Renfro v. Unisys Corp.

PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________

No. 10-2447
___________

MARK RENFRO; GERALD LUSTIG,
AS REPRESENTATIVES OF A CLASS OF SIMILARLY
SITUATED PERSONS, AND ON BEHALF OF THE PLAN

v.

UNISYS CORPORATION;
UNISYS CORPORATION EMPLOYEE
BENEFIT ADMINISTRATIVE COMMITTEE;
UNISYS CORPORATION SAVINGS PLAN MANAGER;
PENSION INVESTMENT REVIEW COMMITTEE;
FIDELITY MANAGEMENT TRUST COMPANY;
FIDELITY MANAGEMENT AND
RESEARCH COMPANY;
FIDELITY INVESTMENTS INSTITUTIONAL
OPERATIONS COMPANY, INC;
J.P. BOLDUC; MATTHEW J. ESPE; GAIL D. FOSLER;
RANDALL J. HOGAN; CLAYTON M. JONES;
CLAY B. LIFLANDER; THEODORE E. MARTIN;
CHARLES B. McQUADE; FMR LLC

Mark Renfro; Gerald Lustig,
Appellants
 _______________________

On Appeal from the United States District Court
for the Eastern District of Pennsylvania
D.C. Civil Action No. 07-cv-02098
(Honorable Berle M. Schiller)
______________

Argued March 7, 2011

Before: SCIRICA, AMBRO and VANASKIE,
Circuit Judges.

(Filed: August 19, 2011)

MICHAEL A. WOLFF, ESQUIRE (ARGUED)
JEROME J. SCHLICHTER, ESQUIRE
Schlichter Bogard & Denton LLP
100 South 4th Street, Suite 900
St. Louis, Missouri 63102
Attorneys for Appellants

LOUISE M. BETTS, ESQUIRE (ARGUED)
ELIZABETH HOPKINS, ESQUIRE
United States Department of Labor
200 Constitution Avenue, N.W., Room N4611
Washington, D.C. 20210
Attorneys for Amicus Curiae-Appellant,
The Secretary of Labor, Hilda L. Solis

CLAIRE PRESTEL, ESQUIRE
Public Justice, P.C.
1825 K Street, N.W., Suite 200

2
Washington, D.C. 20006
Attorney for Amicus Curiae-Appellant,
Public Justice

JAY E. SUSHELSKY, ESQUIRE
AARP Foundation Litigation
601 E Street, N.W., Room B4-250
Washington, D.C. 20049
Attorney for Amicus Curiae-Appellant,
AARP

GREGORY Y. PORTER, ESQUIRE
Bailey & Glasser LLP
910 17th Street, N.W., Suite 800
Washington, D.C. 20006
Attorney for Amici Curiae-Appellants,
Richard Kopcke and Francis Vitagliano

BRIAN T. ORTELERE, ESQUIRE (ARGUED)
JOSEPH J. COSTELLO, ESQUIRE
AZEEZ HAYNE, ESQUIRE
MELISSA D. HILL, ESQUIRE
Morgan Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103

JOSEPH A. TEKLITS, ESQUIRE
Unisys Corporation
801 Lakeview Drive, Suite 100
Blue Bell, Pennsylvania 19422
Attorneys for Appellees,
Unisys Corporation, Unisys Corporation
Employee Benefit Administrative Committee,

3
 Unisys Corporation Savings Plan Manager,
Pension Investment Review Committee,
J.P. Bolduc, Matthew J. Espe, Gail D. Fosler,
Randall J. Hogan, Clayton M. Jones,
Clay B. Liflander, Theodore E. Martin,
Charles B. McQuade

JONATHAN D. HACKER, ESQUIRE (ARGUED)
MEAGHAN McLAINE VERGOW, ESQUIRE
O'Melveny & Myers LLP
1625 Eye Street N.W.
Washington, D.C. 20006

JOHN S. SUMMERS, ESQUIRE
Hangley Aronchick Segal & Pudlin
One Logan Square, 27th Floor
18th & Cherry Streets
Philadelphia, Pennsylvania 19103
Attorneys for Appellees,
Fidelity Management Trust Company,
Fidelity Management and Research Company,
Fidelity Investments Institutional Operations
Company Inc., FMR LLC

THOMAS L. CUBBAGE III, ESQUIRE
Covington & Burling LLP
1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attorney for Amicus Curiae-Appellee,
The Investment Company Institute

NANCY G. ROSS, ESQUIRE
McDermott Will & Emery LLP

4
227 West Monroe Street
Chicago, Illinois 60606
Attorney for Amicus Curiae-Appellee,
Securities Industry and Financial Markets Association

HOWARD SHAPIRO, ESQUIRE
Proskauer Rose LLP
650 Poydras Street, Suite 1800
New Orleans, Louisiana 70130
Attorney for Amicus Curiae-Appellee,
The Chamber of Commerce of the
United States of America
_________________

OPINION OF THE COURT
_________________

SCIRICA, Circuit Judge.

