

and

complaint's

factual

admittedly dependent

authenticity of which is not challenged),

that document effectively merges into the pleadings and the trial

court can review it

12(b)(6).

1015

in deciding a motion

See Fudge
___ _____

to dismiss under

v. Penthouse Int'l, Ltd., 840

______________________

(1st Cir. 1988); see

___

also Branch v.
____ ______

Rule

F.2d 1012,

Tunnell, 14 F.3d 449,

_______

454 (9th Cir. 1994) ("[D]ocuments whose contents are alleged in a

complaint

and whose authenticity

no party questions,

but which

are not physically attached to the pleading, may be considered in

ruling on a Rule 12(b)(6) motion to dismiss."); 2 James Wm. Moore

et

al., Moore's Federal Practice

__________________________

(explaining

that

courts

may

12.34[2]

(3d

consider "[u]ndisputed

ed.

1997)

documents

alleged or referenced

in the complaint" in deciding

dismiss); see generally Fed. R.

___ _________

copy of any written

is a part thereof").

court

a motion to

Civ. P. 10(c) (stating that "[a]

instrument which is an exhibit to a pleading

Accordingly, we conclude that the district

had the authority to consider the Agreement if it chose to

do so.

This

court's

conclusion

central task

makes

eminent

in evaluating

sense.

a motion

district

to dismiss

is to

determine whether the complaint alleges facts sufficient to state

a cause

of action.

not accept

In conducting

complaint's "bald

that tamisage, the court need

assertions"

or

"unsupportable

conclusions."

Chongris v. Board of Appeals, 811 F.2d 36, 37 (1st

________
________________

Cir. 1987).

While a plaintiff only is obliged

allegations,

the court's

allegations

inquiry into

the

to make provable

viability of

those

should not be hamstrung simply because the plaintiff

fails to append to the complaint the

very document upon which by

__

her own admission the allegations rest.

___ ___ _________

Any other approach would

seriously

motions, as

hinder recourse

to Rule

12

a plaintiff

could thwart the

omitting

consideration of a critical

it from the complaint.

We doubt

document merely by

that the drafters of

the Civil Rules, who envisioned Rule 12(b)(6) motions as a swift,

uncomplicated

way to weed out plainly unmeritorious cases, would

have countenanced such a result.

To their

the

lower court

credit, the plaintiffs

had

the prerogative

to

tacitly concede

review the

notwithstanding its omission from the complaint.

instead

that the

court should

not

have done

that

Agreement

They asseverate

so without

also

enabling them to submit other evidence (and, thereby, convert the

motion

before the

reject

that

Agreement

court into

asseveration

one

and hold

for summary

that

judgment).

consideration

We

of the

did not in itself compel the court to treat the motion

before it as

one for

summary judgment.2

See Fed.
___

R. Civ.

P.

____________________

2There is a

certain irony to

the plaintiffs' criticism

the district court's course

of action.

Although the

of

would have

enabled

the plaintiffs'

motion

of

conversion

them to

submit

evidence regarding the Bank's fiduciary responsibilities, the act

of

conversion

standard into

also

would have

the case

and raised the

See Fed. R. Civ. P. 12(b).

___
court ensured that
to

the

less

imported

the

bar for

summary judgment

the plaintiffs.

By eschewing conversion, the district

the plaintiffs' complaint would

demanding

scrutiny

associated

with

be subjected
motions

to

12(b).

the

We offer three reasons in support of this ruling.

Agreement's centrality

limned

in

to the

their complaint,

pleadings,

and,

conjunction

with a

thus,

motion

traditional extrinsic

Zenith Data Sys. Corp.,

________________________

plaintiffs' contentions,

makes

it

in

differentiates

to dismiss

evidence.

987

First,

effect part

its

of

the

evaluation

in

the assessment

of

See Venture Assocs. Corp.

___ ______________________

v.

F.2d

("Documents that a defendant attaches

from

as

429,

431 (7th

Cir.

1993)

to a motion to dismiss are

considered a part of the pleadings if they are referred to in the

plaintiff's complaint and

and relatedly, the

are central to her

complaint predicates

claim.").

the plaintiffs'

Second,

claims

regarding the existence of the Bank's ostensible fiduciary duties

solely on

the Agreement,

not on external

events.

