Alan Halperin v. Mark Richards

In the United States Court of Appeals For the Seventh Circuit ____________________ No. 20-2793 ALAN D. HALPERIN and EUGENE I. DAVIS, Plaintiffs-Appellants, v. MARK R. RICHARDS, et al., Defendants-Appellees. ____________________ Appeal from the United States District Court for the Eastern District of Wisconsin. No. 1:19-cv-01561-WCG — William C. Griesbach, Judge. ____________________ ARGUED APRIL 15, 2021 — DECIDED JULY 28, 2021 ____________________ Before KANNE, ROVNER, and HAMILTON, Circuit Judges. HAMILTON, Circuit Judge. We consider in this case whether the Employee Retirement Income Security Act (ERISA) preempts certain state-law claims brought by bankruptcy creditors on behalf of a company against its directors and oﬃcers and others alleged to have inﬂated the company’s stock value to conceal the company’s decline and to beneﬁt corporate insiders. We hold that ERISA does not preempt the plaintiﬀs’ claims against the company’s directors and oﬃcers. 2 No. 20-2793 ERISA expressly contemplates parallel corporate liability against directors and oﬃcers who serve dual roles as both corporate and ERISA ﬁduciaries. We also hold, however, that ERISA preempts the plaintiﬀs’ claims against the former ERISA trustee of the employee beneﬁt plan and its non- ﬁduciary contractor. Corporation-law aiding and abetting liability against these defendants would interfere with the cornerstone of ERISA’s ﬁduciary duties—the exclusive beneﬁt rule in Section 404, 29 U.S.C. § 1104(a)(1)(A). I. Factual and Procedural Background In reviewing a grant of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), we accept the plaintiﬀs’ fac- tual allegations as true and draw all reasonable inferences in their favor. Kolbe & Kolbe Health & Welfare Beneﬁt Plan v. Medi- cal College of Wisconsin, Inc., 657 F.3d 496, 502 (7th Cir. 2011). According to the plaintiﬀs, Appvion, Inc. was in ﬁnancial freefall from 2012 to 2016 as revenues from its paper business declined sharply. During those years, Appvion repeatedly missed its ﬁnancial projections, yet the defendants continued to project unrealistic success when valuing the company’s stock—which was wholly-owned by employees under an ERISA-covered Employee Stock Ownership Plan (ESOP). The plaintiﬀs assert that, while the corporate ship was sinking, the defendants fraudulently inﬂated these stock val- uations to line the pockets of directors and oﬃcers, whose pay was tied to the ESOP valuations. Plaintiﬀs allege that the di- rectors and oﬃcers carried out this scheme with knowing aid from the ESOP trustee, Argent Trust Company (Argent), and its independent appraiser, Stout Risius Ross, LLC (Stout), who led the ESOP valuation process in coordination with the directors and oﬃcers. The plaintiﬀs also allege that Appvion No. 20-2793 3 directors provided unlawful dividends to its parent company, Paperweight Development Corporation, by forgiving and re- extending certain intercompany notes to it. In October 2017, Appvion and its aﬃliates ﬁled for bankruptcy protection in the Bankruptcy Court for the District of Delaware. See In re OLDAPCO, Inc., No. 17-12082 (MFW) (Bankr. D. Del.). Under Appvion’s liquidation plan, Appvion’s bankruptcy creditors were given authority through a liquidating trust to pursue certain corporation-law claims on behalf of Appvion to recover losses from the defendants’ alleged wrongs against the corporation. See Halperin v. Richards, 2020 WL 5095308, at *1 (E.D. Wis. Aug. 28, 2020) (describing bankruptcy proceedings). Plaintiﬀs here are Alan Halperin and Eugene Davis, co- trustees of the Appvion Liquidating Trust. They originally ﬁled this action in the Delaware bankruptcy court. The bank- ruptcy court transferred Counts I–VIII of the plaintiﬀs’ Re- vised Second Amended Complaint to the U.S. District Court for the Eastern District of Wisconsin. Counts I–IV assert state- law claims against the director and oﬃcer defendants (Mark Richards, Thomas Ferree, Tami Van Straten, Jeﬀrey Fletcher, Kerry Arent, Stephen Carter, Terry Murphy, Andrew Rear- don, Kathi Seifert, Mark Suwyn, Carl Laurino, and David Roberts) for breaching their corporate ﬁduciary duties. Counts V and VI allege that Argent and Stout aided and abet- ted those breaches. And Counts VII and VIII assert state-law unlawful dividend claims against the directors and oﬃcers. All defendants moved in the district court to dismiss all of these claims on the theory that their roles in Appvion’s ESOP valuations were governed by ERISA and that ERISA preempted state corporation-law liability arising from the 4 No. 20-2793 ESOP valuation process. More speciﬁcally, the directors and oﬃcers argue that, despite their dual roles as corporate and ERISA ﬁduciaries, they acted exclusively in their ERISA roles when carrying out the ESOP activity underlying the plaintiﬀs’ claims. See 29 U.S.C. § 1002(21)(A) (a corporate oﬃcer “is a ﬁduciary with respect to a plan to the extent … he has any discretionary authority or discretionary responsibility in the administration of such plan”). Argent and Stout similarly ar- gue that the claims against them “relate to” the plan, 29 U.S.C. § 1144(a), because they are based on the performance of their ERISA duties in valuing the company stock owned by the ESOP. The district court agreed with defendants that ERISA preempts all of plaintiﬀs’ claims. The court granted the de- fendants’ motion to dismiss Counts I–VIII with prejudice be- cause they “are grounded in … ERISA-related duties … and ‘relate to’ the ESOP.” Halperin, 2020 WL 5095308, at *4. The district court’s ERISA preemption ﬁnding is a matter of law that we review de novo. Kolbe & Kolbe, 657 F.3d at 504. II. Principles of ERISA Preemption In enacting ERISA, Congress included two distinct and powerful preemption provisions: complete preemption un- der ERISA § 502, 29 U.S.C. § 1132, and conﬂict preemption un- der ERISA § 514, 29 U.S.C. § 1144. The defendants assert that the claims in this case are conﬂict-preempted under the latter provision, which preempts “any and all State laws insofar as they may now or hereafter relate to any employee beneﬁt plan” covered by ERISA. The fundamental challenge in interpreting this preemp- tion provision stems from its broad language: “If ‘relate to’ No. 20-2793 5 were taken to extend to the furthest stretch of its indetermi- nacy, then for all practical purposes pre-emption would never run its course….” New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995). But, on the other hand, Congress clearly intended ERISA preemp- tion to be broad. Congress chose “deliberately expansive” lan- guage, “conspicuous for its breadth.” California Div. of Labor Standards Enf’t v. Dillingham Construction, N.A., Inc., 519 U.S. 316, 324 (1997), quoting Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384 (1992). Since the broad and vague statutory text oﬀers little help in drawing boundaries for ERISA conﬂict preemption, Travel- ers, 514 U.S. at 655, the Supreme Court “considers ERISA’s ob- jectives ‘as a guide to the scope of the state law that Congress understood would survive.’” Rutledge v. Pharmaceutical Care Mgmt. Ass’n, 141 S. Ct. 474, 480 (2020), quoting Dillingham Construction, 519 U.S. at 325. Congress’s objective in enacting ERISA’s conﬂict preemption provision was “‘to ensure that plans and plan sponsors would be subject to a uniform body of beneﬁts law,’ thereby ‘minimiz[ing] the administrative and ﬁnancial burden of complying with conﬂicting directives’ and ensuring that plans do not have to tailor substantive beneﬁts to the particularities of multiple jurisdictions.” Id., quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990). Guided by that objective, the Supreme Court has written that a law “relates to” an ERISA plan “if it has a connection with or reference to such a plan.