United States Court of Appeals For the First Circuit
DENISE MERRIMON and BOBBY S. MOWERY,
UNUM LIFE INSURANCE COMPANY OF AMERICA,
DENISE MERRIMON and BOBBY S. MOWERY,
UNUM LIFE INSURANCE COMPANY OF AMERICA,
APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE
[Hon. Nancy Torresen, U.S. District Judge]
Torruella and Selya, Circuit Judges, and McAuliffe,* District Judge.
* Of the District of New Hampshire, sitting by designation.
Donald R. Frederico, with whom Catherine R. Connors, Byrne J. Decker, Gavin G. McCarthy, and Pierce Atwood LLP were on brief, for defendant. James F. Jorden, Waldemar J. Pflepsen, Jr., Michael A. Valerio, Ben V. Seessel, John C. Pitblado, Jorden Burt LLP, and Lisa Tate on brief for American Council of Life Insurers, amicus curiae. Jeremy P. Blumenfeld, Morgan, Lewis & Bockius LLP, J. Michael Weston, and Lederer Weston Craig on brief for Defense Research Institute, amicus curiae. John C. Bell, Jr., with whom Lee W. Brigham, Bell & Brigham, Stuart T. Rossman, Arielle Cohen, National Consumer Law Center, M. Scott Barrett, and Barrett Wylie LLC were on brief, for plaintiffs.
July 2, 2014
SELYA, Circuit Judge. In 1974, Congress enacted the
Employee Retirement Income Security Act (ERISA). Pub. L. No. 93-
406, 88 Stat. 829, codified as amended at 29 U.S.C. §§ 1001-1461.
One of ERISA's principal goals is to afford appropriate protection
to employees and their beneficiaries with respect to the
administration of employee welfare benefit plans. See Nachman
Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359 , 361-62 (1980).
As is true of virtually any prophylactic statute, interpretive
questions lurk at the margins. This class action, which arises out
of an insurer's redemption of claims on ERISA-regulated life
insurance policies through the establishment of retained asset
accounts (RAAs), spawns such questions.
Here, the plaintiffs challenge the insurer's use of RAAs
as a method of paying life insurance benefits in the ERISA context.
They presented the district court with two basic questions. First,
did the insurer's method of paying death benefits in the form of
RAAs constitute self-dealing in plan assets in violation of ERISA
section 406(b)? Second, did this redemption method offend the
insurer's duty of loyalty toward the class of beneficiaries in
violation of ERISA section 404(a)? The district court answered the
first question in favor of the insurer and the second in favor of
the plaintiff class. It proceeded to award class-wide relief
totaling more than $12,000,000.
Both sides appeal. We agree with the district court that
the insurer's use of RAAs in the circumstances of this case did not
constitute self-dealing in plan assets. We disagree, however, with
the district court's answer to the second query and hold that the
insurer's use of RAAs did not breach any duty of loyalty owed by
the insurer to the plaintiff class. Accordingly, we affirm in part
and reverse in part.
We briefly rehearse the relevant facts, which are largely
undisputed. Readers who hunger for more exegetic detail may
consult the district court's fulsome rescript. See Merrimon v.
Unum Life Ins. Co., 845 F. Supp. 2d 310 , 312-15 (D. Me. 2012).
The plaintiffs, Denise Merrimon and Bobby S. Mowery,
represent a class of beneficiaries of ERISA-regulated employee
welfare benefit plans funded by certain guaranteed-benefit group
life insurance policies that the defendant, Unum Life Insurance
Company of America (the insurer), issued.1 In 2007, each named
plaintiff submitted a claim for life insurance benefits. After
reviewing the submissions, the insurer approved the claims.
The insurer redeemed the claims by establishing, through
a contractor, accounts for the named plaintiffs at State Street
Bank and credited to each plaintiff's account the full amount of
1 Although the decedents' employers were the named administrators of the plans, each of them delegated to the insurer discretionary authority to make claim determinations.
the benefits owed: $51,000 to Merrimon and $62,300 to Mowery. At
the same time, the insurer mailed books of drafts to the
plaintiffs, along with informational materials regarding the
accounts. The drafts empowered the plaintiffs to withdraw all or
any part of the corpus of the RAAs; provided, however, that each
withdrawal was in an amount not less than $250.
In short order, the plaintiffs fully liquidated their
RAAs and the accounts were closed. During the time that funds
remained in their RAAs, however, the insurer retained the credited
funds in its general account and paid the plaintiffs interest at a
rate of one percent (substantially less, the plaintiffs allege,
than the return the insurer earned on its portfolio).
