from the United States District Court for the District of
Colorado (D.C. No. 1:14-CV-02330-WJM-NYW)
K. Stris, Stris & Maher LLP, Los Angeles, California
(Rachana A. Pathak, John Stokes, Stris & Maher LLP, Los
Angeles, California; Nina Wasow, Todd F. Jackson, Feinberg,
Jackson, Worthman & Wasow LLP, Oakland, California; Todd
Schneider, Mark Johnson, James Bloom, Schneider Wallace
Cottrell Konecky Wotkyns LLP, Emeryville, California; Scot
Bernstein, Law Offices of Scot D. Bernstein, P.C., Folsom,
California; Garret W. Wotkyns, Michael McKay, Schneider
Wallace Cottrell Konecky Wotkyns LLP, Scottsdale, Arizona;
Erin Riley, Matthew Gerend, Keller Rohrback LLP, Seattle,
Washington; Jeffrey Lewis, Keller Rohrback LLP, Oakland,
California, with him on the brief), for the Plaintiff -
G. Phillips, Sidley Austin LLP, Washington, D.C. (Michael L.
O'Donnell, Edward C. Stewart, Wheeler Trigg O'Donnell
LLP, Denver, Colorado; Joel S. Feldman, Mark B. Blocker,
Sidley Austin LLP, Chicago, Illinois, with him on the brief),
for the Defendant -Appellee.
William Alvarado Rivera, (Mary E. Signorille, AARP Foundation
Litigation, Washington, D.C. with him on the brief) for AARP
and AARP Foundation Litigation, Amici Curiae.
F. Jorden, (Waldemar J. Pflepsen, Jr., Carlton Fields Jorden
Burt, P.A., Washington D.C.; and Michael A. Valerio, Carlton
Fields Jorden Burt, P.A., Hartford, Connecticut with him on
the brief), for American Council of Life Insurers, Amicus
G. Ross, Mayer Brown LLP, Chicago, Illinois, (Jed W.
Glickstein, Mayer Brown LLP, Chicago, Illinois; Brian D.
Netter, Mayer Brown LLP, Washington, D.C.; Steven P.
Lehotsky, U.S. Chamber Litigation Center, Washington, D.C.;
Janet M. Jacobson, Washington, D.C., with her on the brief),
for the Chamber of Commerce of the United State of America
and the American Benefits Council, Amici Curiae.
MATHESON, BACHARACH, and McHUGH, Circuit Judges.
MATHESON, Circuit Judge
Life Annuity and Insurance Company ("Great-West")
manages an investment fund that guarantees investors will
never lose their principal or the interest they accrue. It
offers the fund to employers as an investment option for
their employees' retirement savings plans, which are
governed by the Employee Retirement Income Security Act
("ERISA"), 29 U.S.C. § 1001 et seq.
Teets-a participant in an employer retirement plan-invested
money in Great-West's fund. He later sued Great-West
under ERISA, alleging Great-West breached a fiduciary duty to
participants in the fund or that Great-West was a
non-fiduciary party in interest that benefitted from
prohibited transactions with his plan's assets.
certifying a class of 270, 000 plan participants like Mr.
Teets, the district court granted summary judgment for
Great-West, holding that (1) Great-West was not a fiduciary
and (2) Mr. Teets had not adduced sufficient evidence to
impose liability on Great-West as a non-fiduciary party in
interest. Exercising jurisdiction under 28 U.S.C. §
1291, we affirm.
is a Colorado-based insurance company that provides
"recordkeeping, administrative, and investment services
to 401(k) plans." Aplt. App., Vol. II at 149. It
qualifies as a service provider-a "person providing
services to [a] plan"-under ERISA. See ERISA
§ 3(14)(B), 29 U.S.C. § 1002(14)(B).
Teets participated through his employment in the Farmer's
Rice Cooperative 401(k) Savings Plan ("the Plan").
Under the Plan, employees contribute to their own retirement
accounts and choose how to allocate their contributions among
the investment options offered. When employees invest in a
particular fund, they become "participants" in that
fund. Great-West contracts with the Plan and other comparable
employer plans to offer the investment fund that is the
subject of this case. Great-West is not in a contractual
relationship with participants.
section, we first provide an overview of the ERISA legal
framework governing this appeal. We then detail the factual
background of the case and the proceedings in the district
ERISA Protections Against Benefit Plan Mismanagement
regulates employee benefit plans, including health insurance
plans, pension plans, and 401(k) savings plans. It is a
"comprehensive and reticulated statute, the product of a
decade of congressional study of the Nation's private
employee benefit system." Mertens v. Hewitt
Assocs., 508 U.S. 248, 251 (1993) (quotations omitted).