Plaintiffs Mark Renfro and Gerald Lustig,
representatives of a putative class of participants in a 401(k)
defined contribution plan, sued defendants Unisys Corp. and
Fidelity Management Trust Co. and its related corporate
entities under the Employment Retirement Income Security
Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., for breach of
fiduciary duty. Plaintiffs alleged defendants inadequately
selected a mix and range of investment options to include in
the plan. The District Court dismissed the Fidelity entities,
holding they were not fiduciaries with reference to the
challenged conduct, dismissed the action holding plaintiffs‟
claims were implausible because the plan‟s mix and range of
options was reasonable, and, in the alternative, granted
Unisys‟s summary judgment motion holding the ERISA safe-

5
harbor provisions exempted it from liability. We will affirm
the dismissal of the Fidelity entities and the dismissal of the
action. We will not reach the grant of summary judgment.

I.

A.

The Unisys Corporation Savings Plan is a “defined
contribution plan” within the meaning of 29 U.S.C. §
1002(34), which is tax qualified under 26 U.S.C. § 401(k).
“[A] „defined contribution plan‟ . . . promises the participant
the value of an individual account at retirement, which is
largely a function of the amounts contributed to that account
and the investment performance of those contributions.”
LaRue v. DeWolff, Boberg & Assocs., 552 U.S. 248, 250 n.1
(2008). These plans “dominate the retirement plan scene
today.” Id. at 255.

The Unisys plan consists of several investment options
(seventy-three as of the filing of the complaint) into which
non-union Unisys employees may allocate contributions. An
employee-participant may contribute up to 30%, but no more
than $15,000 per year, of his or her pre-tax wages into the
plan. Unisys then matches half of the participant‟s
contribution, capped at 2% of the participant‟s wages, which
it invests in the Unisys Stock Fund. Participants are fully
vested in their accounts.

Of the seventy-three options included in the plan,
participants could invest in either of a stable value fund or the
Unisys Stock Fund, or one of seventy-one options provided
under trust agreement with Fidelity. Of the seventy-one
options provided by Fidelity, four were commingled pools.

6
Commingled pools consist of funds commingled from
different sources owning shares in the pool. They are part of
a group trust owned by a bank. Of the commingled pools
included in the Unisys plan, one commingled pool invested in
an S&P 500 index, and three commingled pools invested in
bonds.

The remaining sixty-seven investment options were
mutual funds. “„A mutual fund is a pool of assets, consisting
primarily of [a] portfolio [of] securities, and belonging to the
individual investors holding shares in the fund.‟” Jones v.
Harris Assocs. L.P., --- U.S. ----, 130 S. Ct. 1418, 1422
(2010) (alterations in original) (quoting Burks v. Lasker, 441
U.S. 471, 480 (1979)). Mutual funds are organized as
investment companies, which are governed by the Securities
Act of 1933, 15 U.S.C. § 77a et seq., and the Investment
Company Act of 1940, 15 U.S.C. § 80a-1 et seq. See Jones,
130 S. Ct. at 1422. Accordingly, they are subject to a variety
of reporting, governance, and transparency requirements that
do not apply to other investment vehicles such as commingled
pools.

The Unisys plan‟s mutual funds were added in 1993 by
way of a trust agreement with Fidelity. Fidelity, as a directed
trustee of the plan, agreed to provide administrative services
bundled with the investment options. In return, Unisys
agreed that any additions to the funds to be managed by
Fidelity would be Fidelity funds. The agreement did not
prohibit Unisys from adding non-Fidelity options to its plan,
and administering them itself, or from contracting with
another company to administer non-Fidelity investments. In
fact, in its recitals, the trust agreement stated certain
investments were to be held in trust and administered by
CoreStates, a trustee unaffiliated with Fidelity.

7
 Each mutual fund included in the plan incurred fees for
investment management. These fees are set for each mutual
fund in an expense ratio—a percentage of each contributor‟s
assets invested in a particular fund. The plan had a wide
variety of risk and expense ratios; the expense ratios on the
funds included in the Unisys plan ranged from 0.1% to
1.21%. Renfro v. Unisys Corp., No. 07-2098, 2010 U.S. Dist.
LEXIS 41563, at *7 n.2 (E.D. Pa. April 26, 2010) (taking
judicial notice of the fees because they were disclosed in
prospectuses filed with the Securities and Exchange
Commission). These fees pay for, among other things,
management of the investments and compliance with
securities laws. All fees were disclosed in materials
distributed to the participants.1 Regardless of these fees, the
Unisys plan participants appear to strongly prefer mutual fund
investments. As of the filing of the complaint, nearly $1.9
billion of the plan‟s roughly $2 billion worth of assets were
invested in these mutual funds.

B.

Plaintiffs sued Unisys and the Fidelity entities in the
United States District Court in the Central District of
California alleging breach of fiduciary duty under 29 U.S.C.
§§ 1104 and 1132(a)(2), and for equitable relief under §
1132(a)(3) relating to defendants‟ selection for inclusion and
maintenance of investment options in the Unisys plan. The
case was transferred to the Eastern District of Pennsylvania.
1
Plaintiffs do not contest that the plan documents distributed
to participants contained accurate information about all the
investment options. Nor do plaintiffs dispute that Unisys
provided information services to furnish participants with
additional information about investment options upon request.