Lastly, the

conversion of a Rule 12(b)(6) motion

matter

quintessentially

court's sound discretion.

IV.
IV.

within

into a Rule 56 motion is

the

purview

of

the

district

See Garita Hotel, 958 F.2d at 18.

___ ____________

ANALYSIS
ANALYSIS

We begin

our treatment of the merits

pertinent portions of ERISA's statutory

the plaintiffs' triad of claims:

cause of action

by examining the

scheme.

We then turn to

(1) that the complaint states a

for fiduciary liability by reason

of the Bank's

discretionary authority over the Plan's real estate holdings; (2)

that the complaint states a claim for fiduciary liability arising

out of the

Plan's Short

Bank's conduct, including its role in

Term Investment Fund

____________________

respect to the

(the STIF); and (3)

that the

dismiss.

complaint

states a

claim

against

the

Bank

for

co-fiduciary

liability.

A.
A.

The Statutory Scheme.

The Statutory Scheme.
____________________

ERISA's fiduciary duty provisions not only describe who

is

a "fiduciary"

or "co-fiduciary,"

but

also what

activities

constitute a

breach of fiduciary

duty.

In the

first instance,

the statute reserves fiduciary liability for "named fiduciaries,"

defined either as those individuals

plan

documents

or

those

who

listed as fiduciaries in the

are

otherwise

fiduciaries pursuant to a plan-specified

1102(a)(2).

identified

procedure.

But the statute also extends fiduciary

functional fiduciaries

persons who act as

as

29 U.S.C.

liability to

fiduciaries (though

not explicitly denominated as such) by performing at least one of

several enumerated

functions with

respect to a

plan.

wise, the statute instructs that

a person

is a

plan

the

to

discretionary

fiduciary with
extent

(i)

authority

he
or

respect to

exercises any
discretionary

control respecting management of such plan or

exercises any authority or control respecting
management or disposition of its assets, (ii)
he renders

investment

advice for

a fee

or

In this

other compensation, direct

respect to
such

any moneys or

plan,

or

has

or indirect, with
other property

any

authority

of
or

responsibility

to do so, or (iii) he has any

discretionary

authority

responsibility in the

or

discretionary

administration of such

plan.

29 U.S.C.

1002(21)(A).

The key determinant of whether a person qualifies

functional

discretionary

fiduciary

is

authority in

whether

respect

10

that

to,

person

or meaningful

as a

exercises

control

over, an ERISA

plan, its administration, or its

by rendering investment advice).

Co.,
___

681

F.2d 94,

2509.75-8, at

or the

generally

1982); see
___

We make

rule.

Arlington Trust
_______________

also 29
____

two points that

C.F.R.

inform the

First, the mere

exercise of physical

of mechanical

administrative tasks

performance

is insufficient

See O'Toole v.
___ _______

Cir.

571 (1986).

application of this

control

96 (1st

assets (such as

to

confer

fiduciary

status.

See
___

Cottrill v. Sparrow, Johnson & Ursillo, Inc., 74

________
_________________________________

F.3d 20, 21-22

(1st Cir. 1996); Concha

______

1502 (9th Cir.

1995),

cert.
_____

dismissed,
_________

fiduciary status

is

not

v. London, 62 F.3d 1493,

______

116

an

S.

Ct.

all or

1710

nothing

(1996).

Second,

proposition;

the

statutory language indicates

that a person

is a plan

fiduciary

only "to the extent" that he possesses or exercises the requisite

discretion and control.

fiduciary

29

U.S.C.

responsibility under

attributable

to

his

authority, fiduciary

correlated

ERISA

possession or

liability

1002(21)(A).

is

directly

exercise

arises

in

Because one's

of

and

solely

discretionary

specific

increments

to the vesting or performance of particular fiduciary

functions in

service of the

plan, not in broad,

See Maniace v. Commerce Bank, 40 F.3d 264, 267

___ _______
______________

general terms.