The closing of the RAAs did not end the matter. In
October of 2010, the plaintiffs filed a putative class action
complaint in the United States District Court for the District of
Maine. Their complaint alleged that the insurer's method of
redeeming their claims violated ERISA sections 404(a) and 406(b),
29 U.S.C. §§ 1104(a), 1106(b), and sought "appropriate equitable
relief" under 29 U.S.C. § 1132(a)(3).2 Following discovery, the
parties cross-moved for summary judgment and the plaintiffs moved
for class certification. The district court granted partial
summary judgment in favor of the insurer on the plaintiffs' section
2 The complaint also advanced supplemental claims under Maine law. The district court dismissed those claims, and the plaintiffs have not attempted to renew them on appeal.
406(b) claims and granted partial summary judgment in favor of the
plaintiffs on their section 404(a) claims. See Merrimon, 845 F.
Supp. 2d at 327-28. The court then certified the plaintiff class.
See id. The insurer moved to reconsider the adverse summary
judgment and class certification rulings, but the district court
doubled down: it both denied the motion and struck it as untimely.
A bench trial ensued to determine the appropriate measure
of relief based on the district court's determination (on partial
summary judgment) that the insurer had violated section 404(a).
When all was said and done, the court awarded the plaintiff class
monetary relief in excess of $12,000,000 (exclusive of prejudgment
interest). Neither side was overjoyed, and these cross-appeals
The insurer argues, albeit conclusorily, that the
plaintiffs lack constitutional standing to pursue their claims.
One of the amici helpfully develops the argument in significantly
greater detail. Although these circumstances might ordinarily give
rise to questions of waiver, see, e.g., United States v. Zannino,
895 F.2d 1 , 17 (1st Cir. 1990) (explaining that issues briefed in
a perfunctory manner are normally deemed abandoned); Lane v. First
Nat'l Bank, 871 F.2d 166 , 175 (1st Cir. 1989) (explaining that a
court will usually disregard issues raised only by amici and not by
parties), no such obstacle exists here. The presence or absence of
constitutional standing implicates a federal court's subject-matter
jurisdiction. When an issue implicates subject-matter
jurisdiction, a federal court is obliged to resolve that issue even
if the parties have neither briefed nor argued it. See Arizonans
for Official English v. Arizona, 520 U.S. 43 , 73 (1997); In re Sony
BMG Music Entm't, 564 F.3d 1 , 3 (1st Cir. 2009).
The Constitution carefully confines the power of the
federal courts to deciding cases and controversies. See U.S.
Const. art. III, § 2; Hollingsworth v. Perry, 133 S. Ct. 2652 , 2661
(2013). "A case or controversy exists only when the party
soliciting federal court jurisdiction (normally, the plaintiff)
demonstrates 'such a personal stake in the outcome of the
controversy as to assure that concrete adverseness which sharpens
the presentation of issues upon which the court so largely
depends.'" Katz v. Pershing, LLC, 672 F.3d 64 , 71 (1st Cir. 2012)
(quoting Baker v. Carr, 369 U.S. 186 , 204 (1962)); see Muskrat v.
United States, 219 U.S. 346 , 361-62 (1911). In order to make such
a showing, "a plaintiff must establish each part of a familiar
triad: injury, causation, and redressability." Katz, 672 F.3d at
71 (citing Lujan v. Defenders of Wildlife, 504 U.S. 555 , 560-61
The pivotal question here involves the injury in fact
requirement. The best argument for the absence of constitutional
standing is the notion that the plaintiffs did not suffer any
demonstrable financial loss as a result of the insurer's alleged
transgressions and, therefore, did not sustain any injury in fact.
Put another way, the argument is that because the plaintiffs
received everything to which they were entitled under the ERISA
plans, they suffered no actual harm.
This argument is substantial. When confronted with
essentially the same question, the Second Circuit bypassed it and
asserted jurisdiction on other grounds. See Faber v. Metro. Life
Ins. Co., 648 F.3d 98 , 102-03 (2d Cir. 2011). The Third Circuit
rejected the argument in a divided opinion. See Edmonson v.
Lincoln Nat'l Life Ins. Co., 725 F.3d 406 , 415-17 (3d Cir. 2013),
cert. denied, 134 S. Ct. 2291 (2014); id. at 429-33 (Jordan, J.,
dissenting). After careful perscrutation, we hold that the
plaintiffs have constitutional standing.
An injury in fact is defined as "an invasion of a legally
protected interest which is (a) concrete and particularized; and
(b) actual or imminent, not conjectural or hypothetical." Lujan,
504 U.S. at 560 (footnote omitted) (internal citations and
quotation marks omitted). But in order to establish standing, a
plaintiff does not need to show that her rights have actually been
abridged: such a requirement "would conflate the issue of standing
with the merits of the suit." Aurora Loan Servs., Inc. v.