8
 While the case was pending, the Supreme Court issued
its decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544
(2007), and Aschroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937
(2009), addressing pleading standards. Plaintiffs sought and
were granted leave to file an amended complaint and a second
amended complaint, which was filed on September 3, 2009.2

In the complaint, plaintiffs allege that Unisys and the
Fidelity entities breached their duties of loyalty and prudence
by selecting and retaining retail mutual funds in the range of
investment options. Specifically, plaintiffs contend the
administrative fees governed by the trust agreement, and the
fees associated with each retail mutual fund, are excessive in
light of the services rendered as compared to other, less
expensive, investment options not included in the plan. These
allegations focus on the inclusion of so-called retail mutual
funds, which are available to individual investors with small
investments as well as to large ERISA funds such as
Unisys‟s. Plaintiffs allege Unisys could have selected
investments having lower fees than mutual funds and/or used
the size of its plan as leverage to bargain for lower fee rates
on mutual funds.

Both the Fidelity entities and Unisys moved to dismiss
under Fed. R. Civ. P. 12(b)(6). See Renfro, 2010 U.S. Dist.
LEXIS 41563, at *3. The Fidelity entities contended they
were not fiduciaries with respect to the challenged conduct
and, relying on the Seventh Circuit‟s decision in Hecker v.
Deere & Co., 556 F.3d 575 (7th Cir. 2009), supplemented by
569 F.3d 708 (7th Cir. 2009), that plaintiffs had failed to
plead a plausible breach of fiduciary duty. In addition, the
2
For ease of reference, we refer to the Second Amended
Complaint simply as “the complaint.”

9
Fidelity entities argued plaintiffs‟ claims were barred by
ERISA‟s six-year limitation period. 29 U.S.C. § 1113.
Unisys similarly argued plaintiffs did not adequately plead a
breach of fiduciary duty. In the alternative, Unisys moved for
summary judgment under Fed. R. Civ. P. 56(c), contending
ERISA‟s safe harbor provision, 29 U.S.C. §
1104(c)(1)(A)(ii), shielded it from liability because the
alleged losses were the aggregate result of the participants‟
own investment decisions.

The District Court denied the statute of limitations
motion on the ground that ERISA fiduciary breaches are
continuing violations that accrue each time a plan incurs a
loss as a result of a breach. But the court granted the Fidelity
entities‟ motion to dismiss, concluding as a matter of law
under the trust agreement that Fidelity and its related
corporate entities were not fiduciaries with respect to the
challenged conduct because they did not exercise control over
the inclusion of investment options in the plan. Renfro, 2010
U.S. Dist. LEXIS 41563, at *15-19. The court also granted
the defendants‟ motion to dismiss on the grounds the
complaint failed to state a claim because the plan “„offered a
sufficient mix of investments for their participants‟ [such]
that no rational trier of fact could find, on the basis of the
facts alleged in the operative complaint, that the Unisys
defendants breached an ERISA fiduciary duty by offering this
particular array of investment vehicles.” Id. at *19 (quoting
Hecker, 556 F.3d at 586.). In the alternative, the court
granted Unisys‟s motion for summary judgment, finding
ERISA section 404(c) shielded Unisys from liability for any
alleged breach because the participants chose the investment
options into which they allocated their contributions. Id. at
*31.

10
 Plaintiffs timely appealed.

II.3

A.

Our review of a Rule 12(b)(6) motion to dismiss is
plenary. Leveto v. Lapina, 258 F.3d 156, 161 (3d Cir. 2001).
Rule 12(b)(6) permits dismissal of complaints for “failure to
state a claim upon which relief can be granted.” Fed. R. Civ.
P. 12(b)(6). The question is “not whether [plaintiffs] will
ultimately prevail . . . but whether [their] complaint was
sufficient to cross the federal court‟s threshold.” Skinner v.
Switzer, --- U.S. ----, 131 S. Ct. 1289, 1296 (2011) (internal
citations and quotations omitted). “Because Federal Rule of
Civil Procedure 8(a)(2) „requires a “showing”, rather than a
blanket assertion, of entitlement to relief,‟ courts evaluating
the viability of a complaint under Rule 12(b)(6) must look
beyond conclusory statements and determine whether the
complaint‟s well-pled factual allegations, taken as true, are
„enough to raise a right to relief above the speculative level.‟”
In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 319 (3d
Cir. 2010) (quoting Twombly, 550 U.S. at 555 & n.3). But
plaintiffs “need only allege „enough facts to state a claim to
relief that is plausible on its face.‟” Matrixx Initiatives, Inc. v.
Siracusano, --- U.S. ----, 131 S. Ct. 1309, 1322 n.12 (2011)
(quoting Twombly, 550 U.S. at 570). Accordingly, we must
examine the context of a claim, including the underlying
substantive law, in order to assess its plausibility. See Ins.
Brokerage, 618 F.3d at 320 n.18.

3
The District Court had jurisdiction under 28 U.S.C. § 1331
and 29 U.S.C. § 1132(e)(1). We have jurisdiction under 28
U.S.C. § 1291.

11
 B.

1.