(8th Cir. 1994);

Brandt v. Grounds, 687 F.2d 895, 897 (7th Cir. 1982); NARDA, Inc.
______
_______
___________

v. Rhode Island Hosp. Trust Nat'l Bank, 744 F. Supp. 685, 690 (D.
___________________________________

Md. 1990).

An ERISA

fiduciary, properly

identified, must

employ

within

the

diligence

defined

domain

"the

care,

skill,

prudence,

and

under the circumstances then prevailing that a prudent

11

man

acting in

would use."

a like

29 U.S.C.

"solely in the

capacity and

familiar with

1104(a)(1)(B).

The fiduciary should act

interest of the participants

and his overarching purpose should

such matters

and beneficiaries,"

be to "provid[e] benefits

to

the

participants

and

reasonable

expenses

1104(a)(1).

their

of

beneficiaries"

administering

fiduciary

who

and

the

fails

to

"defray[]

plan."

to

fulfill

Id.
___

these

responsibilities is "personally liable to make good to [the] plan

any losses to the plan resulting from

. . . such breach."

Id.
___

1109(a).

Co-fiduciary liability

which

one ERISA

another fiduciary.

fiduciary may

is

be

shorthand

liable for

rubric

under

the failings

of

Co-fiduciary liability inheres if a fiduciary

knowingly participates in or conceals another fiduciary's breach,

enables such

other to

breach and fails

commit a breach,

or learns about

to make reasonable efforts

to remedy it.

such a

See
___

id.
___

1105(a).

subject to a

In

some circumstances, co-fiduciary liability is

special set of rules.

This is true,

for example,

where the putative co-fiduciary is a trustee and the breach is at

the

hands of

a plan-appointed

investment manager.

See
___

id.
___

1105(d)(1) (stating generally that a trustee shall only be liable

for a money manager's violation

if the former participates in or

acts to conceal the breach).

B.
B.

The

The Bank's Status.

The Bank's Status.
_________________

starting point for reasoned analysis of the Bank's

fiduciary status is the Agreement.

12

In support of their assertion

that

the

Bank

misvaluation

bears fiduciary

of

the

responsibility

real estate

investments,

for Hawthorne's

the

plaintiffs

direct our attention to three sections of the Agreement, which we

set out in pertinent part:

Section 3.
__________

Investment of

Trustee [the Bank]

the

in

such

The

shall cause all principal

and income at any time forming

fund to be

Fund.

a part of the

invested as a single fund,

property as

the

Trustee may

. . .
deem

proper and appropriate . . . .

Section 4.
_________

Duties and Powers of the Trustee.

The Trustee [the Bank] shall have the duties,

powers and
the

responsibilities with

Fund,

in

addition

modification or

to

respect to

and

limitation of

not

in

the authority

provided by law and this Agreement:

(a) to manage,

control and operate

the Fund and to prepare and

to

the

Committee

[the

Eastern, and otherwise

by

applicable

law,

information,

submit

TAC]

and

as required
all financial

including

periodic

valuation of the

Fund, as required

by

Plan

law,

the

and

this

reinvest

the

Agreement;
. . .
(c)

to

invest

Fund, as

and

provided in Section

3 of

this Agreement;
. . . .

Section 5.
_________
of

Records, Accounting and Valuation

the Assets

Bank]

of Fund.

shall keep

accurate

investments, receipts
other

transactions

Fund. . . .

The Trustee

[the

accounts of

all

and disbursements

and

hereunder

regarding the

Following the

close of

each month

the

Trustee shall provide the Committee [the TAC]

and

Eastern and

such

time

others as

direct

from

to time

with

report

of the assets held in

they shall
a

monthly

the Fund as of

the close of said month . . . .

. . . .
Except
Section,

the

as

otherwise provided
assets

of the

Trust

in
at

this
any

13

monthly

or annual

valuation

valued at market value as

.

Real property

. . .

date shall

be

of such date . . .
shall be

valued at

market value

on the valuation

dates on

the

basis of information obtained from qualified,

available sources
brokers,

such as

or appraisers

with the type of

dealers, bankers,

dealing or

familiar

investment involved, or

on

the basis of reference to the market value of

similar investments; and the Trustee may rely
on an appraisal

of real property made

by an

independent appraiser deemed competent by the

Trustee,

within

two

years

prior

valuation

date

as of

which

such

to

the

value is

being determined.