Craddieth, 442 F.3d 1018 , 1024 (7th Cir. 2006). Instead, a
plaintiff need only show that she has "a colorable claim to such a
right." Id. (emphasis omitted). The evaluation of whether such a
showing has been made must take into account the role of Congress.
After all, Congress has the power to define "the status of legally
cognizable injuries." Katz, 672 F.3d at 75.
These principles are dispositive here. Congress has
mandated ERISA fiduciaries to abide by certain strictures and has
granted ERISA beneficiaries corresponding rights to sue for
violations of those strictures. See 29 U.S.C. § 1132(a)(3)
(authorizing beneficiaries to sue "to obtain . . . appropriate
equitable relief" in order "to redress . . . violations" of ERISA).
An ERISA beneficiary thus has a legally cognizable right to have
her plan fiduciaries perform those duties that ERISA mandates.
We hasten to add a caveat. It is common ground that
Congress cannot confer standing beyond the scope of Article III.
See Summers v. Earth Island Inst., 555 U.S. 488 , 497 (2009) ("[T]he
requirement of injury in fact is a hard floor of Article III
jurisdiction that cannot be removed by statute."). This means, of
course, that an insurer's violation of an ERISA-imposed fiduciary
duty does not necessarily confer standing on all plan
beneficiaries: a beneficiary must show that the alleged violation
has worked some "personal and tangible harm" to her.
Hollingsworth, 133 S. Ct. at 2661.
Here, however, the plaintiffs make colorable claims that
they have suffered just such a harm. They contend that the insurer
has wrongfully retained and misused their assets. If proven, this
would constitute a tangible harm even if no economic loss results.
See, e.g., Restatement (Third) of Restitution and Unjust Enrichment
§ 3 reporter's note a (2011) ("[T]here can be restitution of
wrongful gain in cases where the plaintiff has suffered an
interference with protected interests but no measurable loss
whatsoever."); see also CIGNA Corp. v. Amara, 131 S. Ct. 1866 , 1881
(2011). In addition, the injury — although common to a potentially
wide class of beneficiaries — is particularized to the plaintiffs,
each of whom claims that the insurer wrongfully retained his or her
The Supreme Court has "often said that history and
tradition offer a meaningful guide to the types of cases that
Article III empowers federal courts to consider." Sprint Commc'ns
Co. v. APCC Servs., Inc., 554 U.S. 269 , 274 (2008). Although ERISA
is of relatively recent origin, its administration is informed by
the common law of trusts. See Varity Corp. v. Howe, 516 U.S. 489 ,
496 (1996). Historically, courts have asserted jurisdiction over
cases against a trustee "even though the trust itself ha[d]
suffered no loss." George G. Bogert et al., Law of Trusts and
Trustees § 861 (2013) (citing Mosser v. Darrow, 341 U.S. 267 , 272-
73 (1951); Magruder v. Drury, 235 U.S. 106 , 120 (1914)); see also
Restatement (Third) of Restitution and Unjust Enrichment § 3
reporter's note a (2011). A holding here that the plaintiffs have
satisfied the requirements for constitutional standing would be
entirely consistent with this historical practice.
To say more about the issue of constitutional standing
would be to paint the lily. We hold that the plaintiffs have
asserted colorable and cognizable claims of injuries in fact.
Nothing more is needed here, from a jurisdictional standpoint, to
wrap the plaintiffs in the cloak of constitutional standing.3
III. THE MERITS
The district court made two pertinent liability rulings
at the summary judgment stage. One of these is challenged by the
plaintiffs and the other by the insurer. We review both rulings de
novo. See Kouvchinov v. Parametric Tech. Corp., 537 F.3d 62 , 66
(1st Cir. 2008). Before addressing these rulings, however, we must
resolve a threshold issue: whether deference is due to the relevant
views of the United States Department of Labor (DOL). We start
3 In its opening brief, the insurer suggests that the plaintiffs lack statutory standing under ERISA. Statutory standing is, of course, different than constitutional standing. See Katz, 672 F.3d at 75; Graden v. Conexant Sys. Inc., 496 F.3d 291 , 295 (3d Cir. 2007). One way in which the two concepts differ is that arguments based on statutory standing, unlike arguments based on constitutional standing, are waivable. See, e.g., Bilyeu v. Morgan Stanley Long Term Disab. Plan, 683 F.3d 1083 , 1090 (9th Cir. 2012), cert. denied, 133 S. Ct. 1242 (2013). Any possible defect in statutory standing has been waived in this case because the issue was not raised below. See Teamsters Union, Local No. 59 v. Superline Transp. Co., 953 F.2d 17 , 21 (1st Cir. 1992) ("If any principle is settled in this circuit, it is that, absent the most extraordinary circumstances, legal theories not raised squarely in the lower court cannot be broached for the first time on appeal.").