ERISA is a “comprehensive and reticulated statute, the
product of a decade of congressional study of the Nation‟s
private employee benefit system.” Mertens v. Hewitt Assocs.,
508 U.S. 248, 251 (1993) (internal quotation omitted). In
enacting ERISA, Congress “resolved innumerable disputes
between powerful competing interests—not all in favor of
potential plaintiffs.” Id. at 262. Because “Congress did not
require employers to establish benefit plans in the first place .
. . ERISA represents a careful balancing between ensuring
fair and prompt enforcement of rights under a plan and the
encouragement of the creation of such plans.” Conkright v.
Frommert, --- U.S. ----, 130 S. Ct. 1640, 1648-49 (2010)
(internal quotations and citations omitted). Accordingly,
Congress sought to “induc[e] employers to offer benefits by
assuring a predictable set of liabilities, under uniform
standards of primary conduct and a uniform regime of
ultimate remedial orders and awards when a violation has
occurred.” Rush Prudential HMO, Inc. v. Moran, 536 U.S.
355, 379 (2002). To that end, ERISA authorizes six distinct
civil actions that may be brought by various parties under
delineated circumstances, including actions by plan
participants to remedy a breach of fiduciary duty. See LaRue,
552 U.S. at 253.

2.

ERISA requires each plan to have one or more named
fiduciaries that are granted the authority to manage the
operation and administration of the plan. 29 U.S.C. §
1102(a)(1). But by ERISA‟s definition:

12
 a person is a fiduciary with respect to a plan to
the extent
(i) he exercises any discretionary authority or
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
other compensation, direct or indirect, with
respect to any moneys or other property of such
plan, or has any authority or responsibility to do
so, or
(iii) he has any discretionary authority or
discretionary responsibility in the
administration of such plan. Such term includes
any person designated under section 1105
(c)(1)(B) of this title.

29 U.S.C. § 1002(21)(A). Because an entity is only a
fiduciary to the extent it possesses authority or discretionary
control over the plan, see id.; In re Unisys Corp. Retiree Med.
Benefits ERISA Litig. (Unisys III), 579 F.3d 220, 228 (3d Cir.
2009), we “must ask whether [the entity] is a fiduciary with
respect to the particular activity in question,” Srein v.
Frankford Trust Co., 323 F.3d 214, 221 (3d Cir. 2003)
(internal quotation omitted). “In every case charging breach
of ERISA fiduciary duty, then, the threshold question is not
whether the actions of some person employed to provide
services under a plan adversely affected a plan beneficiary‟s
interest, but whether that person was acting as a fiduciary
(that is, was performing a fiduciary function) when taking the
action subject to complaint.” Pegram v. Herdrich, 530 U.S.
211, 226 (2000).

13
 3.

ERISA imposes statutory duties on fiduciaries that
“„relate to the proper management, administration, and
investment of fund assets,‟ with an eye toward ensuring that
„the benefits authorized by the plan‟ are ultimately paid to
participants and beneficiaries.” LaRue, 552 U.S. at 253
(quoting Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134,
142 (1985)). Accordingly, an ERISA fiduciary is required to:

discharge his duties with respect to a plan solely
in the interest of the participants and
beneficiaries and—
(A) for the exclusive purpose of:
(i) providing benefits to participants and their
beneficiaries; and
(ii) defraying reasonable expenses of
administering the plan;
(B) with the care, skill, prudence, and diligence
under the circumstances then prevailing that a
prudent man acting in a like capacity and
familiar with such matters would use in the
conduct of an enterprise of a like character and
with like aims.

29 U.S.C. § 1104(a)(1)(A)-(B).

The fiduciary standard “is flexible, such that the
adequacy of a fiduciary‟s independent investigation and
ultimate investment selection is evaluated in light of the
character and aims of the particular type of plan he serves.”
In re Unisys Sav. Plan Litig. (Unisys I), 74 F.3d 420, 434 (3d
Cir. 1996) (internal quotation omitted). And an ERISA
fiduciary acts prudently when it gives “appropriate

14
consideration to those facts and circumstances that, given the
scope of such fiduciary‟s investment duties, the fiduciary
knows or should know are relevant to the . . . investment
course of action involved . . . .” 29 C.F.R. § 2550.404a-
1(b)(1)(i). Accordingly, in evaluating a questioned decision,
we have focused on a fiduciary‟s “conduct in arriving at [that]
investment decision.” Unisys I, 74 F.3d at 434. But we have
also approved of an approach examining whether a
questioned decision led to objectively prudent investments.
See In re Unisys Sav. Plan Litig. (Unisys II), 173 F.3d 145,
153-54 (3d Cir. 1999) (approving of the “hypothetical prudent
investor” test); see also Roth v. Sawyer-Cleator Lumber Co.,
16 F.3d 915, 919 (8th Cir. 1994) (“Even if a trustee failed to
conduct an investigation before making a decision, he is
insulated from liability if a hypothetical prudent fiduciary
would have made the same decision anyway.”); Fink v. Nat’l
Sav. & Trust Co., 772 F.2d 951, 962 (D.C. Cir. 1985) (Scalia,
J., concurring in part and dissenting in part) (contending a
fiduciary should not be liable for damages when, regardless
of its failure to investigate beforehand, it made or held
objectively prudent investments).

