David Barboza v. Ca Assn of Prof Firefighters ( 2015 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DAVID BARBOZA, No. 11-15472
Plaintiff-Appellant,
D.C. No.
v. 2:08-cv-02569-
FCD-GGH
CALIFORNIA ASSOCIATION OF
PROFESSIONAL FIREFIGHTERS, a
California corporation; CALIFORNIA
ASSOCIATION OF PROFESSIONAL
FIREFIGHTERS, LONG-TERM
DISABILITY PLAN; CALIFORNIA
ADMINISTRATION INSURANCE
SERVICES, INC., a California
corporation; KENNETH BLANTON;
DENNIS CAMPANALE; GENE
DANGEL; JAMES FLOYD; CHARLES
GLUCK; BRIAN PINOMAKI; WILLIAM
SOQUI, individually and as Plan
Directors,
Defendants-Appellees.
2 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS
DAVID BARBOZA, No. 11-16024
Plaintiff-Appellant,
D.C. No.
v. 2:08-cv-02569-
FCD-GGH
CALIFORNIA ASSOCIATION OF
PROFESSIONAL FIREFIGHTERS, a
California corporation; CALIFORNIA
ASSOCIATION OF PROFESSIONAL
FIREFIGHTERS, LONG-TERM
DISABILITY PLAN; CALIFORNIA
ADMINISTRATION INSURANCE
SERVICES, INC., a California
corporation; KENNETH BLANTON;
DENNIS CAMPANALE; GENE
DANGEL; JAMES FLOYD; CHARLES
GLUCK; BRIAN PINOMAKI; WILLIAM
SOQUI, individually and as Plan
Directors,
Defendants-Appellees.
BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 3
DAVID BARBOZA, No. 11-16081
Plaintiff-Appellee,
D.C. No.
v. 2:08-cv-02569-
FCD-GGH
CALIFORNIA ASSOCIATION OF
PROFESSIONAL FIREFIGHTERS, a
California corporation; CALIFORNIA
ASSOCIATION OF PROFESSIONAL
FIREFIGHTERS, LONG-TERM
DISABILITY PLAN; CALIFORNIA
ADMINISTRATION INSURANCE
SERVICES, INC., a California
corporation; KENNETH BLANTON;
DENNIS CAMPANALE; GENE
DANGEL; JAMES FLOYD; CHARLES
GLUCK; BRIAN PINOMAKI; WILLIAM
SOQUI, individually and as Plan
Directors,
Defendants-Appellants.
4 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS
DAVID BARBOZA, No. 11-16082
Plaintiff-Appellee,
D.C. No.
v. 2:08-cv-02569-
FCD-GGH
CALIFORNIA ASSOCIATION OF
PROFESSIONAL FIREFIGHTERS, a
California corporation; CALIFORNIA ORDER AND
ASSOCIATION OF PROFESSIONAL AMENDED
FIREFIGHTERS, LONG-TERM OPINION
DISABILITY PLAN; CALIFORNIA
ADMINISTRATION INSURANCE
SERVICES, INC., a California
corporation; KENNETH BLANTON;
DENNIS CAMPANALE; GENE
DANGEL; JAMES FLOYD; CHARLES
GLUCK; BRIAN PINOMAKI; WILLIAM
SOQUI, individually and as Plan
Directors,
Defendants-Appellants.
Appeal from the United States District Court
for the Eastern District of California
Frank C. Damrell, Jr., Senior District Judge, Presiding
Argued and Submitted
November 21, 2014—San Francisco, California
Filed April 7, 2015
Amended August 28, 2015
BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 5
Before: John T. Noonan and Sandra S. Ikuta, Circuit
Judges and William H. Albritton III,* Senior District Judge.
Order;
Opinion by Judge Ikuta
SUMMARY**
ERISA
The panel amended an opinion filed April 7, 2015, filed
a superseding opinion, denied the parties’ cross petitions for
rehearing, and denied on behalf of the court the parties’ cross
petitions for rehearing en banc, in a case in which the panel
affirmed in part and reversed in part the district court’s
judgment in an ERISA action alleging breach of fiduciary
duties in the management and administration of an employee
welfare benefit plan.