A. The DOL Guidance.
The Second Circuit, puzzling over essentially the same
riddle that confronts us today, asked the DOL to provide its
interpretation of how the relevant ERISA provisions affect
insurers' decisions to use RAAs as a method of claim redemption.
See Faber, 648 F.3d at 102. The DOL responded by submitting a 16-
page amicus brief. See Secretary of Labor's Amicus Curiae Letter
Brief in Response to the Court's Invitation (the DOL Guidance),
Faber, 648 F.3d at 98 (No. 09-4901). In it, the DOL, after
sedulous analysis, made it crystal clear that an insurer discharges
its fiduciary duties under ERISA by furnishing a beneficiary
unfettered access to an RAA in accordance with plan terms and does
not retain plan assets by holding and managing the funds that back
The insurer, citing Skidmore v. Swift & Co., 323 U.S.
134 , 140 (1944), exhorts us to defer to the DOL Guidance. The
plaintiffs demur, arguing that the DOL Guidance was hastily
prepared and is inconsistent with other authority.
It is important to note that the DOL "shares enforcement
responsibility for ERISA." John Hancock Mut. Life Ins. Co. v.
Harris Trust & Sav. Bank, 510 U.S. 86 , 107 n.14 (1993) (citing 29
U.S.C. § 1204(a)). This responsibility paves the way for — but
does not require — a finding that some deference is due to the
DOL's views. An agency's interpretation of a statute that it
administers may warrant judicial deference, depending on the degree
to which the agency's exposition of the issue is deemed
authoritative. See United States v. Mead Corp., 533 U.S. 218 , 228
While agencies are generally presumed to have particular
expertise with respect to the statutes that they administer,
agencies speak in a variety of ways. As a result,
authoritativeness often depends, at least in part, on context. For
example, when an agency speaks with the force of law, as through a
binding regulation, its interpretation of ambiguous provisions of
a statute that falls within its purview is due judicial deference
as long as that interpretation is reasonable. See id. at 229-30;
Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S.
837 , 842-45 (1984).
But when an agency speaks with something less than the
force of law, its interpretations are entitled to deference "only
to the extent that those interpretations have the 'power to
persuade.'" Christensen v. Harris Cnty., 529 U.S. 576 , 587 (2000)
(quoting Skidmore, 323 U.S. at 140). That is the situation here.
We must, therefore, dig deeper.
To gauge persuasiveness, an inquiring court should look
to a "mix of factors" that "either contributes to or detracts from
the power of an agency's interpretation to persuade." Doe v.
Leavitt, 552 F.3d 75 , 81 (1st Cir. 2009). Those factors include
"the thoroughness evident in [the agency's] consideration, the
validity of its reasoning, [and the] consistency [of its
interpretation] with earlier and later pronouncements." Id.
(alterations in original) (quoting Skidmore, 323 U.S. at 140).
"[T]he most salient of the factors that inform an assessment of
persuasiveness [is] the validity of the agency's reasoning." Id.
We appraise the DOL Guidance with these factors in mind.
In doing so, we are acutely aware that if this inquiry is to have
any real utility, it must involve something more than merely
determining whether the agency's views comport with the court's
independent interpretation of the relevant statutory provisions.
See id. at 80-81. If the relevant factors tilt in favor of giving
weight to the agency's views, it would be an exercise in vanity for
a court to disregard those views.
The DOL Guidance is plainly well-reasoned. Here, as in
Doe, "the agency has consulted appropriate sources, employed
sensible heuristic tools, and adequately substantiated its ultimate
conclusion." Id. at 82. The meticulous nature of the agency's
statement of its views, coupled with the logic of its position,
combine to lend the DOL Guidance credibility.
To be sure, the DOL Guidance was not forged through a
transparent and structured process, nor was it tempered in the
crucible of public comment. Such accouterments would have given
added heft to the DOL Guidance — but none of them is a condition
precedent to deference. See Sun Capital Partners III, LP. v. New
Eng. Teamsters & Trucking Indus. Pension Fund, 724 F.3d 129 , 140-41
(1st Cir. 2013), cert. denied, 134 S. Ct. 1492 (2014); Conn. Office
of Prot. & Advocacy for Pers. with Disabs. v. Hartford Bd. of
Educ., 464 F.3d 229 , 239-40 (2d Cir. 2006) (Sotomayor, J.).
Persuasiveness (or the lack of it) depends on the totality of the
So, too, the fact that the DOL's position is of
relatively recent vintage is not fatal. While the longstanding
nature of an agency interpretation may constitute an added reason
for deference, see Lapine v. Town of Wellesley, 304 F.3d 90 , 106
(1st Cir. 2002), new interpretations — particularly new
interpretations addressing questions not previously posed to the
agency — can be convincing, see, e.g., Conn. Office of Prot. &
Advocacy, 464 F.3d at 244; In re New Times Sec. Servs., Inc., 371
F.3d 68 , 81-83 (2d Cir. 2004).
