Beddall v. State Street Bank & Trust Co.

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, with whom William G. Bell, Barry Klickstein,

and Abrams, Roberts, Klickstein & Levy were on brief, for

appellants.
Henry C. Dinger, with whom Henry C. Dinger, P.C., Dori C.

Gouin, and Goodwin, Procter & Hoar LLP were on brief, for

appellee.

February 27, 1998

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

SELYA, Circuit Judge. A cadre of former pilots for
SELYA, Circuit Judge.

Eastern Airlines, Inc. (Eastern) brought an action under the

Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001

et seq. (1994), against the trustee of the failed air carrier's

retirement plan. The district court dismissed the suit after

reviewing the trust agreement and concluding that the trustee was

not subject to ERISA liability as a fiduciary or co-fiduciary in

respect to the harms alleged. The plaintiffs appeal. We affirm.

I. BACKGROUND
I. BACKGROUND

We draw the facts from the plaintiffs' complaint and

the trust agreement. In 1958, Eastern and the union representing

its pilots established a defined contribution retirement plan

(the Plan) designed to provide retirees with a range of pension

options. Almost a quarter-century later, the Plan's

administrative committee (the TAC) retained State Street Bank and

Trust Company (the Bank) to hold the Plan's assets in trust,

manage them as directed, and periodically report their value (so

that the TAC, inter alia, could effectuate the Plan by

calculating annuity and lump-sum retirement benefits). The

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

in a trust agreement (the Agreement).

As time went by, the Plan invested heavily in real

estate. In reporting the value of these investments, the Bank

relied on information obtained from Hawthorne Associates, Inc.

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

of periodic appraisals prepared by Blake, a consultant engaged by

2

Hawthorne. Despite a 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 & Slye (S&S), an independent appraisal firm, to review

Blake's handiwork. Upon encountering difficulty in gaining

access to the necessary information, the Bank wrote to Hawthorne

stating that:

Our appraiser is prepared to begin his review
on Monday, October 7. If he is not permitted
to 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 to report the real estate at
values supplied by Hawthorne as 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. The Bank submitted the S&S report to the TAC on

November 8, 1991. One week later, the Bank wrote to the TAC's

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

appraisals are incomplete and/or suffer from methodological

flaws." The Bank declared that it was "unwilling to continue to

carry these valuations on its books without qualification in

light of the[se] concerns." Within a matter of weeks, Hawthorne

3

informed the Bank that it had lowered the appraised values of

certain properties. The Bank accepted the new figures without

further investigation.

The TAC eventually retained an independent appraiser to

assess the Plan's real estate holdings. This exercise culminated

in a substantial reduction of the reported values. At that

point, it became evident that Blake's exaggerated valuations had

skewed the Plan's finances: because inflated appraisal figures

had been carried on the Plan's books for nearly a 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. THE ENSUING LITIGATION
II. THE ENSUING LITIGATION

Eastern filed for bankruptcy in 1989. In due course,

several quondam pilots brought an action in a Florida federal

court against the Plan, its sponsors, the TAC, and sundry other

parties (not including the Bank). The plaintiffs' complaint

invoked ERISA and alleged myriad breaches of fiduciary duty in

connection with the investment of the Plan's assets. See Beddall

v. Eastern Air Lines, C.A. No. 91-1865-CIV (S.D. Fla.) (Beddall

I). The Florida court transferred the case to Massachusetts.

See 28 U.S.C. 1404(a).

The Beddall I plaintiffs moved to amend the complaint

to add the Bank as a defendant. As a precaution, they also

initiated a separate suit against the Bank in the Massachusetts

federal court (Beddall II). The complaint in the latter suit

4

charged that the Bank violated ERISA's fiduciary provisions by

its failure to ensure that the Plan's holdings were valued

appropriately.

Judge Wolf eventually approved a class action

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

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

7, 1996) (order approving final settlement),1 and the plaintiffs

withdrew the pending motion to amend. The Bank then moved to

dismiss Beddall II for failure to state a claim. See Fed. R.

Civ. P. 12(b)(6). The district court granted the motion. See

Beddall II, 1996 WL 74218 (D. Mass. Feb. 14, 1996). Judge Wolf

concluded that, because the Agreement absolved the Bank of any

fiduciary responsibility for the alleged overvaluation of the

Plan's real properties once the TAC engaged Hawthorne as the

investment manager in respect to those assets, 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 determined that, even if the Bank knew or

should have known of Hawthorne's indiscretions, co-fiduciary

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

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

id. at *2. This appeal ensued.