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96–97 (1983) (state law requiring plans to pay speciﬁc beneﬁts was not enforceable against ERISA plans). This generally encompasses two categories of state laws. Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 319 (2016). First, 6 No. 20-2793 “[w]here a State’s law acts immediately and exclusively upon ERISA plans … or where the existence of ERISA plans is essential to the law’s operation …, that ‘reference’ will result in pre-emption.” Id. at 319–20, quoting Dillingham Construction, 519 U.S. at 325; see, e.g., Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 829 (1988) (“The Georgia statute at issue here expressly refers to—indeed, solely applies to—ERISA employee beneﬁt plans.”). Second, ERISA preempts a state statute or claim that, while not facially tied to ERISA, “‘governs … a central matter of plan administration’ or ‘interferes with nationally uniform plan administration.’” Gobeille, 577 U.S. at 320, quoting Egelhoﬀ v. Egelhoﬀ, 532 U.S. 141, 148 (2001) (preempting Washington beneﬁts rule that would create state-by-state diﬀerences in plan administration). State laws that directly prohibit something ERISA permits, and vice versa, fall into this second category. See, e.g., Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 524 (1981) (state law preempted “because it eliminates one method for calculating pension beneﬁts—integration—that is permitted by federal law”). But direct conﬂict is not always needed to show preemption. Some state laws that run parallel to or in har- mony with ERISA’s requirements are nonetheless preempted. Gobeille, 577 U.S. at 323 (“even parallel[] regulations from multiple jurisdictions could create wasteful administrative costs and threaten to subject plans to wide-ranging liability”). Some parallel state rules, however, are not preempted. See Rutledge, 141 S. Ct. at 480 (“ERISA does not pre-empt state rate regulations that merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage.”), citing Travelers, 514 U.S. at 668. Relevant here, this second category of laws interfering No. 20-2793 7 with ERISA also includes state-law causes of action seeking “alternative enforcement mechanisms” as an end run around ERISA’s more limited remedial scheme. Travelers, 514 U.S. at 658, citing Ingersoll-Rand, 498 U.S. at 145 (ERISA preempted state-law claim for wrongful discharge based on employee’s allegation that employer ﬁred him to avoid making pension contributions); see also Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54 (1987) (ERISA preempted state-law claims for breach of contract and tort for alleged improper processing of claims for plan beneﬁts). III. Director and Oﬃcer Defendants Applying these principles to the claims against the directors and oﬃcers, we ﬁnd that the plaintiﬀs’ claims are not preempted because ERISA contemplates parallel state- law liability against directors and oﬃcers serving dual roles as both corporate and ERISA ﬁduciaries. Section 408(c)(3) of ERISA explicitly allows corporate insiders to serve as ERISA ﬁduciaries. 29 U.S.C. § 1108(c)(3). This allowance has been called ERISA’s “fundamental contradiction” because of the tension it creates with both the traditional duty of loyalty at the heart of the common law of trusts and ERISA’s “exclusive beneﬁt” rule in 29 U.S.C. § 1104(a)(1)(A)(i). See Daniel R. Fischel & John H. Langbein, ERISA’s Fundamental Contradiction: The Exclusive Beneﬁt Rule, 55 U. Chi. L. Rev. 1105 (1988). Professors Fischel and Langbein defended this “fundamental contradiction” as necessary given employers’ and employees’ dual roles as both settlors and beneﬁciaries of ERISA plans. Id. at 1126. If dual-hat ﬁduciaries were not allowed, employers that established ERISA plans would be “assuming ﬁnancial liabilities without eﬀective controls,” and “Employers tend not to write blank checks.” Id. at 1127. 8 No. 20-2793 Allowing directors and oﬃcers to participate in plan decision- making as ERISA ﬁduciaries therefore supports employers’ incentives to form ERISA plans—something Congress clearly desired. Unsurprisingly, however, these dual roles also produce conﬂicts of interest that have for decades challenged ERISA plans and courts trying to implement ERISA faithfully in an array of contexts. ERISA expressly allows corporate insiders to have dual corporate and ERISA obligations. Whatever complications those dual roles may entail, we are persuaded that ERISA should not be interpreted to preempt parallel state-law liability against the directors and oﬃcers in this case. Our reasoning does not extend to preemption of the aiding and abetting claims against Argent and Stout because those claims seek, in essence, to impose the complicating dual roles on a single-role ERISA ﬁduciary and its contractor, whose actions should be governed by an undiluted exclusive-beneﬁt rule under ERISA. A. Limited Precedent There is little circuit-level precedent assessing whether and to what extent ERISA preempts corporation-law claims against dual-hat directors and oﬃcers. Beyond the Fifth Cir- cuit’s decision in Sommers Drug Stores Co. Employee Proﬁt Shar- ing Trust v. Corrigan Enterprises, Inc., 793 F.2d 1456 (5th Cir. 1986), there seems to be only a handful of district court cases that squarely address the problem. Most of these cases hold that ERISA does not preempt corporation-law claims against dual-hat directors and oﬃcers. In Sommers Drug Stores, for example, the Fifth Circuit as- sessed whether ERISA preempted a common-law breach of No. 20-2793 9 ﬁduciary duty claim brought by an employee proﬁt sharing trust (which was both a minority shareholder and ERISA plan) against the company president (a dual-hat corporate and ERISA ﬁduciary). 793 F.2d at 1468. The trust brought ﬁ- duciary duty claims under both state common law and ERISA. The district court held that ERISA preempted the state-law claims, but the Fifth Circuit reversed. The Fifth Cir- cuit’s reasoning focused on the shareholder-director relation- ship, which imposed special duties wholly independent from any parallel ERISA duties: The state common law of ﬁduciary duty that the Trust seeks to invoke in this case centers upon the relation between corporate director and shareholder. The director’s duty arises from his status as director; the law imposes the duty upon him in that capacity only. Similarly, the shareholder’s rights against the corporate direc- tor arise solely from his status as shareholder. That in a case such as ours the director happens also to be a plan ﬁduciary and the shareholder a beneﬁt plan has nothing to do with the duty owed by the director to the shareholder. The state law and ERISA duties are parallel but in- dependent: as director, the individual owes a duty, deﬁned by state law, to the corporation’s shareholders, including the plan; as ﬁduciary, the individual owes a duty, deﬁned by ERISA, to the plan and its beneﬁciaries. Id. at 1468. Sommers Drug Stores’s “parallel but independent” duties theory has been followed in other cases. See In re Ullico Inc. 10 