In the last analysis, we are satisfied that the
considerations of process and duration stressed by the plaintiffs
are insufficient to sully the well-reasoned DOL Guidance. The
amicus brief filed by the DOL bears the hallmarks of reliability.
There is no good reason to dismiss it, especially since the agency
was not a party to the litigation in which the amicus brief was
filed but articulated its views only in response to the Second
Circuit's direct request. See Conn. Office of Prot. & Advocacy,
464 F.3d at 236, 239-40. Taking into account the scrupulousness of
the DOL Guidance, its analytic rigor, and its crafting of a set of
clear and easily applied rules that are consistent with ERISA's
structure, text, and purpose, we conclude that the DOL Guidance is
deserving of some weight. See Martin v. OSHRC, 499 U.S. 144 , 157
B. Section 406(b).
The plaintiffs' remaining contention is that the
insurer's method of redeeming life insurance policies by paying
death benefits in the form of RAAs constituted self-dealing in plan
assets in violation of ERISA section 406(b). ERISA section 406(b)
prohibits a plan fiduciary from "deal[ing] with the assets of the
plan in [its] own interest or for [its] own account." 29 U.S.C.
§ 1106(b)(1). The plaintiffs assert that the insurer violated this
prohibition on self-dealing in plan assets by retaining and
investing RAA funds for its own enrichment. The district court
rejected this assertion, see Merrimon, 845 F. Supp. 2d at 319, and
so do we.
ERISA nowhere contains a comprehensive definition of what
constitutes "plan assets." See Harris Trust, 510 U.S. at 89. In
an effort to fill this void, the DOL consistently has stated that
"the assets of a plan generally are to be identified on the basis
of ordinary notions of property rights under non-ERISA law." U.S.
Dep't of Labor, Advisory Op. No. 93-14A, 1993 WL 188473 , at *4 (May
5, 1993). Several of our sister circuits have adopted this
formulation. See, e.g., Edmonson, 725 F.3d at 427; Faber, 648 F.3d
at 105-06; Kalda v. Sioux Valley Physician Partners, Inc., 481 F.3d
639 , 647 (8th Cir. 2007); In re Luna, 406 F.3d 1192 , 1199 (10th
Cir. 2005). We too find this formulation persuasive.
The plaintiffs concede that, prior to the creation of an
RAA, funds held in the insurer's general account are not plan
assets. That is because
[i]n the case of a plan to which a guaranteed benefit policy is issued by an insurer, the assets of such plan shall be deemed to include such policy, but shall not, solely by reason of the issuance of such policy, be deemed to include any assets of such insurer.
29 U.S.C. § 1101(b)(2).
The plaintiffs nonetheless posit that when a death
benefit accrues and is redeemed by means of the establishment of an
RAA, the RAA funds become plan assets if those funds are retained
in the insurer's general account. As a corollary, they posit that
those retained funds remain plan assets until the RAA is fully
This argument lacks force. There is no basis, either in
the case law or in common sense, for the proposition that funds
held in an insurer's general account are somehow transmogrified
into plan assets when they are credited to a beneficiary's account.
Indeed, the DOL Guidance — to which a modicum of respect is owed —
indicates exactly the opposite. See DOL Guidance at 7.
We add, more generally, that ordinary notions of property
rights counsel strongly against the plaintiffs' proposition. It is
the beneficiary, not the plan itself, who has acquired an ownership
interest in the assets backing the RAA. See Edmonson, 725 F.3d at
428; Faber, 648 F.3d at 106. Unless the plan documents clearly
evince a contrary intent — and here they do not — a beneficiary's
assets are not plan assets.
The decision in Mogel v. Unum Life Insurance Co., 547
F.3d 23 , 26 (1st Cir. 2008), is not at odds with the conclusion
that the monies retained by the insurer are not plan assets. Mogel
involved a plan that contained a specific directive to pay
beneficiaries in a lump sum. See id. at 25. The insurer ignored
this specific directive and sought instead to redeem claims through
the establishment of RAAs. See id. As has been widely recognized,
this particularized policy provision explains this court's holding
that the insurer, which had not paid the policy proceeds in a
manner permitted by the plan documents, had violated its fiduciary
duties. See Edmonson, 725 F.3d at 428; Faber, 648 F.3d at 106-07;
DOL Guidance at 13-14. Thus, neither the holding in Mogel nor its
broadly cast language is binding precedent for purposes of this
materially different case. See Mun'y of San Juan v. Rullan, 318
F.3d 26 , 28 n.3 (1st Cir. 2003) (explaining that "[d]icta comprises
observations in a judicial opinion . . . that are 'not essential'
to the determination of the legal questions then before the court,"
and that dicta "have no binding effect in subsequent proceedings").