III. STANDARD OF REVIEW
III. STANDARD OF REVIEW

1Under the settlement, the named defendants paid the Plan
more than $10,000,000. As a condition of the settlement, Judge
Wolf precluded the Bank from impleading any of the settling
defendants in the instant action.

5

We afford de novo review to a district court's

resolution of a motion to dismiss. See Garita Hotel Ltd.

Partnership v. Ponce Fed. Bank, 958 F.2d 15, 17 (1st Cir. 1992).

Like the court below we must accept as true the factual

allegations of the complaint, construe all reasonable inferences

therefrom in favor of 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 v.

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

This is familiar lore. Here, however, there is an odd

twist: the court below scrutinized not only the complaint but

also the Agreement and it is undisputed that the plaintiffs

neither appended the latter document to the complaint nor

incorporated it therein by an explicit reference. In this

posture of the case, the lower court's consideration of the

Agreement gives us pause.

We think that this situation calls for a practical,

commonsense approach one that does not elevate form over

substance. The complaint discusses the Agreement at considerable

length. And, although it states conclusorily that "State Street

is a fiduciary of the Plan," it then proceeds to summarize the

parts of the Agreement that, in the plaintiffs' view, justify

this characterization. The Bank responded to these allegations

by filing a Rule 12(b)(6) motion and appending to it a copy of

the Agreement. The plaintiffs neither challenged the

authenticity of the Agreement nor moved to strike it from the

6

record.

Under these circumstances, the Agreement was properly

before the court. When, as now, a complaint's factual

allegations are expressly linked to and admittedly dependent

upon a document (the authenticity of which is not challenged),

that document effectively merges into the pleadings and the trial

court can review it in deciding a motion to dismiss under Rule

12(b)(6). See Fudge v. Penthouse Int'l, Ltd., 840 F.2d 1012,

1015 (1st Cir. 1988); see also Branch v. 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 12.34[2] (3d ed. 1997)

(explaining that courts may consider "[u]ndisputed documents

alleged or referenced in the complaint" in deciding a motion to

dismiss); see generally Fed. R. Civ. P. 10(c) (stating that "[a]

copy of any written instrument which is an exhibit to a pleading

is a part thereof"). Accordingly, we conclude that the district

court had the authority to consider the Agreement if it chose to

do so.

This conclusion makes eminent sense. A district

court's central task in evaluating a motion to dismiss is to

determine whether the complaint alleges facts sufficient to state

a cause of action. In conducting that tamisage, the court need

not accept a complaint's "bald assertions" or "unsupportable

7

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

Cir. 1987). While a plaintiff only is obliged to make provable

allegations, the court's inquiry into the viability of those

allegations 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 hinder recourse to Rule 12 motions, as a plaintiff

could thwart the consideration of a critical document merely by

omitting it from the complaint. We doubt 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 credit, the plaintiffs tacitly concede that

the lower court had the prerogative to review the Agreement

notwithstanding its omission from the complaint. They asseverate

instead that the court should not have done so without also

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

motion before the court into one for summary judgment). We

reject that asseveration and hold that consideration of the

Agreement 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 of
the district court's course of action. Although the conversion
of the plaintiffs' motion would have enabled them to submit
evidence regarding the Bank's fiduciary responsibilities, the act
of conversion also would have imported the summary judgment
standard into the case and raised the bar for the plaintiffs.
See Fed. R. Civ. P. 12(b). By eschewing conversion, the district

court ensured that the plaintiffs' complaint would be subjected
to the less demanding scrutiny associated with motions to

8

12(b). We offer three reasons in support of this ruling. First,

the Agreement's centrality to the plaintiffs' contentions, as

limned in their complaint, makes it in effect part of the

pleadings, and, thus, differentiates its evaluation in

conjunction with a motion to dismiss from the assessment of

traditional extrinsic evidence. See Venture Assocs. Corp. v.

Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993)

("Documents that a defendant attaches to a motion to dismiss are

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

plaintiff's complaint and are central to her claim."). Second,

and relatedly, the complaint predicates the plaintiffs' 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 into a Rule 56 motion is a

matter quintessentially within the purview of the district

court's sound discretion. See Garita Hotel, 958 F.2d at 18.