It governs employers that create and administer benefit plans
as well as third parties that provide services for plans.
See 29 U.S.C. § 1002(1), (4), (14), (16).
seeks to protect employees against mismanagement of their
benefit plans. See Fort Halifax Packing Co., Inc. v.
Coyne, 482 U.S. 1, 15 (1987) ("The focus of the
statute thus is on the administrative integrity of benefit
plans."). "[T]o ensure that employees will not be
left empty-handed," Lockheed Corp. v. Spink,
517 U.S. 882, 887 (1996), ERISA imposes fiduciary duties
on those responsible for plan management and administration.
See ERISA §§ 404, 406, 29 U.S.C.
§§ 1104, 1106. "Congress commodiously imposed
fiduciary standards on persons whose actions affect the
amount of benefits retirement plan participants will
receive." John Hancock Mut. Life Ins. Co. v. Harris
Tr. & Sav. Bank, 510 U.S. 86, 96 (1993)
("Harris Trust ").
Establishing fiduciary status-named and functional
ERISA, a party involved in managing a benefit plan takes on
fiduciary obligations in one of two ways. See In re
Luna, 406 F.3d 1192, 1201 (10th Cir. 2005). First, the
instrument establishing a plan must specify at least one
fiduciary-typically the employer or a trustee-that will have
the "authority to control and manage the operation and
administration of the plan." ERISA § 402(a), 29
U.S.C. § 1102(a). These are "named
fiduciaries." See Maez v. Mountain States Tel. &
Tel, Inc., 54 F.3d 1488, 1498 (10th Cir. 1995) (defining
"named fiduciary"). Second, a party not named in
the instrument can nonetheless be a "functional
fiduciary" by virtue of the authority the party holds
over the plan. See Santomenno v. Transamerica Life Ins.
Co., 883 F.3d 833, 837 (9th Cir. 2018)
("Transamerica Life Insurance"); David P.
Coldesina, D.D.S, P.C., Emp. Profit Sharing Plan
& Tr v. Estate of Simper, 407 F.3d 1126, 1132 (10th
Cir. 2005) ("Coldesina ") (describing the
"functional" approach to evaluating fiduciary
status). Under § 3(21)(A) of ERISA,  a party becomes a
functional fiduciary when
(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) (emphasis added).
fiduciaries' obligations are limited in scope: "Plan
management or administration confers fiduciary status only to
the extent the party exercises discretionary
authority or control." Coldesina, 407 F.3d at
1132. And they must actually exercise their authority or
control over the plan's assets. Leimkuehler v. Am.
United Life Ins. Co., 713 F.3d 905, 914 (7th Cir. 2013)
(explaining that a decision not to exercise control over a
plan's assets does not confer fiduciary status). Any
alleged breach of a functional fiduciary's obligations
must arise out of an exercise of that authority or control.
See id. at 913; Assocs. in Adolescent
Psychiatry, SC v. Home Life Ins. Co., 941 F.2d 561, 569
(7th Cir. 1991).
following discussion illustrates, although named fiduciaries
and functional fiduciaries obtain fiduciary status in
different ways, they are bound by the same restrictions and
duties under ERISA.
Fiduciary duties and prohibited transactions
404 of ERISA imposes general duties of loyalty on
fiduciaries, requiring them to "discharge [their] duties
with respect to a plan solely in the interest of the
participants and beneficiaries" and "for the
exclusive purpose of . . .  providing benefits as to
participants and their beneficiaries; and  defraying
reasonable expenses of administering the plan." 29
U.S.C. § 1104(a)(1).
addition to imposing general duties, ERISA prohibits
fiduciaries from engaging in certain specific transactions.
First, it restricts transactions between plans and
fiduciaries. Under § 406(b)(1), a fiduciary may not
"deal with the assets of the plan in his own interest or
for his own account." 29 U.S.C. § 1106(b)(1).
Second, ERISA restricts transactions between fiduciaries and
non-fiduciary third parties, referred to as "parties in
interest." The latter can include service providers.