The panel affirmed the district court’s summary judgment
in favor of the defendants on a claim that they breached their
duty to hold plan assets in trust. Applying the common law
of trusts, the panel held that under 29 U.S.C. § 1103, a person
(legal or natural) must hold legal title to the assets of an
employee benefit plan with the intent to deal with these assets
*
The Honorable William H. Albritton III, Senior District Judge for the
U.S. District Court for the Middle District of Alabama, sitting by
designation.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
6 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS
solely for the benefit of the members of that plan. Such a
person is the “trustee,” and the resulting relationship between
the trustee and the participants in the plan with respect to a
plan’s assets is a “trust” for purposes of § 1103. The panel
wrote that no specific terminology or label is required; as
long as the trust or plan instrument names a person who will
hold property in trust for another, § 1103(a) is satisfied. The
panel concluded that the plan here complied with § 1103(a).
Applying Skidmore rather than Auer deference, the panel
rejected the Department of Labor’s contention that the plan
at issue does not meet the statutory requirements because the
statute contemplates the “formal execution of a trust
instrument.” The panel wrote that the Department’s attempt,
in its amicus petition for rehearing, to clarify its interpretation
of the statute and regulation likewise lacks persuasive power.
The panel reversed the district court’s summary judgment
in favor of the defendants on a claim that they breached their
fiduciary duties by engaging in unlawful self-dealing. The
panel held that the plan administrator’s practice of paying its
own fees and expenses from the plan’s assets was a
prohibited transaction and therefore a breach of fiduciary
duty.
Reversing the district court’s partial summary judgment
in favor of the plaintiff, the panel held that the defendants did
not breach their fiduciary duties by failing to distribute a
summary annual report because the plan met the definition of
a “totally unfunded welfare plan.”
BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 7
COUNSEL
Geoffrey V. White (argued), Law Office of Geoffrey V.
White, San Francisco, California, for Plaintiff-Appellant/
Cross-Appellee.
Brendan J. Begley (argued) and Louis A. Gonzalez, Jr.,
Weintraub Tobin Chediak Coleman Grodin, Sacramento,
California, for Defendants-Appellees/Cross-Appellants.
Marcia E. Bove (argued), Senior Trial Attorney; M. Patricia
Smith, Solicitor of Labor; Timothy D. Hauser, Associate
Solicitor, Plan Benefits Security Division; Elizabeth Hopkins,
Counsel for Appellate and Special Litigation; and Alex
Felstiner, Attorney, United States Department of Labor,
Office of the Solicitor, Washington, D.C., for Amicus Curiae
Thomas Perez, Secretary of Labor.
ORDER
The opinion filed April 7, 2015, and appearing at
782 F.3d 1072, is hereby amended. The superseding
amended opinion will be filed concurrently with this order.
With these amendments, the panel has unanimously voted
to deny the parties’ cross petitions for rehearing, each filed
May 12, 2015. Judge Ikuta has voted to deny the parties’
cross petitions for rehearing en banc, each filed May 12,
2015, and Judge Noonan and Judge Albritton have so
recommended. The petitions for rehearing en banc were
circulated to the judges of the court, and no judge requested
a vote for en banc consideration.
8 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS
The petitions for rehearing and the petitions for rehearing
en banc are DENIED. No further petitions for rehearing or
rehearing en banc will be entertained.