III.

We first turn to the dismissal of the Fidelity
defendants. Fidelity concedes it was a fiduciary under the
plan because it was a directed trustee with respect to certain
assets and administrative functions. But the parties contest
whether Fidelity and its related corporate entities were
fiduciaries with respect to the challenged conduct of selecting
and retaining investment options in the Unisys plan.
Plaintiffs proceed under three theories to assert that Fidelity
and its related corporate entities were fiduciaries with
reference to the challenged conduct, or otherwise could be

15
liable for restitution.

A.

Plaintiffs contend that Fidelity, by virtue of its role as a
directed trustee, functioned as a fiduciary with reference to
the claimed breach. As noted, ERISA requires every plan to
have one or more named fiduciaries. 29 U.S.C. § 1102(a)(1).
ERISA also requires plan assets to be held in trust. Id. §
1103(a). A directed trustee, such as Fidelity, is a fiduciary
“subject to proper directions” of one of the plan‟s named
fiduciaries. See id. § 1103(a)(1).

The trust agreement appointing Fidelity as a directed
trustee limited Fidelity‟s role to “hold and invest . . . plan
assets in trust among several investment options selected by
the Applicable Fiduciary,” and to “perform recordkeeping
and administrative services for the Plan if the services are
purely ministerial in nature and are provided within a
framework of plan provisions, guidelines and interpretations
conveyed in writing to [Fidelity] by the Administrator.”4
The agreement expressly disclaimed any role for Fidelity in
selecting investment options, stating, “[Fidelity entities] shall
have no responsibility for the selection of investment options
under the Trust,” Instead, the agreement required that
Fidelity be explicitly “direct[ed] . . . as to what investment
options . . . Plan participants may invest in.” Fidelity‟s
limited role as a directed trustee, delineated in the trust
agreement, does not encompass the activities alleged as a
breach of fiduciary duty—the selection and maintenance of
the mix and range of investment options included in the plan.

4
We review interpretations of a trust agreement de novo.
Ulmer v. Harsco Corp., 884 F.2d 98, 101-02 (3d Cir. 1989).

16
As we have explained, a directed trustee is essentially
“immune from judicial inquiry” because it lacks discretion,
taking instructions from the plan that it is required to follow.
See Moench v. Robertson, 62 F.3d 553, 571 (3d Cir. 1995).

Contrary to plaintiffs‟ assertion, the agreement‟s
unambiguous amendment provisions do not undermine this
allocation of authority. Section 5(b) of the trust agreement
allows for amendment of the investment options included in
the trust agreement by mutual agreement of the parties.
Fidelity entities were required to give their consent in order
for funds to be added to the group of plan investments it
administers. This provision extends Fidelity‟s control only
over which investments were to be administered by Fidelity
and not over which investments were selected for inclusion in
the plan as a whole. Unisys remained free to add non-Fidelity
investments to the Unisys plan and to administer such
investments itself or contract that function to another party.
In fact, the trust agreement‟s recitals state Unisys intended to
add other investments to a trust to be managed by CoreStates.
Fidelity had no contractual authority to control the mix and
range of investment options, to veto Unisys‟s selections, or to
constrain Unisys from including other investment options in
the plan administered by an entity other than Fidelity. It
therefore did not a function as a fiduciary with respect to
selecting and maintaining the range of investment options in
the plan. Accordingly, Fidelity‟s status as a directed trustee
does not subject it to liability for these activities.

B.

Plaintiffs also contend Fidelity is liable for any breach
by Unisys as a co-fiduciary under 29 U.S.C. § 1105(a). This
section provides:

17
 In addition to any liability which he may have
under any other provisions of this part, a
fiduciary with respect to a plan shall be liable
for a breach of fiduciary responsibility of
another fiduciary with respect to the same plan
in the following circumstances:
(1) if he participates knowingly in, or
knowingly undertakes to conceal, an act or
omission of such other fiduciary, knowing such
act or omission is a breach;
(2) if, by his failure to comply with section
1104 (a)(1) of this title in the administration of
his specific responsibilities which give rise to
his status as a fiduciary, he has enabled such
other fiduciary to commit a breach; or
(3) if he has knowledge of a breach by such
other fiduciary, unless he makes reasonable
efforts under the circumstances to remedy the
breach.

As noted, Fidelity is a directed trustee of the plan
owing fiduciary duties with respect to the limited authority
and discretion it exercises. At the outset, we note a party
“does not act as a fiduciary with respect to the terms in the
service agreement if it does not control the named fiduciary‟s
negotiation and approval of those terms.” Hecker, 556 F.3d
at 583; see also Chi. Dist. Council of Carpenters Welfare
Fund v. Caremark, Inc., 474 F.3d 463, 473 (7th Cir. 2007).
“When a person who has no relationship to an ERISA plan is
negotiating a contract with that plan, he has no authority over
or responsibility to the plan and presumably is unable to
exercise any control over the trustees‟ decision whether or
not, and on what terms, to enter into an agreement with him.