See ERISA § 3(14)(B), 29 U.S.C. §
1002(14)(B). Under § 406(a), a fiduciary may not allow a
plan to engage in a transaction the fiduciary knows or should
know is (1) a "sale or exchange, or leasing, of any
property between the plan and a party in interest"; (2)
"lending of money or other extension of credit between
the plan and a party in interest"; (3) "furnishing
of goods, services, or facilities between the plan and a
party in interest"; (4) "transfer to, use by or for
the benefit of, a party in interest, of any assets of the
plan"; or (5) "acquisition, on behalf of the plan,
of any employer security or employer real property in
violation of [§] 1107(a)." 29 U.S.C. §
fiduciary engages in one of these prohibited transactions
under § 406, ERISA's civil enforcement provision,
§ 502, allows plan participants to sue the fiduciary
"to enjoin any act or practice which violates any
provision of this subchapter or the terms of the plan"
or "to obtain other appropriate equitable relief."
ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3).
Fiduciaries can avoid liability for a prohibited transaction
if they qualify for certain exemptions under § 408 of
ERISA Non-Fiduciary Parties in Interest and Prohibited
parties in interest have no fiduciary obligations to a plan
or its participants, the Supreme Court has read §
502(a)(3) to allow a suit against a party in interest for its
participation in a prohibited transaction. Harris Tr.
& Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S.
238, 241 (2000) ("Salomon ")
("[Section] 502(a)(3) admits of no limit . . . on the
universe of possible defendants"). A party in interest
is liable if it "had actual or constructive knowledge of
the circumstances that rendered the transaction
unlawful"-that is, prohibited under § 406(a).
Id. at 251. We discuss this standard in detail
The Key Guaranteed Portfolio Fund
offers an investment product called the Key Guaranteed
Portfolio Fund ("KGPF"). The KGPF is a stable-value
fund. It "guarantees capital preservation." Aplt.
App., Vol. II at 150. This means KGPF participants will never
lose the principal they invest or the interest they earn,
which is credited daily to their accounts. Id. The
KGPF was one of 29 investment options the Farmer's Rice
Cooperative Plan's fiduciaries chose to offer
participants like Mr. Teets.
Great-West's management of the KGPF and the Credited
deposits the money that participants have invested in the
KGPF into its general account. That account, in turn, is
invested in fixed-income instruments such as treasury bonds,
corporate bonds, and mortgage-backed securities. Great-West
employs a self-described "conservative investment
strategy." Id. at 157, 173. Its investments
earn lower interest rates than some higher-risk instruments
invested in the KGPF earns interest at the "Credited
Interest Rate" (the "Credited Rate"). Under
the contracts it executes with employer plans, Great-West
sets the Credited Rate quarterly, announcing the new rate at
least two business days before the start of each quarter. Its
contract with Mr. Teets's Plan provides, "Interest
earned on the Key Guaranteed Portfolio Fund value is
compounded daily to the effective annual interest rate. The
interest rate to be credited to the Group Contract holder
[the Plan] will be determined by [Great-West] prior to the
last day of the previous calendar quarter." Aplt. App.,
Vol. I at 129. "The effective annual interest rate will
never be less than 0%." Id.
retains as revenue the difference between the total yield on
the KGPF's monetary instruments and the Credited Rate,
also known as the "margin" or the
"spread." Some portion of the margin goes toward
Great-West's operating costs. Great-West publicly
discloses an administrative fee of .89 percent, but claims
that figure does not capture all the costs associated with
maintaining the KGPF. Great-West retains as profit whatever
portion of the margin exceeds its costs. The parties dispute
the total KGPF-associated profit Great-West has earned, but
all agree that as of 2016 it was greater than $120 million.
Credited Rate dropped from 3.55 percent before the financial
crisis in 2008 to 1.10 percent in 2016. During that time, the
Credited Rate increased only once, in 2013. At the same time,
Great-West's margin remained relatively constant, between
approximately two and three percent.
Exiting the KGPF
may terminate their relationship with Great-West based on
changes to the Credited Rate. If they do, Great-West
"reserves the right to defer payment" of
participants' KGPF money back to the plan-presumably to
reinvest with another provider-"not longer than 12
months." Id. There is no evidence
Great-West has ever exercised the option to impose that
who have placed their money in the KGPF may withdraw their
principal and accrued interest at any time without paying a
fee. Great-West does, however, prohibit plans offering the
KGPF from also offering any other stable value funds, money
market funds, or certain bond funds-in other words, products
with comparable risk profiles.