We also deem relevant to the Bank's status as regards real estate

investments

another section of the Agreement that the plaintiffs

tend to downplay.

We reprint that provision in pertinent part:

Section
6.
___________
Manager.

Appointment

The

direct the

Trustee [the Bank]

all

including

without

initially

of

Investment

Committee [the TAC] .

segregate

portion

of

or

such

a portion

in writing to
of

limitation,
investments

transferred

to

. . may

the

the
all
as

Fund,
or

may

be

Trustee

in

accordance with

this Agreement, into

more

accounts

separate

"Investment

each

Investment
written

be

Manager Accounts."

Committee shall
for

to

one or

known
.

. .

promptly thereafter
Manager

Account

Manager

shall

notice of

. and

such

The

appoint

Investment
.

as

an
give

appointment to

the

responsibility of

the

Trustee. . . .
. . . .
It shall
Committee

to

be the

vest each

Investment

Manager

with the authority necessary to discharge its

duties hereunder and to properly direct

each

Investment Manager to perform such accounting

and valuation functions and such other duties
as shall

be necessary to enable

the Trustee

to fully perform hereunder.

The Trustee shall
of each

Investment Manager

the Investment
of

the

be
or

with respect

Manager Account

Fund;

directions
officer,

follow the directions

provided
in

writing,

partner,

of

14

forming part

that

all

signed
such

to

by

such
an

Investment

Manager. .

. .

The

Trustee shall

obligation to act pursuant

have no

to any directions

from any Investment Manager unless and

it

receives

such

directions

in

until
a

form

satisfactory to it.
The Trustee shall have no responsibility
for supervising any
Trustee
invest

shall

be

Investment Manager.
under

or otherwise to

the Fund

no

manage any

which is subject to

of any Investment Manager.

be under no
inquiries
any

as to

or

the management

The Trustee shall

as

any action or
Manager
to

any

to

asset of

obligation to review or

Investment

herein

obligation

The

taken

to make

direction of
as

failure

provided
to

give

directions, nor to review or value the assets

held in any
to

Investment Manager Account,

make any

suggestions

Manager or Committee
to

the

reinvestment

of investments

Manager

Account . .

not be liable
Investment

Investment

or Eastern with respect

investment and

disposal

to the

nor

in, any

. .

of, or

Investment

The Trustee shall

for any act or omission of any

Manager,

except as

provided

Section 405(a) of ERISA [29 U.S.C.

In the case

of any purchase or

in

1105(a)].
sale of

real property by any Investment Manager,

the

Trustee shall have the right to request, as a

condition to its
paying

over

connection

any
with

executing any documents

assets

of

the

such transaction,

or

Fund

in

that

it

receive a certified appraisal of the value of

such property . . . .

The plaintiffs read these provisions, in the aggregate,

as conferring

upon the

Bank sufficient authority

to make

fiduciary in regard to the Plan's real estate investments.

not agree.

it a

We do

The quoted text authorizes the Bank mainly to perform

administrative

and

ministerial

functions in

respect

to those

investments which,

Investment

Manager

like real estate, are held within a so-called

Account.

Without

more,

mechanical

administrative responsibilities (such as retaining the assets and

keeping a

record of

their value) are

insufficient to

ground a

15

claim

of

fiduciary

status.

See
___

O'Toole,
_______

681

F.2d

at

96

(concluding that a bank's duties "as the depository for the funds

do not

include the discretionary, advisory

by the

[ERISA]

activities described

statute"); Pension Fund

Mid Jersey Trucking
_____________________________________

Indus.
Local 701 v. Omni Funding Group, 731 F. Supp. 161, 174___________________
__________________

75 (D.N.J. 1990) (similar).

To

4, standing

under

give the devil his due, we acknowledge that section

alone, might be

some circumstances,

investments in

a manner

construed as authorizing

to

manage

the

that would render

regard to the valuation of those assets.

cannot be read

in a vacuum.