IV. ANALYSIS
IV. ANALYSIS

We begin our treatment of the merits by examining the

pertinent portions of ERISA's statutory scheme. We then turn to

the plaintiffs' triad of claims: (1) that the complaint states a

cause of action 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 Bank's conduct, including its role in respect to the

Plan's Short Term Investment Fund (the STIF); and (3) that the

dismiss.

9

complaint states a claim against the Bank for co-fiduciary

liability.

A. The Statutory Scheme.
A. 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 listed as fiduciaries in the

plan documents or those who are otherwise identified as

fiduciaries pursuant to a plan-specified procedure. 29 U.S.C.

1102(a)(2). But the statute also extends fiduciary liability to

functional fiduciaries persons who act as fiduciaries (though

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

several enumerated functions with respect to a plan. In this

wise, the statute instructs that

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.

29 U.S.C. 1002(21)(A).

The key determinant of whether a person qualifies as a

functional fiduciary is whether that person exercises

discretionary authority in respect to, or meaningful control

10

over, an ERISA plan, its administration, or its assets (such as

by rendering investment advice). See O'Toole v. Arlington Trust

Co., 681 F.2d 94, 96 (1st Cir. 1982); see also 29 C.F.R.

2509.75-8, at 571 (1986). We make two points that inform the

application of this rule. First, the mere exercise of physical

control or the performance of mechanical administrative tasks

generally is insufficient to confer fiduciary status. See

Cottrill v. Sparrow, Johnson & Ursillo, Inc., 74 F.3d 20, 21-22

(1st Cir. 1996); Concha v. London, 62 F.3d 1493, 1502 (9th Cir.

1995), cert. dismissed, 116 S. Ct. 1710 (1996). Second,

fiduciary status is not an all or nothing 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. 29 U.S.C. 1002(21)(A). Because one's

fiduciary responsibility under ERISA is directly and solely

attributable to his possession or exercise of discretionary

authority, fiduciary liability arises in specific increments

correlated to the vesting or performance of particular fiduciary

functions in service of the plan, not in broad, general terms.

See Maniace v. Commerce Bank, 40 F.3d 264, 267 (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 defined domain "the care, skill, prudence, and

diligence under the circumstances then prevailing that a prudent

11

man acting in a like capacity and familiar with such matters

would use." 29 U.S.C. 1104(a)(1)(B). The fiduciary should act

"solely in the interest of the participants and beneficiaries,"

and his overarching purpose should be to "provid[e] benefits to

the participants and their beneficiaries" and to "defray[]

reasonable expenses of administering the plan." Id.

1104(a)(1). A fiduciary who fails to fulfill 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 is a shorthand rubric under

which one ERISA fiduciary may be liable for the failings of

another fiduciary. Co-fiduciary liability inheres if a fiduciary

knowingly participates in or conceals another fiduciary's breach,

enables such other to commit a breach, or learns about such a

breach and fails to make reasonable efforts to remedy it. See

id. 1105(a). In some circumstances, co-fiduciary liability is

subject to a 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. The Bank's Status.
B. The Bank's Status.

The starting point for reasoned analysis of the Bank's

fiduciary status is the Agreement. In support of their assertion

12

that the Bank bears fiduciary responsibility for Hawthorne's

misvaluation of the real estate investments, the plaintiffs

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

set out in pertinent part:

Section 3. Investment of the Fund. The

Trustee [the Bank] shall cause all principal
and income at any time forming a part of the
fund to be invested as a single fund, . . .
in such 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 responsibilities with respect to
the Fund, in addition to and not in
modification or limitation of the authority
provided by law and this Agreement:

(a) to manage, control and operate
the Fund and to prepare and submit
to the Committee [the TAC] and
Eastern, and otherwise as required
by applicable law, all financial
information, including periodic
valuation of the Fund, as required
by law, the Plan and this
Agreement;
. . .
(c) to invest and reinvest the
Fund, as provided in Section 3 of
this Agreement;
. . . .