No. 20-2793 Litig., 605 F. Supp. 2d 210, 222 (D.D.C. 2009) (“[T]he allega- tions of breach of ﬁduciary duty … were not preempted be- cause they ‘derive from the counterclaim defendants’ obliga- tions and responsibilities as oﬃcers of the corporation under state corporate law, rather than their relationship to the … plans as beneﬁciaries.’”), quoting Carabillo v. ULLICO, Inc., 357 F. Supp. 2d 249, 259 n.7 (D.D.C. 2004), in turn citing Sommers Drug Stores, 793 F.2d at 1470; Crabtree v. Central Florida Invest- ments, Inc. Deferred Comp. Plan, 2012 WL 6523584, at *2 (M.D. Fla. Oct. 3, 2012), report and recommendation approved, 2012 WL 6523078 (M.D. Fla. Dec. 14, 2012) (“The preemption prin- ciples do not apply when, as is the case here, the cause of ac- tion for breach of ﬁduciary duty is against a corporate oﬃcer for duties owed to the corporation.”); Richmond v. American Sys. Corp., 792 F. Supp. 449, 458–59 (E.D. Va. 1992) (same: “The state corporate laws … regulate relations between plaintiﬀs, as minority shareholders … and Ramsey and Curran, as … oﬃcers[] and directors. The relations … function irrespective of [ERISA plan] administration.”); In re Antioch Co., 456 B.R. 791, 839 (Bankr. S.D. Ohio 2011), report and recommendation adopted, 2011 WL 3664564 (S.D. Ohio Aug. 12, 2011), modi- ﬁed on reconsideration sub nom. Antioch Co. Litig. Trust v. Morgan, 2012 WL 6738676 (S.D. Ohio Dec. 31, 2012), (“[A]ll three defendants were ESOP ﬁduciaries. However, … all the claims against these defendants are based on independent le- gal duties owed in their roles as corporate ﬁduciaries….”); In re Dehon, Inc., 334 B.R. 55, 68 (Bankr. D. Mass. 2005) (relying on Sommers Drug Stores and ﬁnding no preemption: “the claims are brought by a third party to enforce rights held by the corporation against directors of that corporation for their acts as corporate directors”); see also Housman v. Albright, 368 No. 20-2793 11 Ill. App. 3d 214, 223, 857 N.E.2d 724, 733 (2006) (same), citing Sommers Drug Stores, 793 F.2d at 1465. Some courts have further noted that preempting state claims against directors and oﬃcers “[s]imply because events precipitating [them] occurred in the general context of an em- ployee beneﬁt plan,” Richmond, 792 F. Supp. at 459, would contravene ERISA’s core purpose to prevent misuse of plan assets by enabling directors and oﬃcers to defraud sharehold- ers and creditors whenever they don their ERISA hats. See In re Antioch, 456 B.R. at 841–42 (preemption “would do nothing more than immunize oﬃcers and directors … from allega- tions of self-dealing by the corporate entity to which they have deﬁned independent legal obligations”); see also Smith v. Crowder Jr. Co., 280 Pa. Super. 626, 639, 421 A.2d 1107, 1114 (Pa. Super. 1980) (“ERISA was not intended as a device to per- mit corporate directors and oﬃcers to defraud with impunity corporate shareholders and creditors….”). The defendants rely on two cases ﬁnding that ERISA did preempt certain state corporation-law claims: McLemore v. Regions Bank, 682 F.3d 414, 425 (6th Cir. 2012), and AT & T v. Empire Blue Cross/Blue Shield, 1994 WL 16057794, at *27 (D.N.J. July 19, 1994). These cases oﬀer little support for the directors and oﬃcers’ defense here. McLemore held ERISA preempted an entirely diﬀerent sort of claim. The McLemore plaintiﬀs asserted state-law damages claims against Regions Bank “for knowingly permitting [ERISA ﬁduciaries] to breach their ﬁduciary duties” under ERISA. 682 F.3d at 426. The Sixth Circuit held such claims were preempted because the plaintiﬀs were ERISA “participant[s], beneﬁciar[ies], or ﬁduciar[ies]” who could bring these same claims under ERISA. Such plaintiﬀs were seeking an “alternative 12 No. 20-2793 enforcement mechanism” under state law, which ERISA § 514 prohibits. Id. (internal quotation omitted). So, unlike in Sommers Drug Stores, the plaintiﬀs’ claims in McLemore sought to enforce ERISA duties, not corporation-law duties. And, unlike McLemore, the plaintiﬀs here—bankruptcy creditors suing on behalf of the corporation—have no corollary cause of action under ERISA that they could invoke. The AT & T case is also unhelpful because it rested on a faulty premise that ERISA preempts any state claim arising from conduct that occurs in the context of plan administration. AT & T held that since “ERISA at least arguably governs the alleged misconduct at issue, plaintiﬀs’ state law claims predicated upon that same alleged conduct are preempted.” 1994 WL 16057794 at *27. The Supreme Court has rejected such a broad rule, clarifying that “lawsuits against ERISA plans for run-of-the-mill state-law claims such as unpaid rent, failure to pay creditors, or even torts committed by an ERISA plan …, although obviously aﬀecting and involving ERISA plans and their trustees, are not pre- empted.” Mackey, 486 U.S. at 833. As a result, the defendants are left without any ﬁrm precedent supporting the position that ERISA preempts corporation-law claims against dual-hat directors and oﬃcers. B. Analysis Turning to this case, we agree with the results reached in most of the above cases, that ERISA did not preempt the plaintiﬀs’ claims against the director and oﬃcer defendants. But our reasons diﬀer somewhat from the “parallel but independent” duties theory employed by other courts. We agree with Sommers Drug Stores that the duties must be parallel; state law cannot be allowed to require an act that No. 20-2793 13 ERISA forbids. So, here, the fact that the directors and oﬃcers’ corporation-law and ERISA duties both prohibit the fraudulent conduct alleged by the plaintiﬀs is crucial. But, unlike Sommers Drug Stores, we do not lean heavily on the fact that the defendants’ corporation-law duties have independent state-law grounds. Virtually all state-law causes of action derive from independent state-law duties. Rather, what we ﬁnd most important is that ERISA is written to invite, and certainly to tolerate, these speciﬁc parallel and independent duties—the directors and oﬃcers’ ﬁduciary duties to the corporation. 1. Alternative Remedies We can ﬁrst quickly dispel any notion that the plaintiﬀs are attempting to circumvent ERISA’s exclusive remedial scheme. These plaintiﬀs have no rights under ERISA as a “participant, beneﬁciary, or ﬁduciary.” 29 U.S.C. § 1132(a)(3). They are not asserting state-law claims as an end run around their more limited federal remedies. See Pilot Life, 481 U.S. at 54 (ERISA’s “policy choices … would be completely under- mined if ERISA-plan participants and beneﬁciaries were free to obtain remedies under state law that Congress rejected in ERISA”) (emphasis added). Unlike plaintiﬀs covered by ERISA, these non-ERISA plaintiﬀs “were not parties to the ERISA ‘bargain’”; they did not “g[i]ve up state law causes of action” to “receive[] federal causes of action under ERISA in exchange.” Lordmann Enters., Inc. v. Equicor, Inc., 32 F.3d 1529, 1533–34 (11th Cir. 1994), quoting Memorial Hosp. Sys. v. North- brook Life Ins. Co., 904 F.2d 236, 249 (5th Cir. 1990). 1 1 We need not decide whether ERISA would preempt similar corporation-law claims brought by ERISA beneficiaries, participants, or 14 No. 20-2793 This is why, under the related ERISA doctrine of complete preemption—which addresses state-law causes of action more often—the ﬁrst prong of the Supreme Court’s test for preemption is whether the plaintiﬀ “at some point in time, could have brought his claim under ERISA….” Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004). This case arises under conﬂict preemption rather than complete preemption. But “given the similar underlying policy considerations,” Davila’s test is useful in assessing the similar question of alternative remedies under conﬂict preemption. Franciscan Skemp Healthcare, Inc. v. Cent. States Joint Board Health & Welfare Trust Fund, 538 F.3d 594, 600 n.3 (7th Cir. 2008). Here, Davila would not preempt the plaintiﬀs’ claims because the plaintiﬀs cannot sue under ERISA. That weighs against the presence of an al- ternative remedies problem here. 2. The Exclusive Beneﬁt Rule The alternative remedies issue, however, only begins our inquiry. ERISA would still preempt the plaintiﬀs’ claims if they “‘govern[] … a central matter of plan administration’ or ‘interfere[] with nationally uniform plan administration.’” Go- beille, 577 U.S. at 320, quoting Egelhoﬀ, 532 U.S. at 148. We must therefore analyze whether and to what extent the plaintiﬀs’ parallel state-law ﬁduciary duty claims interfere with how Congress intended ERISA’s ﬁduciary duties to operate. Section 404 of ERISA imposes an exclusive duty of loyalty on ﬁduciaries to act solely in the interest of ERISA beneﬁciar- ies. Subject to certain qualiﬁcations, “a ﬁduciary shall dis- charge his duties with respect to a plan solely in the interest of fiduciaries who can sue Appvion’s directors and officers under ERISA for the same conduct. No. 20-2793 15 the participants and beneﬁciaries and … for the exclusive pur- pose of … providing beneﬁts to participants and their beneﬁ- ciaries.” 29 U.S.C. § 1104(a)(1)(A)(i) (emphases added). This is known as the “exclusive beneﬁt” rule. A related provision provides another formulation of the rule: “the assets of a plan shall never inure to the beneﬁt of any employer and shall be held for the exclusive purposes of providing beneﬁts to participants in the plan and their beneﬁciaries….” 29 U.S.C. § 1103(c)(1) (em- phases added). In addition, 29 U.S.C. § 1106 provides a list of “prohibited transactions” and implements the exclusive ben- eﬁt rule by prohibiting various types of self-dealing and other conﬂicts of interest. ERISA’s exclusive beneﬁt rule derives from “one of the most fundamental and distinctive principles of trust law, the duty of loyalty.” Langbein & Fischel, 55 U. Chi. L. Rev. at 1108. ERISA is built on a trust-law model. See 29 U.S.C. § 1103(a) (“all assets of an employee beneﬁt plan shall be held in trust”). Congress intended courts to “apply rules and rem- edies similar to those under traditional trust law to govern the conduct of ﬁduciaries.” H.R. Rep. No. 93-1280, at 295 (1974) (Conf. Rep.). By importing the trust form and its duty of loy- alty into beneﬁt plans, ERISA drew from a familiar legal framework to protect plans from the kind of internal misuse that motivated ERISA’s enactment. Congress enacted ERISA in response to widespread concern over the misuse of em- ployee pensions, notoriously exempliﬁed by Studebaker’s de- fault on its pension plan in 1963 and the severe corruption un- covered in the Teamsters union through Senate investiga- tions. See John H. Langbein, What ERISA Means by “Equitable”: The Supreme Court’s Trail of Error in Russell, Mertens, and Great- West, 103 Colum. L. Rev. 1317, 1322–24 (2003). 16 No. 20-2793 ERISA’s duty of loyalty is the “highest known to the law.” Donovan v. Bierwirth, 680 F.2d 263, 272 n.8 (2d Cir. 1982). A ﬁduciary of a trust has “a duty to the beneﬁciary to administer the trust solely in the interest of the beneﬁciary.” Restatement (Second) of Trusts § 170(1) (1959). The reason for such a strict and exclusive duty of loyalty stems from the unique trust re- lationship, where a third party is entrusted with a settlor’s property to be used for the beneﬁciary. Under this arrange- ment, “neither the transferor nor the beneﬁciaries are well sit- uated to monitor closely the actions of the trustee.” Langbein & Fischel, 55 U. Chi. L. Rev. at 1114. With such power comes responsibility. The duty of loyalty steps in as a forceful substitute for direct monitoring. It pro- tects beneﬁciaries by barring any conﬂict of interest that might put the ﬁduciary in a position to engage in self-serving behavior at the expense of beneﬁciaries. The rule is designed to deter misbehavior by establishing an “irrebuttable pre- sumption of wrongdoing whenever the trustee engages in conﬂict tainted transactions.” Id. at 1114–15. This is strong medicine—so strong that a “trustee who deals with trust property for his own account is not allowed a defense even when the transaction was … harmless to the beneﬁciaries,” and even if it actually “beneﬁt[s] both” the beneﬁciary and trustee. Id. at 1115. These common-law trust principles apply equally to ERISA’s duty of loyalty, embodied in the exclusive beneﬁt rule. Good faith is not a defense. Leigh v. Engle, 727 F.2d 113, 124 (7th Cir. 1984). And “ERISA clearly contemplates actions against ﬁduciaries who proﬁt by using trust assets, even where the plan beneﬁciaries do not suﬀer direct ﬁnancial loss.” Id. at 122. As 29 U.S.C. § 1104(a)(1)(A)(i) commands, No. 20-2793 17 ERISA ﬁduciaries must always act with an “eye single to the interests of the participants and beneﬁciaries.” Id. at 123, quot- ing Donovan v. Bierwirth, 680 F.2d at 271. Given the formidable backdrop of ERISA’s exclusive ben- eﬁt rule, we are skeptical of any state-law attempt to saddle ERISA ﬁduciaries with other distracting and potentially con- ﬂicting duties to the corporate employer. Nevertheless, when it comes to corporate directors and oﬃcers, ERISA tolerates some measure of dual loyalty. 3. Exception for Dual-Hat Directors and Oﬃcers Despite the exclusive beneﬁt rule, ERISA § 408(c)(3) ex- plicitly allows corporate insiders—who already have ﬁduci- ary duties under corporation law—to serve as ERISA ﬁduci- aries. Section 408(c)(3) states that ERISA’s “prohibited trans- actions” rules shall not “be construed to prohibit any ﬁduci- ary from … serving as a ﬁduciary in addition to being an of- ﬁcer, employee, agent, or other representative of a party in in- terest.” 29 U.S.C. § 1108(c)(3). ERISA deﬁnes “party in inter- est” to include corporate employers and other plan sponsors. 29 U.S.C. § 1002(14). Moreover, ERISA invites conﬂicts of in- terest within ESOPs like the plan in this case. ERISA’s prohib- ited transaction rules ordinarily forbid deals between plans and other interested parties such as large stockholders, see 29 U.S.C. § 1106(a)(1)(E) & (a)(2), but ERISA speciﬁcally allows such deals for ESOPs, see 29 U.S.C. § 1107(b)(1) & (d)(3)(A)(ii). By “expressly contemplat[ing] ﬁduciaries with dual loyal- ties,” § 408(c)(3) takes “an unorthodox departure from the common law” that is in obvious tension with ERISA’s exclu- sive beneﬁt rule. Donovan v. Bierwirth, 538 F. Supp. 463, 468 (E.D.N.Y. 1981), aﬀ’d as modiﬁed, 680 F.2d 263 (2d Cir. 1982). 