Teets sued Great-West in the United States District Court for
the District of Colorado on behalf of all employee benefit
plan participants who had invested in the KGPF since 2008, as
well as those participants' beneficiaries. The district
court certified the class under Federal Rule of Civil
Procedure 23(b)(3). See Teets v. Great-West Life &
Annuity Ins. Co., 315 F.R.D. 362, 374 (D. Colo. 2016).
At certification, the class included approximately 270, 000
KGPF participants spread across more than 13, 000
plans. Id. at 369. None of the
plans' named fiduciaries is a named plaintiff or a member
of the class.
Mr. Teets's ERISA Claims
Teets alleged three ERISA violations. His first two claims
alleged Great-West had violated ERISA's fiduciary duty
provisions. First, Mr. Teets claimed that Great-West had
breached its general duty of loyalty under § 404 by (1)
setting the Credited Rate for its own benefit rather than for
the plans' and participants' benefit, (2) setting the
Credited Rate artificially low and retaining the difference
as profit, and (3) charging excessive fees. Second, he
claimed that Great-West, again acting in its fiduciary
capacity, had engaged in a prohibited transaction under
§ 406(b) by "deal[ing] with the assets of the plan
in [its] own interest or for [its] own account." 29
U.S.C. § 1106(b).
prerequisite to bring both of these claims, Mr. Teets alleged
that Great-West is an ERISA fiduciary because it exercises
authority or control over the quarterly Credited Rate and, by
extension, controls its compensation. The district court
limited its review of these two fiduciary duty claims by
addressing only this prerequisite-that is, whether Mr. Teets
had sufficiently established Great-West's fiduciary
status. Because the court found that Great-West was not a
fiduciary, it did not address whether Great-West had breached
any fiduciary obligations. Great-West's fiduciary status
is thus the focus of our review of Mr. Teets's fiduciary
Teets's third claim, raised in the alternative, was based
on Great-West's having non-fiduciary status. He alleged
that Great-West was a non-fiduciary party in interest to a
non-exempt prohibited transaction under § 406(a) insofar
as it had used plan assets for its own benefit.
three claims, Mr. Teets sought declaratory and injunctive
relief and "other appropriate equitable relief,"
including restitution and an accounting for profits. Aplt.
App., Vol. I at 37.
Summary Judgment Ruling
discovery, the parties filed cross-motions for summary
judgment. The district court denied Mr. Teets's motion
and granted summary judgment for Great-West. It disposed of
Mr. Teets's first two claims at the same time, concluding
that Great-West was not acting as a fiduciary of the Plan or
its participants. It held that Great-West's contractual
power to choose the Credited Rate did not render it a
fiduciary under ERISA because participants could
"veto" the chosen rate by withdrawing their money
from the KGPF. Id. at 99. As to Great-West's
ability to set its own compensation, the court held that
Great-West did not have control over its compensation and
thus was not a fiduciary because the ultimate amount it
earned depended on participants' electing to keep their
money in the KGPF each quarter.
district court also granted summary judgment on Mr.
Teets's third claim, concluding that Great-West was not
liable as a non-fiduciary party in interest because Mr. Teets
had failed to establish a genuine dispute as to whether
Great-West had "actual or constructive knowledge of the
circumstances that rendered the transaction unlawful."
Id. at 105 (quoting Salomon, 530 U.S. at
251). Mr. Teets timely appealed.
review thus focuses on (1) whether Great-West is a functional
fiduciary because it "exercises . . . authority or
control" over Plan assets, ERISA § 3(21)(A), 29
U.S.C. § 1002(21)(A), when its sets the Credited Rate or
its compensation; and (2) whether, if Great-West is not a
fiduciary, it is liable as a non-fiduciary party in interest
for its participation in a transaction prohibited under
add further factual and procedural background as it becomes
Summary Judgment Background
review a grant of summary judgment de novo, applying the same
legal standard as the district court."
Coldesina, 407 F.3d at 1131. "The court shall
grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law."
Fed.R.Civ.P. 56(a); see Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986). We view the evidence and draw
reasonable inferences in the light most favorable to the
nonmoving party. Bryant v. Farmers Ins. Exch., 432
F.3d 1114, 1124 (10th Cir. 2005).
movant bears the initial burden of making a prima facie
demonstration of the absence of a genuine issue of material
fact and entitlement to judgment as a matter of law."