OPINION
IKUTA, Circuit Judge:
This appeal requires us to interpret three different
provisions of the Employee Retirement Income Security Act
of 1974 (ERISA): (1) the requirement in 29 U.S.C. § 1103(a)
that “all assets of an employee benefit plan shall be held in
trust by one or more trustees,” sometimes called the “hold in
trust” requirement; (2) the prohibition against fiduciary self-
dealing under 29 U.S.C. § 1106; and (3) the “summary annual
report” requirement under 29 C.F.R. § 2520.104b-10(a).1
I
This case arises out of a disability benefits dispute
between David Barboza, a retired firefighter for the City of
Tracy, California, and the California Association of
Professional Firefighters (CAPF), the manager of an
employee welfare benefit plan. Barboza initially filed an
action against CAPF and other co-defendants in March 2008,
alleging that CAPF had withheld certain long-term disability
1
We address the parties’ additional claims on appeal and cross appeal
in an unpublished memorandum disposition filed concurrently with this
opinion. Barboza v. Cal. Ass’n of Prof’l Firefighters, 600 F. App’x 509
(9th Cir. 2015).
BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 9
benefits to which Barboza was entitled.2 While that related
action was ongoing, Barboza initiated a second lawsuit (the
action on appeal here) in October 2008 against CAPF,
California Administration Insurance Services, Inc. (CAISI),
and individual members of the board of directors for both
CAPF and CAISI (collectively, the defendants). This time,
Barboza alleged that the defendants had breached their
fiduciary duties under ERISA in a number of different ways.
Barboza and the defendants filed cross motions for summary
judgment. The district court’s order on these cross motions
is now before us on appeal.
A
An explanation of CAPF, CAISI, and the underlying
employee welfare benefits plan is necessary to understand
Barboza’s ERISA claims.
According to its corporate bylaws, CAPF is a non-profit
mutual benefit corporation. It was incorporated at the behest
of “[v]arious unions and other profit and non-profit mutual
benefit associations” for the purpose of providing long-term
disability benefits to participating employee members (and
their beneficiaries) from the various fire departments around
California. CAPF accomplishes this goal through its
2
The district court dismissed Barboza’s related action for failure to
exhaust available administrative remedies under the Plan. We reversed in
a published decision and remanded for further proceedings. Barboza v.
Cal. Ass’n of Prof’l Firefighters, 651 F.3d 1073 (9th Cir. 2011). On
remand, the district court granted in part and denied in part each party’s
motion for summary judgment. On appeal for a second time, we affirmed
in part and reversed in part the district court’s order and again remanded
the case to the district court for further proceedings. Barboza v. Cal.
Ass’n of Prof’l Firefighters, 594 F. App’x 903 (9th Cir. 2014).
10 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS
management of a long-term disability plan (“Plan”),
established by a document entitled the CAPF Long Term
Disability Plan (the “Plan Instrument”).
The parties do not dispute that the Plan is an employee
welfare benefit plan governed by ERISA, see 29 U.S.C.
§ 1002(1)(A), which receives its funding exclusively from
Plan participants and pays all benefits solely from Plan assets.
Under the terms of the Plan Instrument, all funds, property,
and additional assets held by the Plan are maintained
exclusively in the name of CAPF for the benefit of the
participants. CAPF manages the assets of the Plan through its
board of directors, and supervises the payment of benefits to
Plan members made pursuant to the terms of the Plan
Instrument. The Plan Instrument provides that the Plan will
be administered on a day-to-day basis by “a qualified
California-licensed third party administrator” pursuant to an
administrative services agreement that is consistent with the
terms of the Plan Instrument and is approved by CAPF’s
board of directors. Pursuant to this provision, the Plan
employs the California Administration Insurance Services,
Inc. (CAISI) to act as the Plan’s administrator under CAPF’s
supervision.
The Plan functions as follows. First, each participant
makes a monthly contribution to the Plan in an amount
established by the board of directors of CAPF. These
contributions are deposited into a Wells Fargo Bank checking
account, for which officers of CAISI are the signatories.
When a Plan participant suffers total disability from an
injury, sickness, or pregnancy, the participant submits
evidence of this disability to CAISI, which then determines
whether the participant is eligible to receive benefits under
the criteria provided by the Plan Instrument. If the participant
BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 11
is eligible, CAISI issues a check drawn on the Wells Fargo
account for the appropriate amount.
In addition to paying benefits to eligible participants,
CAISI also pays Plan expenses from the Wells Fargo account,
including its own administrative service fees. CAISI gives
CAPF quarterly financial statements itemizing the Plan’s fees
and expenses.