18 No. 20-2793 As noted, scholars have defended this “fundamental contra- diction” as necessary to encourage employers to establish beneﬁt plans. Without dual-hat ﬁduciaries, employers that es- tablish ERISA plans would be “assuming ﬁnancial liabilities without eﬀective controls.” Langbein & Fischel, 55 U. Chi. L. Rev. at 1127. The eﬀect of adhering strictly to the common- law rule would likely be a lower rate of plan formation. Id. ERISA’s necessary accommodation for dual-hat directors and oﬃcers has produced messy conﬂicts of interest that courts and commentators have long recognized and struggled to resolve. See generally Laurence B. Wohl, Fiduciary Duties Under ERISA: A Tale of Multiple Loyalties, 20 U. Dayton L. Rev. 43 (1994). Courts “are faced with the problem of reconciling the overwhelming requirements of common-law trustee singlemindedness with the ERISA permission for dual loyalties.” Id. at 58. Courts “must develop a tolerance for the resulting conﬂicts such dual roles undoubtedly will cause.” Id. The Supreme Court itself has noted this problem, writing that “the analogy between ERISA ﬁduciary and common law trustee becomes problematic … because the trustee at common law characteristically wears only his ﬁduciary hat when he takes action to aﬀect a beneﬁciary, whereas the trustee under ERISA may wear diﬀerent hats.” Pegram v. Herdrich, 530 U.S. 211, 225 (2000). Accordingly, since the 1980s, courts have recognized and tried to harmonize directors and oﬃcers’ dual loyalties under ERISA. In Donovan v. Bierwirth, for example, the Secretary of Labor sued dual-hat trustees of an ERISA plan for breaching their duty of loyalty to beneﬁciaries by using plan assets to purchase company stock at an inﬂated price to fend oﬀ an out- side takeover bid. 538 F. Supp. at 465–68. The district court No. 20-2793 19 ﬁrst noted that, because ERISA “abrogated the traditional common law rule” and “clearly contemplates … ﬁduciaries with dual loyalties,” the trustees “did not commit per se vio- lations of ERISA either by their failure to abstain from the in- vestment decision … or by the mere acquisition of [company] stock.” Id. at 469–70. Nevertheless, the court held that “when a ﬁduciary has dual loyalties, his independent investigation into the basis for an investment decision which presents a potential conﬂict of interests must be both intensive and scrupulous” to ensure that the conﬂict is not inﬂuencing the decision. Id. at 470, dis- cussing 29 U.S.C. § 1104(a)(1)(B) (ERISA duty of prudence). Applying that standard, the court found that the trustees failed to exercise such care by not recognizing and taking steps to neutralize their inherent conﬂict—such as, at the very least, consulting independent counsel. Id. at 473. The Second Circuit aﬃrmed, clarifying that dual-hat di- rectors and oﬃcers must do everything possible to “avoid placing themselves” in a decision presenting an actual con- ﬂict, and if faced with such a conﬂict must inform themselves and act to neutralize it, perhaps by temporarily resigning as trustees. Donovan v. Bierwirth, 680 F.2d at 271–72. But unlike at common law, the court acknowledged, “oﬃcers of a corpo- ration … do not violate their duties as trustees by taking ac- tion which, after careful and impartial investigation, they rea- sonably conclude best to promote the interests of participants and beneﬁciaries simply because it incidentally beneﬁts the corporation or, indeed, themselves.” Id at 271. In this circuit, we used a similar approach to reconcile ERISA’s exclusive beneﬁt rule with its allowance for dual-hat directors and oﬃcers in Leigh v. Engle, 727 F.2d 113 (7th Cir. 20 No. 20-2793 1984). Dual-hat directors and oﬃcers invested ERISA trust as- sets in companies that were targets of directors and oﬃcers’ hostile takeover attempts. We said that “plan trustees who are also oﬃcers of either the ‘target’ or the ‘raider’ could be seen as having a signiﬁcant ‘interest’ of their own in the outcome of the contest.” Id. at 127. We invoked the Donovan v. Bierwirth method of addressing directors and oﬃcers’ dual loyalties and held that the directors and oﬃcers violated ERISA’s ﬁdu- ciary requirements: Where the potential for conﬂicts is substantial, it may be virtually impossible for ﬁduciaries to discharge their duties with an “eye single” to the interests of the beneﬁciaries, and the ﬁduci- aries may need to step aside, at least temporar- ily, from the management of assets where they face potentially conﬂicting interests. … Where it might be possible to question the ﬁduciaries’ loyalty, they are obliged at a minimum to en- gage in an intensive and scrupulous independ- ent investigation of their options to insure that they act in the best interests of the plan beneﬁ- ciaries. In the case before us, we believe there is an additional factor which weighs heavily in evaluating the loyalty of the ﬁduciaries. Here the control eﬀorts lasted for several months, and in the case of Hickory, for over a year. The Reli- able Trust held its shares involved in the control contests throughout these periods, and, as we discuss below, the trust’s use of its assets at all relevant times tracked the best interests of the Engle [corporate insiders’] group in the control contest. We believe that the extent and duration No. 20-2793 21 of these actions congruent with the interests of another party are also relevant for courts in de- ciding whether plan ﬁduciaries were acting solely in the interests of plan beneﬁciaries. Id. at 125–26, citing Donovan v. Bierwirth, 680 F.2d at 272; see also Newton v. Van Otterloo, 756 F. Supp. 1121, 1127–30 (N.D. Ind. 1991) (applying Leigh’s “three-pronged approach”); Dan- aher Corp. v. Chicago Pneumatic Tool Co., 635 F. Supp. 246, 250 (S.D.N.Y. 1986) (doubting “the appropriateness of [a] chief ex- ecutive oﬃcer continuing in his position of ESOP trustee dur- ing [a] takeover attempt” that was favored by current beneﬁ- ciaries at the expense of potential future beneﬁciaries). These cases illustrate how courts have adapted ERISA’s ﬁ- duciary rules to account for the exception allowing for dual- hat director and oﬃcer ﬁduciaries. Courts have even applied these adapted ﬁduciary rules in cases involving ESOP valua- tions much like the one at issue in this case. In Donovan v. Cun- ningham, for example, the Fifth Circuit applied Donovan v. Bierwirth’s approach in a case where an ESOP trustee who was also a corporate oﬃcer participated in the valuation of corpo- rate stock for an ESOP purchase. 716 F.2d 1455 (5th Cir. 1983). The court recognized that “the stringent prophylactic rules of the common law cannot be incorporated reﬂexively under” ERISA, id. at 1466–67, but that ERISA’s exception allowing ESOPs to purchase employer stock for “adequate considera- tion” must still be interpreted to imply an exacting duty of prudence for dual-hat ﬁduciaries with potential conﬂicts of interest. Id. at 1467 & n.27. The Fifth Circuit reaﬃrmed this principle in a case where dual-hat directors and oﬃcers were involved in an ESOP’s purchase of company stock at an inﬂated price. Perez v. 22 No. 20-2793 Bruister, 823 F.3d 250, 262–63 (5th Cir. 2016) (“The trustees did not separate Bruister’s personal interests from Donnelly’s val- uation process so as to avoid a conﬂict of interest. Their breach of the duty of loyalty turns on their failure to place the inter- ests of participants and beneﬁciaries ﬁrst”; to prove ESOP purchase was “prudent”, “care must be taken to avoid any identiﬁed conﬂicts of interest”); see also Howard v. Shay, 100 F.3d 1484, 1488–89 (9th Cir. 1996) (citing Donovan v. Bierwirth and Leigh v. Engle and holding that dual-hat ﬁduciaries vio- lated their ERISA duties of care and loyalty when ESOP sold undervalued shares back to the dual-hat company president). 