Libertarian Party of N.M. v. Herrera, 506 F.3d 1303,
1309 (10th Cir. 2007) (citing Celotex, 477 U.S. at
323). A movant that does not bear the burden of persuasion at
trial may satisfy this burden "by pointing out to the
court a lack of evidence on an essential element of the
nonmovant's claim." Id. (citing
Celotex, 477 U.S. at 325).
the movant meets this initial burden, the burden then shifts
to the nonmovant to set forth specific facts from which a
rational trier of fact could find for the nonmovant."
Id. (quotations omitted). To satisfy this burden,
the nonmovant must identify facts "by reference to
affidavits, deposition transcripts, or specific exhibits
incorporated therein." Id. (citation omitted).
These facts "must establish, at a minimum, an inference
of the presence of each element essential to the case."
Bausman v. Interstate Brands Corp., 252 F.3d 1111,
1115 (10th Cir. 2001).
as here, we are presented with cross-motions for summary
judgment, we must view each motion separately, in the light
most favorable to the non-moving party, and draw all
reasonable inferences in that party's favor."
United States v. Supreme Ct. of N.M., 839 F.3d 888,
906-07 (10th Cir. 2016) (quotations omitted).
Teets argues that (A) Great-West is a fiduciary because it
has the authority to set the Credited Rate each quarter and,
by extension, to determine its own compensation; and (B) even
if Great-West is not a fiduciary, it is nonetheless liable as
a party in interest because it benefitted from a transaction
prohibited under ERISA.
Fiduciary Duty Claims-Great-West's Fiduciary
threshold question for the two fiduciary duty claims is
whether Great-West is a functional fiduciary under ERISA. Mr.
Teets argues it is because Great-West exercises
"authority or control" over the Plan or its assets
by changing the Credited Rate without plan or participant
approval. Aplt. Br. at 17-19, 25-26. He also contends
Great-West has sufficient control over its own compensation
to render it an ERISA fiduciary. We conclude that Mr. Teets
did not make an adequate showing in response to
Great-West's summary judgment motion to support these
following discussion describes the pertinent legal
background, summarizes the district court's ruling, and
analyzes the evidence of Great-West's authority in
relation to plans and participants.
noted above, a service provider can be a functional fiduciary
under § 3(21)(A) of ERISA when it exercises authority or
control over plan management or plan assets. See 29
U.S.C. § 1002(21)(A). Courts consider an employee
benefit plan contract-like the one between Mr. Teets's
Plan and Great-West-to be an asset of the plan, such that a
service provider's authority or control over the plan
contract can give rise to fiduciary status. See Chicago
Bd. Options Exch, Inc. v. Conn. Gen. Life Ins. Co., 713
F.2d 254, 260 (7th Cir. 1983) ("CBOE")
("[T]he policy itself is a plan asset.");
accord ERISA § 401(b)(2), 29 U.S.C. §
1101(b)(2) (providing that a contract for a
guaranteed-benefit policy is an asset of the plan to which it
case law points to a two-step analysis to determine whether a
service provider is a functional fiduciary when a plaintiff
alleges it has acted to violate a fiduciary
duty. First, courts decide whether the service
provider's alleged action conformed to a specific term of
its contract with the employer plan. By following the terms
of an arm's-length negotiation, the service provider does
not act as a fiduciary. See, e.g., Schulist v.
Blue Cross of Iowa, 717 F.2d 1127, 1132 (7th Cir. 1983)
(holding service provider was not fiduciary where its
compensation was established through successive
negotiations). Second, if the service provider took
unilateral action beyond the specific terms of the contract
respecting the management of a plan or its assets,
the service provider is a fiduciary unless the plan or
perhaps the participants in the plan (see below) have the
unimpeded ability to reject the service provider's action
or terminate the relationship with the service provider.
See, e.g., Midwest Cmty. Health Serv., Inc. v.
Am. United Life Ins. Co., 255 F.3d 374, 377-78 (7th Cir.
2001) (holding service provider was fiduciary when it could
make changes to plan contract without plan approval and would
assess a fee for plans withdrawing funds).
to establish a service provider's fiduciary status, an
ERISA plaintiff must show the service provider (1) did not
merely follow a specific contractual term set in an
arm's-length negotiation; and (2) took a unilateral
action respecting plan management or assets ...