As a fallback, the plaintiffs invite us to adopt the
Ninth Circuit's functional approach to determining which assets are
plan assets. See Acosta v. Pac. Enters., 950 F.2d 611 , 620 (9th
Cir. 1991). The functional approach looks to "whether the item in
question may be used to the benefit (financial or otherwise) of the
fiduciary at the expense of plan participants or beneficiaries" as
a means of ascertaining whether the item is a plan asset. Id.
Although courts occasionally have found this approach useful, we
have never endorsed it. Nor do we need to explore its possible
utility today: while the functional approach might be of some
assistance in doubtful cases, the assets with which we are
concerned — the funds backing the RAAs — fall squarely within the
compass of section 401(b)(2) prior to the establishment of an RAA,
and they are not governed by ERISA subsequent thereto. As the DOL
Guidance makes manifest, those funds are simply not plan assets.
The plaintiffs have one final shot in their sling. They
say that even if the court below appropriately determined that the
retained funds were not plan assets, its ultimate conclusion that
the insurer did not offend section 406(b) was nevertheless
incorrect. This is so, the plaintiffs' thesis runs, because the
life insurance policies themselves were plan assets and the insurer
exercised control respecting the management of the policies when it
established the RAAs, retained and invested the RAA funds to its
own behoof, and decided how much of the investment profit to keep
and how much to pay in interest.
The insurer's first line of defense is that this claim
was waived because it was not proffered below. The plaintiffs'
disavowal points only to a single paragraph in their complaint.
Standing alone, this solitary paragraph is too thin a reed by which
to exorcize the evils of waiver. We explain briefly.
"Even an issue raised in the complaint but ignored at
summary judgment may be deemed waived. If a party fails to assert
a legal reason why summary judgment should not be granted, that
ground is waived and cannot be considered or raised on appeal."
Grenier v. Cyanamid Plastics, Inc., 70 F.3d 667 , 678 (1st Cir.
1995) (internal quotation marks omitted). That is precisely what
happened here. After filing their complaint, the plaintiffs did
nothing to develop this particular claim, and the summary judgment
papers disclose no development of it. The claim is, therefore,
This brings us to the end of the road. We hold that the
funds backing the plaintiffs' RAAs were not, and never became, plan
assets. Consequently, the court below did not err in holding that
there was no showing of self-dealing sufficient to ground a section
C. Section 404(a).
ERISA section 404(a) provides, with certain reservations
not relevant here, that "a fiduciary shall discharge his duties
with respect to a plan solely in the interest of the participants
and beneficiaries." 29 U.S.C. § 1104(a)(1). Relatedly, ERISA
a "person is a fiduciary with respect to a plan," and therefore subject to ERISA fiduciary duties, "to the extent" that he or she "exercises any discretionary authority or discretionary control respecting management" of the plan, or "has any discretionary authority or discretionary responsibility in the administration" of the plan.
Varity, 516 U.S. at 498 (quoting 29 U.S.C. § 1002(21)(A)). The
crux of the plaintiffs' section 404(a) claims is that the insurer
acted as a fiduciary when setting the RAA interest rate and that it
did not set the rate solely in the interest of the beneficiaries.
The district court found this claim persuasive. The
court premised its conclusion that the insurer was acting as a
fiduciary on the insurer's retention of discretion both "to
determine the interest rates and other features accruing to [the
RAAs]" and "to award itself the business of administering the
Plaintiffs' RAAs" while retaining the assets backing these
accounts. Merrimon, 845 F. Supp. 2d at 319-20. With this premise
in place, the court concluded that the insurer, as a fiduciary,
"managed the RAAs to optimize its own earnings and not to optimize
the beneficiaries' earnings." Id. at 320. It granted partial
summary judgment holding the insurer liable under ERISA section
404(a). See id.
The insurer mounts a formidable challenge to this
holding. The centerpiece of its challenge is the assertion that,
by establishing the RAAs in accordance with the plan documents, the
insurer fully discharged its fiduciary duties. Consequently, the
subsequent relationship between the insurer and the beneficiary was
in the nature of a debtor-creditor relationship, governed not by
ERISA but by state law. In other words, when the insurer invested
the retained funds and paid interest to the beneficiaries, it was
not acting as an ERISA fiduciary.
The insurer's position makes sense, and it is bulwarked
by relevant authority. To begin, the DOL has stated explicitly
that a life insurer discharges its fiduciary duties when it redeems
a death-benefit claim through the establishment of an RAA as long
as that method of redemption is called for by the plan documents.