18
Such a person is not an ERISA fiduciary with respect to the
terms of the agreement for his compensation.” F.H. Krear &
Co. v. Nineteen Named Trs., 810 F.2d 1250, 1259 (2d Cir.
1987). Plaintiffs allege Unisys selected investment options
with excessive fees caused by a fee structure negotiated
between Unisys and Fidelity for included mutual funds.
Fidelity owes no fiduciary duty with respect to the negotiation
of its fee compensation by Unisys. Moreover, Fidelity was
not yet a plan fiduciary at the time it negotiated the fee
compensation with Unisys.

Even assuming Fidelity‟s subsequent assumption of
the role of directed trustee could subject it to co-fiduciary
liability for a breach by Unisys relating to the mix and range
of investment options in the plan, including risk and fee
profiles, sections 1105(a)(1) and (3) require actual
knowledge of the breach.5 “„Under this rule, the fiduciary
must know the other person is a fiduciary with respect to the
plan, must know that he participated in the act that constituted
a breach, and must know that it was a breach.‟” Donovan v.
Cunningham, 716 F.2d 1455, 1475 (5th Cir. 1983) (quoting
H.R. Rep. No. 1280). Plaintiffs‟ claims fail because they do

5
Section 1105(a)(2) does not provide a remedy for plaintiffs.
Under that section, as a predicate to liability, plaintiffs must
first plausibly allege Fidelity breached fiduciary duties it
owed in its role as a directed trustee. Plaintiffs have not
alleged any breach by Fidelity of its fiduciary duties
regarding its disposition of assets or administration of the
plan as a directed trustee. The complaint is directed
exclusively at the selection and maintenance of investment
options, which, as discussed above, fall outside of the scope
of Fidelity‟s fiduciary duty.

19
not contend Fidelity had knowledge about Unisys‟s allegedly
flawed decision-making process regarding investment options
to be included in the plan. In fact, by contending that Fidelity
failed adequately to review the plan‟s fees in light of the size
of the plan‟s assets, plaintiffs effectively concede Fidelity did
not possess actual knowledge of Unisys‟s alleged breach. See
Second Am. Compl. ¶¶ 75(B), 80B-C. Similarly, plaintiffs do
not allege Fidelity knew Unisys‟s selection of investment
options constituted a breach of fiduciary duty. Accordingly,
plaintiffs fail to state a claim against Fidelity under § 1105(a).

C.

Finally, plaintiffs contend the Fidelity entities are
liable for restitution under 29 U.S.C. § 1132(a)(3), which
provides a civil action may be brought:

by a participant, beneficiary, or fiduciary
(A) to enjoin any act or practice which violates
any provision of this subchapter or the terms of
the plan, or
(B) to obtain other appropriate equitable relief
(i) to redress such violations or
(ii) to enforce any provisions of this subchapter
or the terms of the plan.

We have held this provision authorizes direct suits
against fiduciaries for breach of their duty. See Bixler v.
Central Pa. Teamsters Health & Welfare Fund, 12 F.3d 1292,
1293-94 (3d Cir. 1993). But two years after Bixler, in Reich
v. Compton, 57 F.3d 270, 284 (3d Cir. 1995), we examined
whether the Secretary of Labor could bring suit under 29
U.S.C. §1132(a)(5) against nonfiduciaries alleged to have
participated in a breach of fiduciary duty. We noted the

20
Supreme Court‟s dictum in Mertens, 508 U.S. at 260,
expressed “considerable doubt that [29 U.S.C. § 1132(a)(3)]
authorizes suits against nonfiduciaries who participate in
fiduciary breaches.” Reich, 57 F.3d at 282. Finding this
dictum persuasive and noting that “the language shared by
[sections 1132(a)(3) and 1132(a)(5)] „should be deemed to
have the same meaning,‟” id. at 284 (quoting Mertens, 508
U.S. at 260), we held that the Secretary of Labor could not
bring suit under § 1132(a)(5) against “nonfiduciaries charged
solely with participating in a fiduciary breach,”6 id.

In light of Reich, and interpreting identical language,
we find Mertens persuasive and hold that 29 U.S.C. §
1132(a)(3) does not authorize suit against “nonfiduciaries
charged solely with participating in a fiduciary breach.”
Reich, 57 F.3d at 284. Because, as previously discussed, the
Fidelity entities did not act as fiduciaries with respect to the
alleged breach, they may not be sued under this section for
acts taken in a nonfiduciary role.

Accordingly, we will affirm the District Court‟s
dismissal of the complaint against the Fidelity defendants.

IV.

As for the claims against Unisys, it appears to concede

6
In Reich, we found that the same section authorized suits for
nonfiduciary participation by parties in interest to transactions
prohibited under ERISA. 57 F.3d at 287; accord Harris Trust
& Sav. Bank v. Salomon Smith Barney Inc., 530 U.S. 238,
241 (2000). In this case, plaintiffs do not appear to contend
the Fidelity entities were parties in interest to a prohibited
transaction.

21
it is a fiduciary with respect to the selection and maintenance
of the plan‟s mix and range of investment options. But the
parties contest whether, given the composition of the mix and
range, plaintiffs have plausibly pleaded a breach of fiduciary
duty.