Plan's

it a

the Bank,

real

estate

fiduciary with

Nevertheless, section 4

The TAC nominated Hawthorne

as an

investment manager in respect to the Plan's real estate holdings,

and

the plain

little doubt but

language of

section

that the TAC thereby

6 of

the Agreement

leaves

relieved the Bank

of all

fiduciary responsibility regarding those

section

discretion

shifts

to

appointed

investment

In terms,

manager

all

over affected assets and makes the investment manager

not the trustee

and

an

investments.

valuation

responsible for "perform[ing] such accounting

functions

necessary

to enable

matters,

section

and

such

the Trustee

expressly

other

to fully

duties

as shall

perform."

absolves

the

be

To cinch

trustee

of

"responsibility for supervising any Investment Manager"; confirms

that the trustee

is not obliged "to review or

make inquiries as

to any

action or

direction of any

Investment Manager,"

review

or

the

in

value

assets held

16

any

Investment

or "to

Manager

account."

relevant

Further, it

to this

proclaims, with

discussion,

that the

a single

trustee

exception not

"shall not

liable for any act or omission of any Investment Manager."

stipulations

strip

any

veneer

plaintiffs' bald assertion that

to liability

for Hawthorne's

of

plausibility

the Bank is a fiduciary

overvaluation of

be

These

from

the

subject

the Plan's

real

force of

this

property.

In

a last-ditch

attempt to

blunt the

conclusion,

the

plaintiffs

trustee the right

point to

language

to reject the investment

in certain circumstances

form satisfactory to

that

gives the

manager's directions

say, if those directions are not "in a

it"

and they

argue that, as a

result of

this "discretion" (to use plaintiffs' word), the Bank retains its

status

as

fiduciary

contained in section 6.

It

is

all significant

that

for designated

when

the

powers

language

TAC appoints

assets, the

and relegates the

functionary.

remaining

details as

other

With

are ministerial.

checking whether

assets to the

trustee to the role

section

an

Agreement shifts

discretion and control over those

investment manager

Bank's

the

This argument will not fly.

beyond cavil

investment manager

administrative

notwithstanding

of an

velivolant, the

They

involve such

Hawthorne's instructions

are in

writing

signed

reports to

by

an authorized

the TAC anent the

arguably may

acceptable

refuse to

person

and

Fund's status.

issuing periodic

Although

follow instructions that

the Bank

are not

in an

format, this negative discretion lies well within the

17

administrative sphere, and

Bank into

fiduciary

its existence does not

vis- -vis

the affected

transform the

assets.3

See

___

Arizona State Carpenters Pension Trust Fund v. Citibank, 125 F.3d

___________________________________________
________

715, 722 (9th Cir. 1997).

We need not paint the lily.

that

the

TAC

investments.

appointed Hawthorne

the Bank of

discretionary control

may

have

investment

valuation

to

manage

its real

estate

In that circumstance, the trust document, read as a

whole, divests

powers

The complaint acknowledges

any and all management

over those

been

in

the

assets.

absence

authority or

Whatever the

of

duly

Bank's

appointed

manager, no fiduciary responsibility in regard to the

of

the

Plan's

real

estate

holdings

appointment.

C.

The Bank's Actions.

survived

the

C.

Charting

The Bank's Actions.

__________________

slightly

plaintiffs urge us to set the

the Bank

a fiduciary

virtue of its actions.

entirely passive

an independent

ultimately

different

flight

path,

Agreement to one side and to

of the Plan's

real estate

deem

investments by

They posit that, because the Bank was not

it questioned Hawthorne's valuations,

appraiser

threatened

the

to

to

review

Hawthorne's

report Hawthorne's

engaged

numbers,

practices

and

to the

____________________

3Similarly, the Bank's retention under section

6 of a right

to secure a certified appraisal of the real estate does not alter

the

decisional

Indeed, section

calculus because
6

explicitly

obligation "to review or value

the

Bank

provides that

has
the

no such
Bank

duty.
____
has

no

the assets held in any Investment

Manager Account."

18

authorities

as one.

it acted as a fiduciary and thus we should treat it

We think not.