B
Barboza alleges that the defendants violated ERISA
through numerous breaches of their fiduciary duties in their
management and administration of the Plan. The district
court granted the defendants’ summary judgment motion on
Barboza’s claims that the defendants breached their fiduciary
duties by failing to hold Plan assets in trust, and by allowing
CAISI to pay its own fees from the Wells Fargo account. The
district court granted Barboza’s summary judgment motion
on his claim that defendants breached their fiduciary duty by
failing to distribute a summary annual report to Plan
participants. The parties subsequently brought this appeal
and corresponding cross appeal.
II
We have jurisdiction under 28 U.S.C. § 1291. We review
a district court’s decision on cross motions for summary
judgment de novo. See Guatay Christian Fellowship v. Cnty.
of San Diego, 670 F.3d 957, 970 (9th Cir. 2011). We must
determine, taking the evidence in the light most favorable to
the nonmoving party, whether there are any genuine disputes
of material fact and whether the moving party is entitled to
12 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS
judgment as a matter of law. See Olsen v. Idaho State Bd. of
Med., 363 F.3d 916, 922 (9th Cir. 2004).
A
We first consider Barboza’s claim that the defendants
violated ERISA’s hold-in-trust requirement. ERISA requires
that, subject to exceptions not relevant here, “all assets of an
employee benefit plan shall be held in trust by one or more
trustees.” 29 U.S.C. § 1103(a). “Such trustee or trustees
shall be either named in the trust instrument or in the plan
instrument . . . or appointed by a person who is a named
fiduciary.” Id. The trustee or trustees “shall have exclusive
authority and discretion to manage and control the assets of
the plan.” Id. The applicable regulations echo the statute,
stating that with an exception not applicable here, “all assets
of an employee benefit plan shall be held in trust by one or
more trustees pursuant to a written trust instrument.” 29
C.F.R. § 2550.403a-1(a). Neither ERISA nor the regulations
define the terms “trust,” “trustee,” or “trust instrument.”
In the absence of any statutory or regulatory definition of
these terms, we apply the “familiar maxim that a statutory
term is generally presumed to have its common-law
meaning.” E.g., Evans v. United States, 504 U.S. 255, 259
(1992) (internal quotation marks omitted). This maxim has
particular force in the ERISA context, because the Supreme
Court has held that “Congress invoked the common law of
trusts to define the general scope” of fiduciary duties when it
drafted the statute. Varity Corp. v. Howe, 516 U.S. 489, 496
(1996) (quoting Cent. States, Se. & Sw. Areas Pension Fund
v. Cent. Transp., Inc., 472 U.S. 559, 570 (1985)). Our
analysis therefore “both starts and ends” with the ordinary
meaning of the terms “trust” and “trustee,” as provided by the
BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 13
common law of trusts. See United States v. Lazarenko,
564 F.3d 1026, 1039 (9th Cir. 2009).
The common law of trusts has its roots in medieval
England and the ancestor of the trust, the land conveyance
device termed the “use.” See Amy Hess, George G. Bogert
& George T. Bogert, The Law of Trusts & Trustees § 2 (3d
ed. 2007) (hereinafter Hess et al., Trusts & Trustees). The
use was first employed to give gifts of property to religious
friars whose vows prohibited them from owning property
themselves, but by the beginning of the fifteenth century, it
was the leading means of land conveyance. Id.; see also
William M. McGovern, Sheldon F. Kurtz & David M.