Section 5. Records, Accounting and Valuation

of the Assets of Fund. The Trustee [the
Bank] shall keep accurate accounts of all
investments, receipts and disbursements and
other transactions hereunder regarding the
Fund. . . .
Following the close of each month the
Trustee shall provide the Committee [the TAC]
and Eastern and such others as they shall
direct from time to time with a monthly
report of the assets held in the Fund as of
the close of said month . . . .
. . . .
Except as otherwise provided in this
Section, the assets of the Trust at any

13

monthly or annual valuation date shall be
valued at market value as of such date . . .
. Real property . . . shall be valued at
market value on the valuation dates on the
basis of information obtained from qualified,
available sources such as dealers, bankers,
brokers, or appraisers dealing or familiar
with the type of 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 to the
valuation date as of which such 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. Appointment of Investment

Manager. The Committee [the TAC] . . . may
direct the Trustee [the Bank] in writing to
segregate all or a portion of the Fund,
including without limitation, all or a
portion of such investments as may be
initially transferred to the Trustee in
accordance with this Agreement, into one or
more separate accounts to be known as
"Investment Manager Accounts." . . . The
Committee shall promptly thereafter appoint
for each Investment Manager Account an
Investment Manager . . . and shall give
written notice of such appointment to the
Trustee. . . .
. . . .
It shall be the responsibility of the
Committee to 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 follow the directions
of each Investment Manager with respect to
the Investment Manager Account forming part
of the Fund; provided that all such
directions be in writing, signed by an
officer, or partner, of such Investment

14

Manager. . . . The Trustee shall have no
obligation to act pursuant to any directions
from any Investment Manager unless and until
it receives such directions in a form
satisfactory to it.
The Trustee shall have no responsibility
for supervising any Investment Manager. The
Trustee shall be under no obligation to
invest or otherwise to manage any asset of
the Fund which is subject to the management
of any Investment Manager. The Trustee shall
be under no obligation to review or to make
inquiries as to any action or direction of
any Investment Manager taken as provided
herein or as to any failure to give
directions, nor to review or value the assets
held in any Investment Manager Account, nor
to make any suggestions to the Investment
Manager or Committee or Eastern with respect
to the investment and reinvestment of, or
disposal of investments in, any Investment
Manager Account . . . . The Trustee shall
not be liable for any act or omission of any
Investment Manager, except as provided in
Section 405(a) of ERISA [29 U.S.C. 1105(a)].
In the case of any purchase or sale of
real property by any Investment Manager, the
Trustee shall have the right to request, as a
condition to its executing any documents or
paying over any assets of the Fund in
connection with such transaction, 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 it a

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

not agree. The quoted text authorizes the Bank mainly to perform

administrative and ministerial functions in respect to those

investments which, like real estate, are held within a so-called

Investment Manager 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 activities described

by the [ERISA] 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 give the devil his due, we acknowledge that section

4, standing alone, might be construed as authorizing the Bank,

under some circumstances, to manage the Plan's real estate

investments in a manner that would render it a fiduciary with

regard to the valuation of those assets. Nevertheless, section 4

cannot be read in a vacuum. The TAC nominated Hawthorne as an

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

and the plain language of section 6 of the Agreement leaves

little doubt but that the TAC thereby relieved the Bank of all

fiduciary responsibility regarding those investments. In terms,

section 6 shifts to an appointed investment manager all

discretion over affected assets and makes the investment manager

not the trustee responsible for "perform[ing] such accounting

and valuation functions and such other duties as shall be

necessary to enable the Trustee to fully perform." To cinch

matters, section 6 expressly absolves the 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," or "to

review or value the assets held in any Investment Manager

16

account." Further, it proclaims, with a single exception not

relevant to this discussion, that the trustee "shall not be

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

stipulations strip any veneer of plausibility from the

plaintiffs' bald assertion that the Bank is a fiduciary subject

to liability for Hawthorne's overvaluation of the Plan's real

property.

In a last-ditch attempt to blunt the force of this

conclusion, the plaintiffs point to language that gives the

trustee the right to reject the investment manager's directions

in certain circumstances say, if those directions are not "in a

form satisfactory to it" and they argue that, as a result of

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

status as a fiduciary notwithstanding the other language

contained in section 6. This argument will not fly.

