NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JUN 23 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHEAP EASY ONLINE TRAFFIC Nos. 19-55055
SCHOOL; et al.,
D.C. No.
Plaintiffs-Appellants, 3:16-cv-02644-WQH-MSB
v.
MEMORANDUM*
PETER L. HUNTTING & CO., INC.; et al.
Defendants-Appellees.
CHEAP EASY ONLINE TRAFFIC No. 19-55653
SCHOOL; et al.,
D.C. No.
Plaintiffs-Appellees, 3:16-cv-02644-WQH-MSB
v.
PETER L. HUNTTING & CO., INC.;
ESTATE OF PETER L. HUNTTING,
Defendants-Appellants,
and
SMI PENSIONS; et al.,
Defendants.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Page 2 of 6
CHEAP EASY ONLINE TRAFFIC No. 19-55654
SCHOOL; et al.,
D.C. No.
Plaintiffs-Appellees, 3:16-cv-02644-WQH-MSB
v.
SMI PENSIONS; et al.,
Defendants-Appellants,
and
PETER L. HUNTTING & CO., INC.; et al.,
Defendants.
Appeal from the United States District Court
for the Southern District of California
William Q. Hayes, District Judge, Presiding
Argued and Submitted June 3, 2020
Pasadena, California
Before: RAWLINSON and N.R. SMITH, Circuit Judges, and KORMAN,**
District Judge.
Marla Keller and her husband, Borna Mozafari, own and manage two online
traffic schools, the Cheap Easy Online Traffic School and Easy Online Traffic
School (collectively “Plaintiffs”), and are trustees of the schools’ retirement plans
(“Plans”). Plaintiffs sued Peter Huntting, William Sheffler, Sheffler Consulting
**
The Honorable Edward R. Korman, United States District Judge for the
Eastern District of New York, sitting by designation.
Page 3 of 6
Actuaries Inc., and SMI Pensions (collectively “Defendants”), third-party
administrators who provided services related to the Plans. Plaintiffs alleged
Defendants breached their duties under the Employee Retirement Security Income
Act (“ERISA”), and also alleged state law professional negligence and breach of
contract claims. The district court granted Defendants’ summary judgment motion,
holding that Plaintiffs’ ERISA claim failed at the threshold because Defendants were
not fiduciaries, and declined to exercise supplemental jurisdiction over the state law
claims. The district court also denied defendants’ motions for counsel fees and costs.
These cross-appeals followed. We have jurisdiction under 28 U.S.C. § 1291, and we
affirm.
1. Plaintiffs’ ERISA claims against Defendants turn on whether they acted as
fiduciaries “when taking the actions subject to complaint.” Pegram v. Herdrich, 530
U.S. 211, 226 (2000). The parties entered into Engagement Agreements stating that
Defendants were not fiduciaries. However, whether one is a fiduciary, turns on the
activity in question, rather than the title of the person or entity. CSA 401(K) Plan v.
Pension Prof’ls, Inc., 195F.3d 1135, 1138 (9th Cir. 1999). Under ERISA, discretion
is the sine qua non of fiduciary status and duty, and fiduciary status requires the
actual exercise of discretionary authority. 29 U.S.C. § 1002(21)(A); Depot, Inc. v.
Caring for Montanans, Inc., 915 F.3d 643, 656–57 (9th Cir. 2019); IT Corp. v. Gen.
Am. Life Ins. Co., 107 F.3d 1415, 1420 (9th Cir. 1997).
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Third-party administrators are not fiduciaries when they “perform their usual
professional functions in rendering legal, accounting, actuarial, or consulting
services to an employee benefit plan.” CSA 401(K), 195 F.3d at 1139. Indeed, the
Department of Labor has explained that such services constitute strictly ministerial
conduct that cannot give rise to fiduciary liability. See 29 C.F.R. § 2509.75–8.
Plaintiffs allege Defendants’ activities went beyond ordinary, advisory services
when Defendants: (1) told Plaintiffs how much to contribute annually to the Plans;
(2) amended the benefit formula for one of the Plans in 2009 and 2010 without
consulting Plaintiffs; (3) decided that Plaintiffs’ defined benefit plans should be
terminated and rolled over into a profit-sharing plan after Defendants’ advice caused
the plans to be overfunded by almost $2 million. Plaintiffs’ claims are without merit.
Plaintiffs essentially assert that Defendants gave them bad advice, but such
claims of malfeasance sound in common-law negligence or malpractice, not
ERISA’s fiduciary obligations. The record shows that Defendants advised Plaintiffs
on the permissible contribution ranges for their retirement plans. However, Plaintiffs
retained their final, independent judgment on how much to contribute, so these
recommendations could not have constituted discretionary administration of the
Plans. 29 U.S.C. § 1002(21)(A). Plaintiffs also allege that Defendants improperly
amended one of their pension plans in 2010. While Defendants prepared certain tax
forms reflecting a necessary plan amendment, Plaintiffs executed those forms, and
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maintained sole authority to make changes to the plan. Likewise, Plaintiffs’
allegation that Defendants forced Plaintiffs to terminate and roll over one of their
profit-sharing plans fails at the threshold because Defendants never gave Plaintiffs
a directive, and never deprived Plaintiffs of their discretion or final decision-making
authority. Accordingly, Defendants’ actions do not make them functional
fiduciaries.
2. Turning to Defendants’ appeal, we review the denial of fees and costs for
an abuse of discretion, and reversal is warranted if the judge below “made a clear
error of judgment in its conclusion upon weighing relevant factors.” Hummell v. S.
E. Rykoff & Co., 634 F.2d 446, 452 (9th Cir. 1980). Attorneys’ fees are awarded at
the court’s discretion under Section 502(g)(1) of ERISA. 29 U.S.C § 1132(g)(1).
Once the moving party shows that they have achieved “some degree of success on
the merits,” Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 255 (2010), the
court turns to the multi-factor Hummell test, weighing: (1) the opposing parties’
culpability or bad faith; (2) the opposing parties’ ability to pay; (3) whether a fees
award would deter others from acting under similar circumstances; (4) whether the
moving parties sought to benefit all beneficiaries of an ERISA plan or to resolve a
significant legal question regarding ERISA; and (5) the relative merits of the parties’
positions. Hummell, 634 F.2d at 453.
After a review of the relevant law, including Hummel, the district court denied
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Defendants’ motion for fees and costs in a six-page opinion. On appeal, Defendants
argue Plaintiffs should have known that they did not have a viable ERISA claim
against Defendants, and that the judge should have found that the first, third, and
fifth Hummel factors counseled in favor of granting Defendants fees and costs. We
disagree. The district court correctly observed that Plaintiffs’ failure to prevail on
the merits did not demonstrate culpability or bad faith, and that an award would serve
no deterrent purpose. At most, the fifth factor was wrongly determined to be neutral.
But that factor alone did not tilt the balance, and there was no clear error of judgment
in concluding that this case did not warrant an award of fees or costs.
AFFIRMED.