4. Preemption Implications These cases inform our preemption holding as to the directors and oﬃcers in this case. Congress explicitly departed from the common law to allow directors and oﬃcers to serve as ERISA ﬁduciaries despite their dual loyalties. These permissible dual loyalties weigh in favor of allowing parallel corporation-law liability against the directors and oﬃcers in this case. If parallel liability were preempted, the directors and oﬃcers would in eﬀect cease to be corporate ﬁduciaries when carrying out their ERISA ﬁduciary roles. That result would contravene § 408(c)(3)’s mandate that ERISA not be construed to prevent corporate ﬁduciaries from also serving as ERISA ﬁduciaries. Preempting the plaintiﬀs’ corporation-law claims against the directors and oﬃcers would also thwart ERISA’s purpose to protect plan assets from misuse. The third-party bank- ruptcy creditors in this case cannot sue under ERISA. So, as- suming the plaintiﬀs’ allegations are true, completely fore- closing their state-law claims could leave them without re- course for a fraudulent ESOP valuation that enabled insiders No. 20-2793 23 to loot the company as it was sinking toward bankruptcy. Congress enacted ERISA in response to Senate investigations into “widespread looting of plan funds through sweetheart deals, kickbacks, and … cronyism,” especially within the Teamsters union. Langbein, 103 Colum. L. Rev. at 1324. It would be odd if ERISA operated to shield similar fraudulent activity in this case. “ERISA was not intended as a device to permit corporate directors and oﬃcers to defraud with impu- nity corporate shareholders and creditors.” Smith, 421 A.2d at 1114. Preempting all of plaintiﬀs’ claims could also frustrate congressional intent by discouraging ESOP formation. It could be rational for creditors to demand higher interest rates or more security for loans to ESOP-owned companies to ac- count for the risk that directors and oﬃcers might abuse the corporation without any recourse for creditors under corpo- ration law. In the healthcare arena, courts have relied on a similar concern in refusing to preempt negligent misrepresen- tation claims by third-party hospitals against ERISA plan in- surers. See Lordmann, 32 F.3d at 1533, citing Memorial Hospital Sys., 904 F.2d at 246 (“If ERISA preempts [hospitals’] potential causes of action for misrepresentation, health care providers can no longer rely as freely and must either deny care or raise fees…. In that event, the employees whom Congress sought to protect would ﬁnd medical treatment more diﬃcult to ob- tain.”). Finally, allowing plaintiﬀs to pursue their claims under corporation law against the directors and oﬃcers should not disrupt national uniformity in plan administration. The famil- iar “internal aﬀairs” doctrine is a conﬂict of laws principle that recognizes that only one state should have authority to 24 No. 20-2793 regulate a corporation’s internal aﬀairs, including ﬁduciary duties of directors and oﬃcers. See LaPlant v. Northwestern Mutual Life Ins. Co., 701 F.3d 1137, 1139 (7th Cir. 2012), citing Edgar v. MITE Corp., 457 U.S. 624, 645 (1982); Treco, Inc. v. Land of Lincoln Sav. & Loan, 749 F.3d 374, 377 (7th Cir. 1984); Re- statement (Second) of Conﬂict of Laws § 302, cmts. a & e (1971). Our holding as to the directors and oﬃcers is limited to the plaintiﬀs’ particular claims in this case, which would impose corporate liability that runs parallel to, not in conﬂict with, ERISA’s ﬁduciary duties. By that we mean that the directors and oﬃcers’ corporation-law and ERISA duties both prohibit the fraudulent conduct alleged by plaintiﬀs. ERISA expressly contemplates such parallel liability for dual-hat directors and oﬃcers. We agree with the Fifth Circuit’s prediction in Sommers Drug Stores that a director’s state-law and ERISA duties will often run parallel, so that duties to shareholders require the same conduct as the duties to ERISA beneﬁciaries. See Sommers Drug Stores, 793 F.2d at 1468. In cases like this one, where shareholders and beneﬁciaries are both suing the directors and oﬃcers for the same conduct, if shareholders can recover then ERISA beneﬁciaries likely can as well. ERISA’s trust duty “imposes a standard of care at least as high as that imposed by the director-shareholder duty.” Id. at 1468–69; see also Wohl, 20 U. Dayton L. Rev. at 78 n.139 (when dual-hat directors and oﬃcers face “questions from the corporation’s shareholders,” they “will ﬁnd at least some protection by virtue of the business judgment rule”). If a dual- hat director or oﬃcer’s duties irreconcilably conﬂict, however, the director or oﬃcer “might have to resign one position or No. 20-2793 25 the other,” Sommers Drug Stores, 793 F.2d at 1469. And if he or she does not, ERISA’s federal duties will trump conﬂicting corporation-law duties. Here, the plaintiﬀs are pursuing parallel corporation-law claims against dual-hat directors and oﬃcers, so ERISA does not preempt those claims. IV. Argent Trust Company The plaintiﬀs’ Count V aiding and abetting claims against Argent Trust Company (Argent) are a diﬀerent matter. These claims are preempted because ERISA does not permit states to dilute the exclusive beneﬁt rule further, beyond its narrow exception for dual-hat directors and oﬃcers. Unlike the directors and oﬃcers, Argent is a “single-hat” ERISA ﬁduciary. It has no state-law duty of loyalty to the corporation. Still, the plaintiﬀs seek to extend corporation-law liability to Argent through an aiding and abetting theory.2 Aiding and abetting a breach of a ﬁduciary duty is a well- established tort. See Restatement of Torts (Second) § 874, cmt. c (1979). Yet it is expansive in that it requires any third party working with a corporate ﬁduciary to be alert to the ﬁduciary’s special duties and to avoid knowingly giving aid to a breach. In this respect, aiding and abetting claims use 2 The parties dispute whether Wisconsin or Delaware law applies. We need not resolve that question because both states impose liability on par- ties who knowingly aid and abet a corporate fiduciary’s breach of duty. See Burbank Grease Servs., LLC v. Sokolowski, 294 Wis. 2d 274, 304, 717 N.W.2d 781, 796 (2006) (“If a duty of loyalty exists, and a third party en- courages and profits from a breach of the duty of loyalty, a claim for aiding and abetting the breach will lie.”); Gotham Partners, L.P. v. Hallwood Realty Partners, L.P., 817 A.2d 160, 172 (Del. 2002) (stating elements of a claim for aiding and abetting a breach of fiduciary duty under Delaware law). 