As a

impose

be

matter of

policy and

Good Samaritan liability.

deemed

to

have volunteered

principle, ERISA does

not

A financial institution cannot

itself

as

fiduciary simply

because it undertakes reporting responsibilities that exceed

its

official

who

mandate.

Imputing

fiduciary

status

to

those

gratuitously assist a

plan's administrators is undesirable

in a

variety of ways, and ERISA's somewhat narrow fiduciary provisions

are

designed to

avoid such

incremental costs.

See
___

Mertens v. Hewitt Assocs., 508 U.S. 248, 262-63

_______
_______________

against this backdrop, a rule

the

generally
_________

(1993).

Viewed

that would dampen any incentive on

part of depository institutions voluntarily to make relevant

information available to fund administrators and other interested

parties is counter-intuitive.

Moreover, such a wrong-headed rule

"would

also

risk

creating

institutions would routinely

the

risk that fiduciary

work."

climate

in

which

increase their fees to

liability might attach

depository

account for

to nonfiduciary

Arizona State Carpenters, 125 F.3d at 722.

________________________

To

the extent

that

the plaintiffs'

fiduciary

claim

derives from

the Bank's

activities with

apart from real estate, it fares no better.

that because the

regard to Plan

assets

The plaintiffs argue

Bank is a fiduciary with regard to the STIF, it

had a statutory responsibility to make a timely disclosure to the

Plan participants of

valuations.

its concerns about Hawthorne's

We agree with the plaintiffs' premise

19

real estate

clearly, the

Bank had

STIF

some discretion

with regard to

investing cash

in the

but their conclusion does not necessarily follow.

Refined to

bare essence,

the question

is whether

an

ERISA fiduciary for one purpose has an obligation to disclose his

suspicions

even when

there is

fiduciary responsibilities and

an

issue of

perhaps

the

one hand,

governed

trusts.

facts

the

certainly

in this

Good arguments exist on

obligations

by federal

law,

his particular

the perceived jeopardy.

first impression,

more broadly.

no nexus between

are

of

an ERISA

informed by

circuit, and

both sides.

fiduciary,

the

the

responsibility."

beneficiary

Eddy
____

as

"the

core

of

v. Colonial Life Ins. Co.,

______________________

On

while

common law

That law generally treats the communication

to

This is

of

of material

fiduciary's

919 F.2d 747,

750

(D.C. Cir. 1990).4

On the

other hand, it is settled that a

non-fiduciary's failure to communicate knowledge of a fiduciary's

breach does not "constitute culpable participation in a breach of

trust under ERISA."

21 Welfare Fund v.
_______________

Painters of Philadelphia Dist. Council No.

___________________________________________

Price Waterhouse, 879 F.2d 1146, 1153 n.9 (3d

________________

Cir. 1989).
____________________

4We note,

however, that

fiduciary duty

to disclose

beneficiary of

new and

also

to

advise

the Eddy
____
as the

support

him of

circumstances

in which

Indeed, every case

of

related

association with the

plan.

as it

ERISA's

inform a

arises, but

threaten interests

at 750 (emphasis

that the plaintiffs have cited in

disclose arises in a context

charges the
(i.e.,

that

only to

Eddy, 919 F.2d

____

an affirmative duty to

the plaintiff

information

duty "not

relevant information

relevant to the relationship."

______________________________
supplied).

court described

defendant with

relevant)
See,
___

to

e.g., Ream v.
____ ____

the

withholding

fiduciary's

Frey, 107
____

F.3d

147, 149-50 (3d Cir. 1997); Glaziers and Glassworkers Union Local

_____________________________________

No. 252 Annuity Fund v. Newbridge Sec., Inc., 93 F.3d 1171, 1175____________________
____________________
77 (3d Cir. 1996).

20

Although this question is

we need not answer it today.

both close and

interesting,

Apart from the co-fiduciary claim,

considered

infra, the plaintiffs'

_____

complaint does not

claim

the

obligation

on

Bank's

supposed

to

premise a

inform

Plan

participants

of

the

suspected

misvaluations.