English, Wills, Trusts & Estates 370 (4th ed. 2010)
(hereinafter McGovern et al., Wills, Trusts & Estates). In its
simplest form, the use was a legal relationship by which one
party, called the “feoffee to uses,” agreed to accept and hold
legal title to property on behalf and for the use of the
beneficiary party, called the “cestui que use.” See Hess et al.,
Trusts & Trustees § 2; McGovern et. al, Wills, Trusts &
Estates at 370. Although King Henry VIII attempted to
abolish this practice through the passage of the Statute of
Uses in 1535, the statute left unaffected a number of uses,
including a use by which the feoffee to uses (the modern day
“trustee”) took on active administrative duties when it agreed
to hold the property on behalf of the cestui que use (the
modern day “beneficiary”). Hess et al., Trusts & Trustees
§ 4, 5. The uses that survived the Statute of Uses became
known as “trusts” and were legally enforceable in courts of
equity in England and, later, in the United States. Id. § 5; see
also Davis v. United States, 495 U.S. 472, 481 (1990)
(holding that the statutory phrase “for the use of ” “suggested
a trust relationship” because “[f]rom the dawn of English
14 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS
common law through the present, the word ‘use’ has been
employed to refer to various forms of trust arrangements”).
As this legal relationship became more pervasive in both
England and its American colonies (and later the United
States) in the eighteenth and nineteenth centuries, legal
scholars sought to identify its main components. After
surveying various definitions of the term “trust” between
1734 and 1897, one scholar concluded that a trust was “an
obligation imposed either expressly or by implication of law
whereby the obligor is bound to deal with property over
which he has control for the benefit of certain persons of
whom he may himself be one, and any one of whom may
enforce the obligation.” Walter G. Hart, What Is a Trust?,
15 L.Q. Rev. 294, 301 (1899). A later scholar observed that
the law of trusts appeared “to have two aspects, the creation
of personal relations, and the creation of rights in rem.”
Pierre Lepaulle, Civil Law Substitutes for Trusts, 36 Yale L.J.
1126, 1126 (1927). Thus, at common law, the term “trust”
referred to a legal relationship by which one party, the
“trustee,” agreed to hold and administer property (the trust
“res”) for the benefit of another.
Consistent with this traditional common law doctrine,
both scholars and courts define the terms “trust” and “trustee”
as legal relationships.3 E.g., Austin Wakeman Scott, William
3
Courts and treatises differentiate between the trust as a legal
relationship, as it existed at common law, and “the use of the trust as a
substitute for incorporation, as in the case of the so-called business trust
or Massachusetts trust.” Scott & Ascher on Trusts § 2.1.2. While the
latter device is sometimes referred to as a “trust,” it is not a common law
trust relationship. Rather, a business or “‘Massachusetts Trust’ is a form
of business organization” similar to a corporation. Hecht v. Malley,
265 U.S. 144, 146 (1924); see also Northstar Fin. Advisors Inc. v. Schwab
BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 15
Franklin Fratcher & Mark L. Ascher, Scott & Ascher on
Trusts § 2.1.4 (5th ed. 2006) (hereinafter Scott & Ascher on
Trusts) (“We have said that a trust is a relationship with
certain characteristics.”); Id. § 2.2.2 (“A trust is a relationship
with respect to property held by a trustee.”). For example, the
Restatement (Third) of Trusts defines the term “trust” as “a
fiduciary relationship with respect to property, arising from
a manifestation of intention to create that relationship and
subjecting the person who holds title to the property to duties
to deal with it for the benefit of charity or for one or more
persons, at least one of whom is not the sole trustee.”
Restatement (Third) of Trusts § 2 (2003). Under the
Restatement’s definition, “[t]he term ‘trust’ also includes
public funds and public and private pension-fund
arrangements in trust form.” Id. § 2 cmt. a. The Restatement
defines “trustee” as simply the person, including a
corporation or unincorporated association, “who holds
property in trust.” Id. § 3(3); see also id § 3(3) cmt. e. It is
not necessary to use specific words to create a trust. George
T. Bogert, Trusts § 11 (6th ed. 1987). Rather, “[i]f the words
used convey the intent to establish a trust, they will have that
effect.” Id.; see also United States v. Mitchell, 463 U.S. 206,
225 (1983) (holding in a different context that a trust
relationship arises where “[a]ll of the necessary elements of
Invs., 779 F.3d 1036, 1040 (9th Cir. 2015) (distinguishing “a
Massachusetts trust from the ordinary or private trust”). As such, a
business trust is generally governed by rules applicable to that form of
business organization. See Restatement (Third) of Trusts § 1 cmt.b (2003)
(excluding “[t]he law relating to the use of trusts as devices for conducting
business and investment activities” from its scope because such devices
are business arrangements “best dealt with in connection with business
associations” and more “properly governed by laws applicable to
investment companies and to the issuance and sale of securities” rather
than the common law of trusts).