See DOL Guidance at 11. We owe a measure of deference to this
view. See supra Part III(A). This deference is especially
appropriate because the only two courts of appeals to have
addressed the issue subsequent to the DOL's statement of its views
have reached the same conclusion. See Edmonson, 725 F.3d at 424-
26; Faber, 648 F.3d at 104-05.
The plaintiffs beseech us not to follow these
authorities. Their variegated arguments sound two related themes.
First, they assert that the insurer continued to act as a fiduciary
even after it established the RAAs because it continued to hold the
policy proceeds in its general account. Second, they assert that
the insurer acted as a fiduciary in setting the interest rate
because the plan documents stipulated no specific interest rate.
We treat these arguments separately.
1. Retention of Policy Proceeds. It is clear beyond
hope of contradiction that sponsors of ERISA plans have
considerable latitude in plan design, including the establishment
of methods for paying benefits. See Faber, 648 F.3d at 104 (citing
Hughes Aircraft Co. v. Jacobson, 525 U.S. 432 , 444 (1999)); see
also Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73 , 78 (1995).
When ERISA deals with the payment of benefits, the term benefit
"denotes the money to which a person is entitled under an ERISA
plan." Evans v. Akers, 534 F.3d 65 , 70 (1st Cir. 2008) (internal
quotation marks omitted). Although fiduciary duties do encompass
some acts connected to the distribution of plan benefits, see
Mogel, 547 F.3d at 27, such fiduciary duties relate principally to
ensuring that monies owed to beneficiaries are disbursed in
accordance with the terms of the plan.
In this instance, each of the plans provides that the
insurer will, upon proof of claim, pay the death benefit owed by
"mak[ing] available to the beneficiary a retained asset
account"(emphasis in original).4 Each plan describes an RAA as "an
interest bearing account established through an intermediary bank."
The insurer followed this protocol precisely: it made available to
each plaintiff an interest-bearing RAA established through an
intermediary bank, which was credited with the full amount of the
death benefit owed. No more was exigible to carry out the terms of
Once the insurer fulfilled these requirements, its duties
as an ERISA fiduciary ceased. See Edmonson, 725 F.3d at 425-26;
Faber, 648 F.3d at 105; DOL Guidance at 11. There is simply no
basis for concluding that ERISA-imposed fiduciary duties remained
velivolant after that point. Cf. LaRocca v. Borden, Inc., 276 F.3d
22 , 30 (1st Cir. 2002) (explaining that the purpose of ERISA is "to
protect contractually defined benefits"). Any further obligation
that the insurer had to the beneficiaries "constituted a
straightforward creditor-debtor relationship." Faber, 648 F.3d at
105; accord Edmonson, 725 F.3d at 426; DOL Guidance at 10-11.
The plaintiffs labor to dull the force of this reasoning.
They start by asseverating that the establishment of an RAA does
not constitute payment of benefits. But this asseveration rests
chiefly on our decision in Mogel, 547 F.3d at 26; and as we already
have explained, Mogel is inapposite here. See supra Part III(B).
4 The plans except death benefits totaling less than $10,000. That exception is not relevant here.
The plaintiffs also asseverate that, under general trust
principles, "[e]ven when a trust terminates, the trustee's powers
and duties continue until the trustee delivers the trust property
to the persons entitled to it." Plaintiffs' Br. at 66. Here,
however, the insurer paid the death benefits that were owed by
delivering to the beneficiaries an instrument (the RAA) required by
the terms of the plans. Under the plans, that delivery constituted
delivery in full of the policy proceeds to the person(s) entitled
to those proceeds. Therefore, the general trust principles relied
on by the plaintiffs do not support their claim.
This analysis also explains why the plaintiffs'
insistence that the insurer had to obtain the plaintiffs' informed
consent before it invested the retained funds is without merit.
This argument, too, is based on general trust principles; and the
simple answer to it is that the insurer was not acting as a
fiduciary when it invested the retained funds.5 See Edmonson, 725
F.3d at 426.
2. Setting of Interest Rate. This leaves the second
theme sounded by the plaintiffs. They contend that because the
insurer retained discretion to set the interest rate to be paid on
the RAAs, rate-setting was a fiduciary act, which the insurer did
not carry out solely in the interest of the beneficiaries. Cf. 29
U.S.C. § 1002(21)(A) (defining a plan fiduciary in terms of
discretion). The plaintiffs' reach exceeds their grasp.
Discretionary acts trigger fiduciary duties under ERISA only when
and to the extent that they relate to plan management or plan
assets. See id.; see also Varity, 516 U.S. at 498; Livick v.