A.

1.

In this case, the putative class frames its complaint as a
challenge against the selection and periodic evaluation of the
Unisys defined contribution plan‟s mix and range of
investment options. Plaintiffs do not challenge the prudence
of the inclusion of any particular investment option.
Specifically, plaintiffs take issue with the inclusion of an
array of Fidelity retail mutual funds—funds that are available
on the same terms to individual investors in the open market.
Plaintiffs also allege the fees on the mutual fund options are
excessive in comparison to the services rendered, both as
compared to other mutual funds and to other types of
investments Unisys could have selected for inclusion in the
plan. Within this rubric, plaintiffs point to the structure of
Fidelity‟s fee compensation on the mutual funds, which is in
part calculated as a percentage of the total assets in the funds.
Plaintiffs contend the services required to administer mutual
funds do not vary based on the aggregate amount of assets in
the funds. Rather, they contend fees should be calculated on
a per-participant basis. In addition, because the plan includes
only a few other investment vehicles such as commingled
funds and company stock, plaintiffs argue this plausibly
demonstrates Unisys breached its fiduciary duties in
composing the mix and range of investment options included

22
in the plan.7 In sum, plaintiffs challenge the 401(k) plan as a
whole, alleging Unisys inadequately investigated and selected
investment options into which plan participants could choose
to allocate their contributions.

2.

Two sister circuits have evaluated similar complaints
at the motion to dismiss stage. See Hecker, 556 F.3d 575;
Braden v. Wal-Mart Stores, Inc., 588 F.3d 585 (8th Cir.
2009). Hecker and Braden share a similar analytical
framework for evaluating an ERISA breach of fiduciary duty
claim targeting the selection and maintenance of a mix and
range of investment options in a 401(k) defined contribution
plan. Both courts looked first to the characteristics of the mix
and range of options and then evaluated the plausibility of
claims challenging fund selection against the backdrop of the
reasonableness of the mix and range of investment options.
See Hecker, 556 F.3d at 586 (“In our view, the undisputed
facts leave no room for doubt that the Deere Plans offered a
sufficient mix of investments for their participants. Thus, . . .
no rational trier of fact could find, on the basis of the facts
alleged in th[e] Complaint, that Deere failed to satisfy [the
duty to furnish an acceptable array of investment vehicles].”);
Braden, 588 F.3d at 596 (“[T]he complaint‟s allegations can
7
In addition, plaintiffs allege for the first time on appeal that
Fidelity impermissibly distributed fee revenues among its
corporate affiliates. As discussed, plaintiffs did challenge the
mutual fund fee structure in the complaint, see Second Am.
Compl. ¶¶ 42-43, but they did not challenge Fidelity‟s
internal distribution of fees. Accordingly, this issue is
waived. See Srein, 323 F.3d at 224 n.8; Gordon v. Wawa,
Inc., 388 F.3d 78, 84 (3d Cir. 2004).

23
be understood to assert that the Plan includes a relatively
limited menu of funds which were selected by Wal-Mart
executives despite the ready availability of better options.
The complaint alleges, moreover, that these options were
chosen to benefit the trustee at the expense of the
participants.”).

In Hecker, the Seventh Circuit examined a plan
containing twenty-three Fidelity mutual funds, two
investment funds also managed by Fidelity, a fund of Deere
stock, as well as access to a brokerage window granting
access to 2500 other funds managed by a variety of
companies. See 556 F.3d at 578. Plaintiffs alleged the fees
were excessive because most of the plan‟s options were retail
mutual funds. Id. at 579. The fee ratios ranged from .07% to
just over 1%. Id. at 586. The Seventh Circuit affirmed the
district court‟s dismissal of the claim, reasoning the mix and
range of options was sufficient to fulfill any fiduciary duty
Deere had to “furnish an acceptable array of investment
vehicles.” See id. The court found it implausible that the
decision-making process was undertaken imprudently and
held that plaintiffs failed to state a breach of fiduciary duty
claim.

Conversely, in Braden, the Eighth Circuit examined a
plan containing ten retail mutual funds, a collective trust,
Wal-Mart stock, and a stable value fund. See 588 F.3d at
589. Plaintiffs alleged breaches of fiduciary duties
surrounding the fees on the funds, including allegations of a
hidden kickback scheme between Merrill Lynch, a fiduciary,
and the included funds. See id. at 590. Taking the same
approach as Hecker, but arriving at a different conclusion, the
Braden court evaluated the complaint‟s allegations, including
the kickback scheme, in light of a plan that had far fewer

24
available investment options than the plan in Hecker. See id.
at 596 n.6 (“The far narrower range of investment options
available in this case makes more plausible the claim that this
Plan was imprudently managed.”).

We agree with our sister circuits‟ approach to
evaluating these claims. An ERISA defined contribution plan
is designed to offer participants meaningful choices about
how to invest their retirement savings. Accordingly, we hold
the range of investment options and the characteristics of
those included options—including the risk profiles,
investment strategies, and associated fees—are highly
relevant and readily ascertainable facts against which the
plausibility of claims challenging the overall composition of a
plan‟s mix and range of investment options should be
measured.