16 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS
a common-law trust are present: a trustee (the United States),
a beneficiary (the Indian allottees), and a trust corpus (Indian
timber, lands, and funds)” notwithstanding the fact that
“nothing is said expressly in the authorizing or underlying
statute (or other fundamental document) about a trust fund, or
a trust or fiduciary connection” (quoting Navajo Tribe of
Indians v. United States, 224 Ct. Cl. 171, 183, 624 F.2d 981,
987 (1980))).
Applying the common law definitions to ERISA’s
requirement that “all assets of an employee benefit plan shall
be held in trust by one or more trustees,” 29 U.S.C. § 1103(a),
a person (legal or natural) must hold legal title to the assets of
an employee benefit plan with the intent to deal with these
assets solely for the benefit of the members of that plan.
Such a person is the “trustee,” and the resulting relationship
between the trustee and the participants in the plan with
respect to a plan’s assets is a “trust” for purposes of
§ 1103(a). Finally, while these trustees must be identified in
either “the trust instrument or in the plan instrument . . . or
appointed by a person who is a named fiduciary,” id., no
specific terminology or labels are required. Bogert, Trusts
§ 11. As long as the trust or plan instrument names a person
who will hold property in trust for another, § 1103(a) is
satisfied.
Accordingly, we conclude that the Plan complies with
§ 1103(a). The Plan Instrument requires CAPF to hold legal
title to “all property, monies and contract rights” as well as all
of the funds maintained in connection with the Plan. CAPF
holds these assets for the Plan on behalf of the participants,
and is therefore the named trustee. Restatement (Third) of
Trusts § 3(3). The Plan Instrument thus establishes a
fiduciary relationship between CAPF, as the trustee, and the
BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 17
participants, as beneficiaries, with respect to the property
contributed to the Plan (the trust res); this constitutes a trust
according to its common law definition. Because the Plan
Instrument here is a written instrument that establishes a trust
relationship and names CAPF as the trustee, it is a written
trust instrument for purposes of § 1103(a) and 29 C.F.R.
§ 2550.403a-1(a). Cf. Mitchell, 463 U.S. at 225; George T.
Bogert, Trusts § 1 (6th ed. 1987).
In arguing against this conclusion, the Department of
Labor contends that the Plan at issue here does not meet the
statutory requirements in § 1103(a) because “[t]he statute
clearly contemplates the formal execution of a trust
instrument and the appointment of trustees, as the Secretary’s
regulations [at 29 C.F.R. § 2550.403a-1] reflect.” The
Department’s brief does not further explain its interpretation
of what § 1103(a) requires or what it means by the “formal
execution of a trust instrument.”
Although we are doubtful that the single sentence quoted
above qualifies as an interpretation of either § 1103(a) or 29
C.F.R. § 2550.403a-1, we will give the Department the
benefit of the doubt and review its argument pursuant to our
framework for examining agency interpretations of statutes
and regulations. In general, “[i]f the intent of Congress is
clear, that is the end of the matter; for the court, as well as the
agency, must give effect to the unambiguously expressed
intent of Congress.” Chevron, U.S.A., Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837, 842–43
(1984). If “the statute is silent or ambiguous” as to the
precise question at issue, Gonzales v. Dep’t of Homeland
Sec., 508 F.3d 1227, 1235 (9th Cir. 2007) (internal quotation
marks omitted), we next consider the agency’s “regulations,
which are entitled to deference if they resolve the ambiguity
18 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS
in a reasonable manner.” Coeur Alaska, Inc. v. SE Alaska
Conservation Council, 557 U.S. 261, 277–78 (2009). But if
these “regulations, too, are ambiguous . . . we next turn to the
agencies’ subsequent interpretation of those regulations.” Id.
at 278.