Gillette Co., 524 F.3d 24 , 29 (1st Cir. 2008). In the
circumstances of this case, the setting of the interest rate did
not relate to plan management but, rather, related to the
5 The plaintiffs launch an array of other plaints based on DOL statements. These statements deal, inter alia, with the practice of fiduciaries "earn[ing] interest from the 'float' that occurs between the time a benefits check is issued and the time it is cashed by the beneficiary," Plaintiffs' Br. at 69 (citing U.S. Dep't of Labor, Field Assistance Bull. 2002-3, 2002 WL 34717725 , at *2-3 (Nov. 5, 2002); U.S. Dep't of Labor, Advisory Op. No. 92-24A, 1993 WL 349627 , at *1-2 (Sept. 13, 1993)), and with fiduciaries who "provide record-keeping and related services to a defined contribution plan," id. at 70 (citing U.S. Dep't of Labor, Advisory Op. No. 2013-03A, 2013 WL 3546834 , at *3-4 (July 3, 2013)). These DOL statements are at best tenuously connected to the circumstances at hand. Thus, they cannot trump the on-point views expressed in the DOL Guidance. Cf. United States v. Nascimento, 491 F.3d 25 , 41 (1st Cir. 2007) (adopting authority "more directly on point"); United States v. Palmer, 946 F.2d 97 , 99 (9th Cir. 1991) (similar).
management of the RAAs. The RAAs were not plan assets, see Faber,
725 F.3d at 106, and the setting of an interest rate for use in
connection with the RAAs thus did not implicate any ERISA-related
fiduciary duty, see Edmonson, 725 F.3d at 424 n.14; cf. DOL
Guidance at 8 (indicating that the determination of whether the
discretionary setting of an interest rate implicates ERISA depends
in significant part on whether the interest-earning assets are plan
This conclusion follows inexorably from our holding that
the establishment of an RAA constitutes payment under the terms of
the plans. When the insurer redeems a death benefit that is due a
beneficiary by establishing an RAA, no other or further ERISA-
related fiduciary duties attach. Thus, the insurer's setting of an
interest rate for the RAAs does not implicate ERISA; rather, its
setting of the interest rate must be viewed as part of the
management of the RAAs, governed by state law.6 See Edmonson, 725
F.3d at 425-26; Faber, 648 F.3d at 104-05; DOL Guidance at 11.
The Supreme Court's decision in Varity, loudly bruited by
the plaintiffs, does not demand a contrary result. There, the
Court was confronted with an employer that lied to its employees
about the effect of a pending corporate reorganization on their
6 We are mindful that the district court characterized what happened here as the insurer "award[ing] itself the business of administering the Plaintiffs' RAAs." Merrimon, 845 F. Supp. 2d at 319. But this characterization is inapropos; the insurer did no more than carry out the express terms of the plans.
benefits. See Varity, 516 U.S. at 493-94. One issue was whether
the employer, in communicating with its work force, was acting as
an ERISA plan administrator or an employer. See id. at 498. In
holding that the employer was acting in the former capacity, the
Court noted that "[t]here is more to plan (or trust) administration
than simply complying with the specific duties imposed by the plan
documents or statutory regime." Id. at 504.
Like barnacles clinging to the hull of a sinking ship,
the plaintiffs cling to these words. Their reliance is mislaid.
Varity, which involved a plan administrator that "significantly and
deliberately misled the beneficiaries," id. at 492, is plainly
distinguishable. The Court's acknowledgment that a plan
administrator may have extra-textual fiduciary duties that are
implicated in such parlous circumstances does not mean that those
duties are implicated here. Varity held that plan administration
"includes the activities that are ordinary and natural means of
achieving the objective of the plan," whether or not spelled out in
the plan. Id. (internal quotation marks omitted). The objective
of each of the plans at issue here was the delivery of a guaranteed
death benefit to the beneficiary, and the delivery of the benefit
through the establishment of an RAA fulfilled that objective. No
other or further fiduciary duties attached.
Let us be perfectly clear. This case is not about the
desirability, fairness, or social utility of retained asset
accounts. It is, rather, about the boundaries of ERISA. The
plaintiffs attempt to invoke ERISA to attack practices that fall
outside the compass of the ERISA statute. Consequently, they are
not entitled to relief.
We need go no further.7 The plaintiffs have not made out
their claims that the insurer breached any of its ERISA-related
fiduciary duties. Thus, we affirm the district court's order of
partial summary judgment in favor of the insurer with respect to
ERISA section 406(b) and reverse the district court's order of
partial summary judgment in favor of the plaintiffs with respect to
section 404(a). Accordingly, the trial (which was devoted to
potential relief) was a nullity and the resultant judgment must be
vacated. To conclude the matter, we remand to the district court
with instructions to enter judgment in favor of the insurer. All
parties shall bear their own costs.
7 Inasmuch as we have resolved the liability issues adversely to the plaintiffs, the other issues that have been briefed and argued in connection with these appeals fall by the wayside. Without exception, those issues relate to relief, and we have determined that the plaintiffs are not entitled to any relief.