It is beyond cavil that when the TAC appoints an

investment manager for designated assets, the Agreement shifts

all significant discretion and control over those assets to the

investment manager and relegates the trustee to the role of an

administrative functionary. With section 6 velivolant, the

Bank's remaining powers are ministerial. They involve such

details as checking whether Hawthorne's instructions are in a

writing signed by an authorized person and issuing periodic

reports to the TAC anent the Fund's status. Although the Bank

arguably may refuse to follow instructions that are not in an

acceptable format, this negative discretion lies well within the

17

administrative sphere, and its existence does not transform the

Bank into a fiduciary vis- -vis the affected 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. The complaint acknowledges

that the TAC appointed Hawthorne to manage its real estate

investments. In that circumstance, the trust document, read as a

whole, divests the Bank of any and all management authority or

discretionary control over those assets. Whatever the Bank's

powers may have been in the absence of a duly appointed

investment manager, no fiduciary responsibility in regard to the

valuation of the Plan's real estate holdings survived the

appointment.

C. The Bank's Actions.
C. The Bank's Actions.

Charting a slightly different flight path, the

plaintiffs urge us to set the Agreement to one side and to deem

the Bank a fiduciary of the Plan's real estate investments by

virtue of its actions. They posit that, because the Bank was not

entirely passive it questioned Hawthorne's valuations, engaged

an independent appraiser to review Hawthorne's numbers, and

ultimately threatened to report Hawthorne's practices 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 calculus because the Bank has no such duty.

Indeed, section 6 explicitly provides that the Bank has no
obligation "to review or value the assets held in any Investment
Manager Account."

18

authorities it acted as a fiduciary and thus we should treat it

as one. We think not.

As a matter of policy and principle, ERISA does not

impose Good Samaritan liability. A financial institution cannot

be deemed to have volunteered itself as a fiduciary simply

because it undertakes reporting responsibilities that exceed its

official mandate. Imputing fiduciary status to those who

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 generally

Mertens v. Hewitt Assocs., 508 U.S. 248, 262-63 (1993). Viewed

against this backdrop, a rule that would dampen any incentive on

the 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 a climate in which depository

institutions would routinely increase their fees to account for

the risk that fiduciary liability might attach to nonfiduciary

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

To the extent that the plaintiffs' fiduciary claim

derives from the Bank's activities with regard to Plan assets

apart from real estate, it fares no better. The plaintiffs argue

that because the Bank is a fiduciary with regard to the STIF, it

had a statutory responsibility to make a timely disclosure to the

Plan participants of its concerns about Hawthorne's real estate

valuations. We agree with the plaintiffs' premise clearly, the

19

Bank had some discretion with regard to investing cash in the

STIF 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 no nexus between his particular

fiduciary responsibilities and the perceived jeopardy. This is

an issue of first impression, certainly in this circuit, and

perhaps more broadly. Good arguments exist on both sides. On

the one hand, the obligations of an ERISA fiduciary, while

governed by federal law, are informed by the common law of

trusts. That law generally treats the communication of material

facts to the beneficiary as "the core of a fiduciary's

responsibility." Eddy v. Colonial Life Ins. Co., 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." Painters of Philadelphia Dist. Council No.

21 Welfare Fund v. Price Waterhouse, 879 F.2d 1146, 1153 n.9 (3d

Cir. 1989).

4We note, however, that the Eddy court described ERISA's

fiduciary duty to disclose as the duty "not only to inform a
beneficiary of new and relevant information as it arises, but
also to advise him of circumstances that threaten interests
relevant to the relationship." Eddy, 919 F.2d at 750 (emphasis

supplied). Indeed, every case that the plaintiffs have cited in
support of an affirmative duty to disclose arises in a context
in which the plaintiff charges the defendant with withholding
information related (i.e., relevant) to the fiduciary's
association with the plan. See, e.g., Ream v. 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 both close and interesting,

we need not answer it today. Apart from the co-fiduciary claim,

considered infra, the plaintiffs' complaint does not premise a

claim on the Bank's supposed obligation to inform Plan

participants of the suspected misvaluations. Instead, the

complaint predicates the plaintiffs' alternate claim of fiduciary

liability on the Bank's "willingness to accept Hawthorne's

instructions as to the values to be carried on [the Bank's]

books." According to the complaint, this gaffe "resulted in

those properties being carried on the [Bank's] books for many

years at values greatly in excess of their market values, which

in turn led to retiring pilots receiving millions more in lump

sum benefits than the benefits to which they were entitled."