3.

Looking—as plaintiffs urge—at the Unisys plan as a
whole in the context of plaintiffs‟ allegations, we are unable
“to infer from what is alleged that the process was flawed.”
Braden, 588 F.3d at 596. The Unisys plan contains a variety
of investment options including company stock, commingled
funds, and mutual funds. As of the filing of the second
amended complaint, the plan contained seventy-three distinct
investment options. Among the retail mutual funds
specifically targeted in the complaint were funds with a
variety of risk and fee profiles, including low-risk and low-
fee options. This range of selections is much closer to the
characteristics of the plan evaluated by the Hecker court than
to the scanty mix and range of selections in the plan reviewed
by the Braden court.

25
 In light of the reasonable mix and range of investment
options in the Unisys plan, plaintiffs‟ factual allegations about
Unisys‟s conduct do not plausibly support their claims.
Unlike the pleadings in Braden, plaintiffs have not contended
there was any sort of concealed kickback scheme relating to
fee payments made to the directed trustee as the quid pro quo
for inclusion of particular unaffiliated mutual funds. Their
allegations concerning fees are directed exclusively to the fee
structure and are limited to contentions that Unisys should
have paid per-participant fees rather than fees based on a
percentage of assets in the plan.

Evaluating plaintiffs‟ complaint in light of an ERISA
defined contribution 401(k) plan having a reasonable range of
investment options with a variety of risk profiles and fee
rates, we believe plaintiffs have provided nothing more than
conclusory assertions that Unisys breached its duty to
prudently and loyally select and maintain the plan‟s mix and
range of investment options. Accordingly, evaluating the
plan as a whole in light of plaintiffs‟ general allegations of
imprudence and disloyalty in the selection and inclusion of
funds, we do not believe plaintiffs have plausibly alleged a
breach of fiduciary duty. We will affirm the District Court‟s
dismissal of the complaint for failure to state a claim of
breach of fiduciary duty.

V.

The District Court also granted Unisys‟s summary
judgment motion, holding in the alternative that even if
Unisys breached its fiduciary duties in its selection and
maintenance of the range and mix of investment options in its
ERISA 401(k) plan, Unisys was shielded from liability by 29
U.S.C. § 1104(c), ERISA‟s safe harbor provision. The

26
provision reads in part:

(A) In the case of a pension plan which
provides for individual accounts and permits a
participant or beneficiary to exercise control
over the assets in his account, if a participant or
beneficiary exercises control over the assets in
his account (as determined under regulations of
the Secretary)—
....
(ii) no person who is otherwise a fiduciary shall
be liable under this part for any loss, or by
reason of any breach, which results from such
participant‟s or beneficiary‟s exercise of control
....

29 U.S.C. § 1104(c)(1)(A).

In Unisys I, we held “[t]here is nothing in Section
1104(c)[‟s plain language] which suggests that a breach on
the part of a fiduciary bars it from asserting section 1104(c)‟s
application. . . . [T]he statute‟s unqualified instruction that a
fiduciary is excused from liability for „any loss‟ which
„results from [a] participant‟s or [a] beneficiary‟s exercise of
control‟ clearly indicates that a fiduciary may call upon
section 1104(c)‟s protection where a causal nexus between a
participant‟s or a beneficiary‟s exercise of control and the
claimed loss is demonstrated.”8 74 F.3d at 445 (footnote
8
We found the term “control” in § 1104(c)(1)(A) to be
ambiguous as to “whether [a plan] fall[s] within the statute‟s
coverage.” Unisys I, 74 F.3d at 446. We acknowledged that
the Department of Labor was charged by Congress to issue
regulations about which plans would qualify for the defense,

27
omitted). We went on to explain that “[t]his requisite causal
connection is, in our view, established with proof that a
participant‟s or a beneficiary‟s control was a cause-in-fact, as
well as a substantial contributing factor in bringing about the
loss incurred.” Id.

Plaintiffs, supported by the Secretary of Labor as
amicus curiae, maintain we must give Chevron deference to
the Secretary‟s current position that “section 404(c) does not
give fiduciaries a defense to liability for their own
imprudence in the selection or monitoring of investment
options available under the plan.” Br. of the Sec‟y of Labor
in Supp. of Pls. at 22. Conversely, defendants maintain
Unisys I‟s holding that the statute unambiguously exempts a
fiduciary from liability for any loss caused by a participant‟s
exercise of control forecloses plaintiffs‟ arguments. Because
the District Court properly dismissed the complaint, we
refrain from deciding whether Unisys was entitled to
summary judgment on this defense.

id. at 444 n.21, but we explained that because the regulations
were not in effect when the challenged transactions occurred,
they did not guide our analysis, id. Accordingly, we
examined the legislative history of the statute and the
common law of trusts to ascertain whether the plans at issue
were eligible for safe harbor protection. Id. at 444-46.
Consequently, because we found this to be a fact-bound issue
on which Unisys had not met its burden, we denied summary
judgment and remanded for consideration in light of our
analysis. Id. at 446-47.

28
 VI.

Accordingly, for the foregoing reasons, we will affirm
the judgment of the District Court.

29