26 No. 20-2793 directors and oﬃcers’ corporation-law duties as a foundation for a wider layer of tort liability reaching third parties. States are usually within their rights to impose aiding and abetting liability on third parties. However, ERISA preempts such liability when it comes to third parties like Argent who are subject to exclusive federal duties to act solely in the inter- est of beneﬁciaries. Unlike with dual-hat directors and oﬃc- ers, ERISA does not contemplate single-hat ﬁduciaries owing any parallel duties to the corporation—even a limited duty not to aid and abet breaches against the corporation. The prospect of aiding and abetting liability in this case simply creates too great a risk that single-hat ERISA ﬁduciaries like Argent would be forced to worry about whether directors and oﬃcers were complying with separate corporation-law duties. This would interfere with the single- minded focus on the plan and its beneﬁciaries that ERISA’s exclusive beneﬁt rule prescribes for ﬁduciaries like Argent. In particular, the conﬂicts of interest that plague dual-hat directors and oﬃcers would suddenly infect single-hat entities, as well. Imagine, for example, an ERISA ﬁduciary worrying whether it would be aiding a breach of ﬁduciary duty simply by convincing a dual-hat director or oﬃcer to approve a plan decision that favors beneﬁciaries at the expense of company proﬁts. Such conﬂicts of interest are challenging enough when they aﬀect only the directors and oﬃcers. They can paralyze eﬃcient plan administration. “[W]ith the strict common-law standard of not holding conﬂicting oﬃces removed by ERISA, it is very diﬃcult for an ERISA ﬁduciary to be assured of a benign assessment by third parties of the motivational factors underlying the ﬁduciary’s act.” Wohl, 20 U. Dayton L. Rev. at No. 20-2793 27 48–49. As a result, “the ﬁduciary may be reluctant to act” even where no malfeasance is afoot. Id. at 49. These problems are most likely to arise in cases like this one involving failing com- panies. Langbein & Fischel, 55 U. Chi. L. Rev. at 1132 (In cases involving “plant closings or in corporate reorganizations …, the gains from self-interested action by nonneutral ﬁduciaries may outweigh the usual … costs. It is for this reason, we sus- pect, that the contested plan administration cases so often arise when the incentives of the long term relationship” be- tween employer and employees “are attenuated”). Such conﬂicts of interest are exactly what ERISA’s exclu- sive beneﬁt rule is meant to prevent. So while ERISA explicitly tolerates some conﬂicts among directors and oﬃcers, both the text and purpose of ERISA’s exclusive beneﬁt rule make clear that courts should resist any further dilution through state- law aiding and abetting claims that would eﬀectively force a second hat onto single-hat ERISA ﬁduciaries. Cf. UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 378–79 (1999) (ERISA preempted state-law doctrine deeming employer an agent of insurer; state-law rule would force the employer, “as plan ad- ministrator, to assume a role, with attendant legal duties and consequences, that it has not undertaken voluntarily” under ERISA). We recognize that “aiding and abetting” liability against Argent would impose liability only for intentionally fraudulent conduct. It is therefore unlikely that the conduct prohibited by state law—aiding a fraud—would be something that Argent’s corollary ERISA duties require or even allow. In fact, ERISA beneﬁciaries, participants, and ﬁduciaries can sue Argent under ERISA for knowingly aiding the directors and oﬃcers’ alleged breaches of their ERISA 28 No. 20-2793 duties. See 29 U.S.C. § 1105(a)(1) (“a ﬁduciary … shall be liable for a breach of ﬁduciary responsibility of another ﬁduciary … 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”). As with the directors and oﬃcers, then, state-law liability against Argent would run parallel to Argent’s ERISA liability. But, again, the key diﬀerence is that the exclusive beneﬁt rule preempts such parallel state-law liability outside the narrow and unavoidable exception for dual-hat directors and oﬃcers. Indeed, the preeminence of ERISA’s exclusive beneﬁt rule is what distinguishes the aiding and abetting claims against Argent from other non-preempted, “run-of-the-mill” tort claims brought against single-hat ERISA ﬁduciaries. See Mackey, 486 U.S. at 833. In Mackey, the Supreme Court recognized that claims for ordinary torts allegedly committed by ERISA ﬁduciaries are often not preempted. Id. (“lawsuits against ERISA plans for run-of-the-mill state-law claims such as unpaid rent, failure to pay creditors, or even torts committed by an ERISA plan—are relatively commonplace…. [T]hese suits, although obviously aﬀecting and involving ERISA plans and their trustees, are not pre-empted by ERISA § 514(a).”). Accordingly, courts have permitted many tort claims against ERISA ﬁduciaries even when the tortious conduct oc- curred in the context of plan activity. See Mackey, 486 U.S. at 833 n.8 (collecting cases); see also, e.g., Franciscan Skemp, 538 F.3d at 601 (third-party hospital’s negligent misrepresenta- tion claim against ERISA plan insurer was not completely preempted); Dishman v. UNUM Life Ins. Co. of Am., 269 F.3d 974, 979–84 (9th Cir. 2001) (beneﬁciary could pursue invasion No. 20-2793 29 of privacy tort against ERISA plan insurer for actions taken to investigate beneﬁts claim); Lane v. Goren, 743 F.2d 1337, 1340 (9th Cir. 1984) (beneﬁciary could pursue state-law race and age discrimination claims against ERISA ﬁduciaries). In those and other “run-of-the-mill” cases, however, the plaintiﬀs were either (1) beneﬁciaries who suﬀered torts unrelated to their ERISA rights, as in Dishman and Lane, or (2) true third parties, such as the hospital in Franciscan Skemp or the outside creditors in Mackey. State-law liability to the beneﬁciaries in Dishman and Lane thus did not risk distracting ﬁduciaries from their single-minded focus on beneﬁciaries. And in Franciscan Skemp and Mackey, because liability ﬂowed to third parties, there was no risk of dividing single-hat ﬁduciaries’ allegiance between the beneﬁciary and her corporate employer—the foremost entity that ERISA ﬁduciaries are not supposed to serve. Here, however, the injured plaintiﬀ is the corporate em- ployer. Parallel state-law liability would foster just the sort of dual loyalty that the exclusive beneﬁt rule prohibits. The plaintiﬀs in this case are bankruptcy creditors, not the corpo- ration itself, but they are suing on behalf of the corporate em- ployer for alleged breaches of duties owed to the corporation before the bankruptcy. So, unlike in Mackey-type cases, the aiding and abetting claims against Argent here would in fact impose on single-hat ﬁduciaries new state-law duties to the corporate employer. Such liability is fundamentally at odds with the text and purpose of ERISA’s exclusive beneﬁt rule and is therefore preempted. 30 No. 20-2793 V. Stout Risius Ross The preemptive force of ERISA’s exclusive beneﬁt rule also protects the Stout Risius Ross defendants (Stout) from corporate aiding and abetting liability even though Stout is not a ﬁduciary under ERISA. Like Argent, Stout is not a dual- hat director or oﬃcer for whom ERISA contemplates parallel corporate liability. Argent hired Stout for its expertise in aid- ing the ESOP valuation process. In this role, Stout owed no ﬁduciary duties to the corporation or to ERISA beneﬁciaries. This means Stout is not subject to the exclusive beneﬁt rule. So at ﬁrst glance, parallel non-ﬁduciary liability against Stout under both ERISA and state law would seem not to con- ﬂict with the exclusive beneﬁt rule. But upon closer inspec- tion, Stout is situated more similarly to Argent than to the di- rectors and oﬃcers when it comes to preemption. Three con- siderations point to this conclusion. First, to protect Argent’s single-minded focus on beneﬁciaries, it is also necessary to protect its contractor, Stout, whose involvement in the ESOP valuation stemmed solely from Argent’s trustee duties. Sec- ond, given Stout’s role in the ESOP valuation process, parallel state liability to the corporation would conﬂict with Stout’s non-ﬁduciary obligations to beneﬁciaries when performing core ERISA functions. Third, state-law liability for Stout could lead to a damages remedy that would arguably conﬂict with ERISA’s remedial limits on claims against non-ﬁduciaries. So, while the question is a closer call, ERISA also preempts the plaintiﬀs’ aiding and abetting claims against Stout. In assessing the state-law claims against Stout, it is ﬁrst important to clarify that, although Stout is not a ﬁduciary un- der ERISA, it still had federal-law obligations under ERISA when serving as Argent’s contractor. Speciﬁcally, under No. 20-2793 31 ERISA §§ 502(a)(5) & (l), 29 U.S.C. §§ 1132(a)(5) & (l), Stout can be sued by the Secretary of Labor for knowingly aiding an ERISA ﬁduciary’s breach of its duties to beneﬁciaries. See Harris Tr. & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 248 (2000) (“the Secretary may bring a civil action under § 502(a)(5) against an ‘other person’ who ‘knowing[ly] partic- ipat[es]’ in a ﬁduciary’s violation”), quoting 29 U.S.C. § 1132(l). Thus, under ERISA, Stout must concern itself with Argent’s and the directors and oﬃcers’ ﬁduciary duties to beneﬁciaries so as not to participate knowingly in a violation. 