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

motion to dismiss, for that matter) do the plaintiffs make the

entirely distinct claim that the Bank breached a fiduciary

obligation under ERISA because it failed to notify Plan

participants of Hawthorne's erroneous appraisals.

That ends the matter. Afterthought theories even

cleverly constructed afterthought theories cannot be introduced

for the first time in an appellate venue through the simple

expedient of dressing them up to look like preexisting claims.

"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." 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. 1991). Since there are no extraordinary

circumstances here when the plaintiffs sued, they had

experienced counsel, a good grasp of the facts (honed by the

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

press that principle applies full bore.

D. Co-Fiduciary Liability.
D. Co-Fiduciary Liability.

The plaintiffs' final approach centers around a claim

that the Bank is liable as a co-fiduciary. This claim comes

perilously close to suffering from the same procedural infirmity

that we have just identified. The complaint is not artfully

pleaded and no explicit co-fiduciary liability claim appears on

its face. Nevertheless, the plaintiffs argued a co-fiduciary

liability claim theory below and the district court addressed

it.5 So do we.

We need not linger long. The short of it is that the

plaintiffs' allegations, even if well-pleaded and assumed to be

true, do not establish a violation of ERISA's co-fiduciary

provisions. ERISA renders a fiduciary vulnerable to liability

for breaches committed by other fiduciaries in three situations:

(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;

5The lower court apparently cobbled the co-fiduciary claim
together from a liberal reading of the complaint. The complaint
does allege that the Bank is a fiduciary (an allegation that is
irrefutable with regard to the STIF), that it had some knowledge
of Hawthorne's improprieties, and that it failed to make
reasonable efforts to remedy the situation.

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(2) if, by his failure to comply with . . .
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.

29 U.S.C. 1105(a). Given their allegations, the plaintiffs'

claim must stand or fall on the third of these scenarios.6 We

think that it falls.

29 U.S.C. 1105(d) provides that a fiduciary (such as

the Bank) cannot be held responsible as a co-fiduciary on the

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

If an investment manager or managers have
been appointed . . . then, notwithstanding

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

shall be liable from the acts or omissions of
such investment manager or managers, or be
under an obligation to invest 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 to steer away from the obvious

conclusion and to ensure a soft landing by two stratagems.

First, they point to the exact language of section 6 of the

Agreement ("The Trustee shall not be liable for 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). We

reject that assertion out of hand. The Agreement's reference to

29 U.S.C. 1105(a) can only be read as incorporating that

section to the extent that it would impart liability under the

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

Gen. Life Ins. Co., 713 F.2d 254, 259 (7th Cir. 1983) (stating

that "although the parties may decide how much authority to vest

in any person, they may not decide how much [ERISA] liability

attaches to the exercise of that authority").

The plaintiffs' second attempt to avoid the clear

implication of section 1105(d) is disingenuous at best. They

speculate that Hawthorne may not be an "investment manager"

within the meaning of the statute. This suggestion contradicts

the premise on which the case has been argued up to this point

and is thus precluded. In the district court, 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 to be an

admission that Hawthorne was an investment manager (at least for

the purpose of the pending Rule 12(b)(6) motion). Moreover, the

plaintiffs made no effort to correct the district court's

24

understanding by moving for reconsideration after Judge Wolf had

issued his decision. See, e.g., Vanhaaren v. State Farm Mut.

Auto. Ins. Co., 989 F.2d 1, 4-5 (1st Cir. 1993). We generally

will not permit litigants to assert contradictory positions at

different stages of a lawsuit in order to advance their

interests. See Patriot Cinemas, Inc. v. General Cinema Corp.,

834 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 circumstances sufficient to warrant a

departure). In all events, even if the investment manager gambit

is not judicially estopped, it is surely waived inasmuch as it

makes its debut in this court.

V. CONCLUSION
V. CONCLUSION

We need go no further. Because the trust agreement

(coupled with the TAC's appointment of Hawthorne) unambiguously

establishes that the Bank retained no discretionary authority

over the Plan's real estate investments, we hold 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, specifically 29 U.S.C. 1105(d),

limits such liability to knowing participation or concealment

facts not alleged in this case. Hence, the district court

appropriately granted the Bank's motion to dismiss.

Affirmed.
Affirmed.

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