Instead,

the

complaint predicates the plaintiffs' alternate claim of fiduciary

liability

on

instructions

books."

the

as to

years at values

the

to

to

be carried

on the

Hawthorne's

on [the

to which

in

for many

market values, which

pilots receiving millions more

the benefits

Bank's]

gaffe "resulted

[Bank's] books

greatly in excess of their

than

accept

complaint, this

being carried

led to retiring

sum benefits

"willingness

the values

According to

those properties

in turn

Bank's

they were

in lump

entitled."

Nowhere in the complaint (or in the plaintiffs' opposition to the

motion to

entirely

obligation

dismiss, for that

distinct claim

under

ERISA

that

matter) do the plaintiffs

the

because

Bank

it

breached

failed

to

participants of Hawthorne's erroneous appraisals.

make the

fiduciary

notify

Plan

That ends

the matter.

Afterthought

cleverly constructed afterthought theories

for

the first

expedient

"If any

the most

time in

an

of dressing them

appellate venue

up to look

theories

even

cannot be introduced

through the

simple

like preexisting claims.

principle is settled in this circuit, it is that, absent

extraordinary circumstances, legal theories

not raised

squarely in the lower court cannot be broached for the first time

on appeal."

Teamsters Local No. 59 v. Superline Transp. Co., 953

______________________
_____________________

21

F.2d 17, 21 (1st Cir. 1992); accord McCoy v. M.I.T., 950 F.2d 13,
______ _____
______

22

(1st

Cir.

circumstances

experienced

1991).

Since

here

when

counsel, a

the

good grasp

there

are

no

plaintiffs

of the

extraordinary

sued,

they

facts (honed

had

by the

rigors of Beddall I), and ample time to decide which arguments to

_________

press

that principle applies full bore.

D.
D.

Co-Fiduciary Liability.
Co-Fiduciary Liability.
______________________

The plaintiffs' final approach

that

the Bank

perilously

is liable

centers around a

as a co-fiduciary.

This

claim

claim comes

close to suffering from the same procedural infirmity

that

we have

just identified.

pleaded and no

its face.

Nevertheless,

the plaintiffs

theory below

not artfully

and the

argued a

appears on

co-fiduciary

district court

addressed

So do we.

We need

not linger long.

plaintiffs' allegations, even

true,

complaint is

explicit co-fiduciary liability claim

liability claim

it.5

The

do not

provisions.

establish

ERISA renders

The short

of it is that the

if well-pleaded and assumed

violation

of

to be

ERISA's

co-fiduciary

a fiduciary vulnerable

to liability

for breaches committed by other fiduciaries in three situations:

(1)

if

he

participates

knowingly undertakes
omission

of

knowingly

to conceal,

such other

or

an act

or

fiduciary,

such act or omission is a breach;

____________________

in,

knowing

5The lower

court apparently cobbled the

co-fiduciary claim

together from a liberal reading

of the complaint.

does allege

fiduciary (an allegation that is

that the Bank is a

irrefutable with regard to the

of

Hawthorne's

The complaint

STIF), that it had some knowledge

improprieties,

and

that

it

failed

reasonable efforts to remedy the situation.

22

(2) if, by
the

his failure to comply with

administration

responsibilities which
status as

of

his

give

rise

a fiduciary, he

. . .

specific
to

has enabled

his
such

other fiduciary to commit a breach; or

(3) if he

has knowledge of a

breach by such

to

make

other fiduciary,

unless he

makes reasonable

efforts under the circumstances to remedy the

breach.

29 U.S.C.

1105(a).

claim must stand

Given

their allegations, the

or fall on the

plaintiffs'

third of these scenarios.6

We

think that it falls.

29 U.S.C.

the Bank)

cannot be

1105(d) provides that a fiduciary (such

held responsible as

a co-fiduciary

as

on the

basis of acts described in section 1105(a)(2) or (3):

If

an

investment manager

been appointed

. .

. then,

or

managers have
notwithstanding
_______________

subsections (a)(2) and (3) . . ., no trustee

___________________________
shall be liable from the acts or omissions of
such investment
under

manager or

an obligation

managers, or

to invest

be

or otherwise

manage any asset of the plan which is subject

to the management of such investment manager.