3 Because Stout incurs ERISA liability if it knowingly aids a breach of ﬁduciary duty, Stout was acting in a limited single- hat ERISA role when aiding the ESOP valuation process as Argent’s contractor. Stout was obligated under ERISA to avoid aiding Argent’s or the directors and oﬃcers’ alleged 3 While the Secretary’s cause of action against Stout suffices in this case to illustrate Stout’s non-fiduciary obligations to beneficiaries under ERISA, whether private parties could similarly sue Stout under § 502(a)(3) for aiding a fiduciary’s breach of duty remains undecided in our circuit. The logic of Harris suggests they can. Harris held that private parties could sue non-fiduciaries under § 502(a)(3) for knowingly aiding a prohibited transaction under § 406. 530 U.S. at 248–49. And Harris’s reasoning would seem to extend equally to a § 404 fiduciary duty claim. See id. (allowing § 502(a)(3) claim because Congress intended beneficiaries’ cause of action to match the Secretary’s cause of action under § 502(a)(5)). See also Daniels v. Bursey, 313 F. Supp. 2d 790, 807–08 (N.D. Ill. 2004) (extending Harris’s logic to a claim alleging participation in a breach of fiduciary duty). Nev- ertheless, even after Harris, some circuits have continued to hold that a non-fiduciary’s participation in a breach of fiduciary duty is not actionable under § 502(a)(3). See Renfro v. Unisys Corp., 671 F.3d 314, 325 (3d Cir. 2011); Gerosa v. Savasta & Co., 329 F.3d 317, 322–23 (2d Cir. 2003). We need not and do not decide this issue here. See Gordon v. CIGNA Corp., 890 F.3d 463, 477 n.2 (4th Cir. 2018) (flagging but not deciding this issue). 32 No. 20-2793 breaches. For three reasons, this obligation imposed on Stout under ERISA preempts the plaintiﬀs’ attempt to impose addi- tional duties on Stout based on aiding and abetting liability to the corporation. First, to ensure Argent’s single-minded focus as an ERISA ﬁduciary, that single-minded focus must also extend to Stout, whom Argent hired to help perform core trustee functions. Stout’s involvement in this case stems solely from Argent’s single-hat trustee duties. Argent hired Stout for its expertise to help Argent with the ESOP valuation process. If state law could burden Argent’s contractors with liability to the corpo- ration, that would hinder Argent’s ability as trustee to hire trusted experts whose thinking is not clouded with concerns about recommending actions to directors and oﬃcers that might be contrary to the corporation’s interests. Hence, to protect Argent’s ability to act for the exclusive beneﬁt of ben- eﬁciaries, it becomes important also to prevent the expansion of dual-hat loyalties to non-ﬁduciary contractors like Stout. Otherwise, ERISA ﬁduciaries may not be able to conﬁde fully in non-ﬁduciary contractors to help perform core trustee du- ties with an eye single to beneﬁciaries. Second, and most simply, given Stout’s key role in the ESOP valuation process, ERISA’s focus on protecting beneﬁ- ciaries weighs against permitting corporate aiding and abet- ting liability against Stout. Like Argent, Stout is not locked into the (potentially) conﬂicting dual roles that ERISA accepts for directors and oﬃcers. So, as with Argent, there is no need under ERISA to tolerate state laws that impose corporation- law liability on non-ﬁduciary contractors who perform cen- tral ERISA functions such as ESOP valuations. Stout’s services were central to plan administration—preparing the No. 20-2793 33 independent valuation of the ESOP’s holdings. As with Ar- gent, then, when performing such core plan tasks, Stout’s fed- eral ERISA obligations should not be muddled with distract- ing and potentially conﬂicting state-law obligations to the cor- poration. Such liability rules would aﬀect central matters of plan administration in a manner not consistent with ERISA, and would thus “relate to” an ERISA plan, 29 U.S.C. § 1114(a). See, e.g., Egelhoﬀ, 532 U.S. at 147 (state rule requiring admin- istrators to pay beneﬁts to beneﬁciaries chosen by state law was not consistent with ERISA’s rule that beneﬁts be paid to those identiﬁed in plan documents). Last, state-law liability against Stout could lead to a damages remedy that is arguably in tension with ERISA’s remedial limits on claims against non-ﬁduciaries. As mentioned above, the Secretary of Labor can sue a non- ﬁduciary like Stout under § 502(a)(5) for knowingly participating in a breach of duty. Yet, like beneﬁciaries’ private cause of action under § 502(a)(3), the Secretary’s cause of action under § 502(a)(5) is limited to “equitable relief.” As a result, ERISA does not authorize suits for damages against non-ﬁduciaries who knowingly participate in a ﬁduciary’s breach of ﬁduciary duty. See Mertens v. Hewitt Assocs., 508 U.S. 248, 260–61 (1993) (explaining that even the Secretary’s ability to assess civil penalties against non-ﬁduciaries under § 502(l) does not “establish[] the existence of a damages remedy” against non-ﬁduciaries, but rather counts as “equitable relief” under § 502(a)(5)). Mertens’s equitable limit on Stout’s potential ERISA liability produces some additional tension in this case between plaintiﬀs’ state-law damages claims against Stout and ERISA’s remedial scheme. Although Mertens applies only 34 No. 20-2793 to ERISA claims, it would be odd if the corporation could obtain remedies against Stout that could not be sought by the Secretary of Labor on behalf of similarly injured beneﬁciaries. That result could give non-ﬁduciaries like Stout incentives to be more attentive to the corporation than to beneﬁciaries. Such an eﬀect would undermine ERISA’s purpose of ensuring that ERISA ﬁduciaries and their contractors focus ﬁrst and foremost on the interests of plan beneﬁciaries—not the corporation. For all these reasons, we ﬁnd that ERISA also preempts the plaintiﬀs’ state-law claims against Stout. Conclusion The exclusive beneﬁt rule is a cornerstone of ERISA that state law cannot dilute. While ERISA narrowly contemplates parallel liability against the dual-hat director and oﬃcer de- fendants, it preempts further aiding and abetting liability that would impose additional duties on Argent and Stout beyond their exclusive ERISA obligations. We therefore REVERSE the dismissal of Counts I–IV and Counts VII and VIII against the directors and oﬃcers and AFFIRM the dismissal of Counts V and VI against Argent and Stout and REMAND the case for further proceedings consistent with this opinion.

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