29

U.S.C.

1105(d)

(emphasis

supplied).

Given

its literal

meaning, section 1105(d) defenestrates the plaintiffs' claim that

the Bank is subject to co-fiduciary liability in this instance.

The plaintiffs attempt

conclusion

First,

and

they

Agreement

to ensure

to steer away from

soft

point to

the exact

("The Trustee

shall

landing

by two

language of

not

the obvious

stratagems.

section 6

be liable

for

of the

any act

of

____________________

6Of course,

the

Bank

argues

that it

did,

indeed,

take

reasonable steps to investigate Hawthorne's improprieties and put

an

end to them.

The potential issues

relating to whether such

steps actually were taken and/or their sufficiency are not before
us, and we do not endeavor to decide those issues.

23

omission of the Investment Manager, except as provided in Section

_____________________________

405(a) of ERISA [29

________________

U.S.C.

1105(a)].") (emphasis

supplied).

This verbiage, they assert, evinces an intent to hold a fiduciary

liable for all the conduct described in

section 1105(a), without

reference to the exculpatory

provisions of section 1105(d).

reject that assertion out of

hand.

29

U.S.C.

section to

statute.

1105(a)

can

the extent that

only be

We

The Agreement's reference to

read

as incorporating

it would impart liability

that

under the

Cf. Chicago Bd. Options Exchange, Inc. v. Connecticut

___ ___________________________________
___________

Gen. Life Ins. Co., 713 F.2d

___________________

254, 259 (7th Cir.

that "although the parties may

in any

person, they

1983) (stating

decide how much authority to vest

may not decide

how much

[ERISA] liability

attaches to the exercise of that authority").

The plaintiffs'

implication of section

speculate

that

and is

attempt

1105(d) is

Hawthorne

within the meaning

the premise on

second

of the statute.

thus precluded.

In the

avoid

disingenuous at

may not

which the case has

to

be

an

the

clear

best.

They

"investment manager"

This suggestion contradicts

been argued up to

district court,

this point

the plaintiffs

repeatedly characterized Hawthorne as the Plan's "principal money

manager," and never contended otherwise during the hearing on the

motion to dismiss.

The

plaintiffs must have recognized that the

district

court

understood

their

representations

admission that Hawthorne was an investment

the purpose of the pending

plaintiffs

made

no

effort

correct

be

an

manager (at least for

Rule 12(b)(6) motion).

to

to

the

Moreover, the

district

court's

24

understanding

issued his

by moving for reconsideration after Judge Wolf had

decision.

See, e.g., Vanhaaren

___ ____ _________

v. State Farm Mut.

________________

Auto. Ins. Co.,

______________

will

not permit litigants

different

stages

interests.

See
___

834

989 F.2d 1, 4-5

of

(1st Cir. 1993).

We generally

to assert contradictory

lawsuit

in

order

to

positions at

advance

their

Patriot Cinemas, Inc.

_____________________

v. General Cinema Corp.,

_____________________

F.2d 208, 211-12 (1st Cir. 1987);

see also United States v.

___ ____ _____________

Levasseur, 846 F.2d 786, 792-93 (1st Cir. 1988) (stating the rule
_________

but

finding exceptional

departure).

is not

circumstances sufficient

to warrant

In all events, even if the investment manager gambit

judicially estopped, it

is surely waived inasmuch

as it

makes its debut in this court.

V.
V.

CONCLUSION
CONCLUSION

We

need go

no further.

Because the

trust agreement

(coupled with the TAC's

establishes

over

the

that the

Plan's

appointment of Hawthorne)

Bank retained

real

unambiguously

no discretionary

estate investments,

we

hold

authority

that

the

complaint fails to state an actionable claim against the Bank for

Hawthorne's overvaluation

of those assets.

By the

same token,

the complaint fails to state an actionable claim for co-fiduciary

liability

inasmuch as ERISA,

limits such liability

facts

not alleged

in

specifically 29 U.S.C.

to knowing participation or

this

case.

Hence,

25

concealment

the district

appropriately granted the Bank's motion to dismiss.

Affirmed.
Affirmed.
________

1105(d),

court