If the agency’s interpretation of its regulations resolves
the ambiguity of the regulations in a manner that is not
“plainly erroneous or inconsistent with the regulation,” we
will ordinarily defer to it even when the agency’s
“interpretation comes to us in the form of a legal brief.” Auer
v. Robbins, 519 U.S. 452, 461–62 (1997) (internal quotation
marks omitted). Auer deference is not warranted, however,
if “the underlying regulation does little more than restate the
terms of the statute itself.” Gonzales v. Oregon, 546 U.S.
243, 257 (2006). When an agency promulgates a regulation
that merely paraphrases the statute, we treat the agency’s
interpretation of the “parroting regulation” as an
interpretation of the statute itself, which is entitled to
deference “only to the extent it is persuasive.” Id. at 257,
268–69 (citing Skidmore v. Swift & Co., 323 U.S. 134, 140
(1944)). Nor do we accord Auer deference to an
interpretation that “would seriously undermine the principle
that agencies should provide regulated parties fair warning of
the conduct [a regulation] prohibits or requires.” Christopher
v. SmithKline Beecham Corp., 132 S. Ct. 2156, 2167 (2012)
(internal quotation marks omitted). Where an agency
announces its interpretation for the first time in an
enforcement proceeding, and has not previously taken any
action to enforce that interpretation, “the potential for unfair
surprise is acute.” Id. at 2167–68. Accordingly, under such
circumstances, the agency’s interpretation is entitled only to
the “measure of deference proportional to the thoroughness
evident in its consideration, the validity of its reasoning, its
BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 19
consistency with earlier and later pronouncements, and all
those factors which give it power to persuade.” Id. at
2168–69 (quoting United States v. Mead Corp., 533 U.S. 218,
228 (2001) (quoting Skidmore, 323 U.S. at 140)).
Applying this framework to the Department’s amicus
brief, and assuming for the sake of argument that 29 U.S.C.
§ 1103 and 29 C.F.R. § 2550.403a-1 are “silent or
ambiguous” as to the “precise question” at issue here, we do
not defer to the Department’s interpretation in this case.
First, Auer deference is not warranted here because the
Department’s regulation “does little more than restate the
terms of the statute itself.” Gonzales, 546 U.S. at 257.
Compare 29 U.S.C. § 1103(a), with 29 C.F.R. § 2550.403a-
1(a), (c). Indeed, the only difference between the statute and
the regulation is that the regulation adds the phrase “pursuant
to a written trust instrument” to its hold in trust requirement.
29 C.F.R. § 2550.403a-1(a). Both the regulation and the
statute, however, require that the trustees of the Plan “shall be
either named in the trust instrument or in the plan
instrument.” Compare 29 U.S.C. § 1103(a), with 29 C.F.R.
§ 2550.403a-1(c). As a result, “the near equivalence of the
statute and regulation belies the Government’s argument for
Auer deference.” Gonzales, 546 U.S. at 257. Therefore, we
defer to any interpretation by the Department only to the
extent it has the “power to persuade.” Skidmore, 323 U.S. at
140.
Applying Skidmore deference, the Department’s minimal
interpretation of its regulation—which is little more than the
assertion that the Plan does not meet statutory and regulatory
requirements, as interpreted by the Department—lacks any
persuasive power. The Department’s statement that “[t]he
statute clearly contemplates the formal execution of a trust
20 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS
instrument and the appointment of trustees, as the Secretary’s
regulations reflect,” does not provide clear guidance, or make
plain how the Plan fell short of this requirement. See, e.g.,
Bogert, Trusts § 1 (“The trust instrument is the document by
which property interests are vested in the trustee and
beneficiary and the rights and duties of the parties (called the
trust terms) are set forth.”). Nor does the Department contend
that it has taken enforcement actions against those deemed to
have violated its interpretation of § 1103(a) or that its view is
consistent “with earlier and later pronouncements,” which
might clarify its interpretation and “give it power to
persuade.” See Mead, 533 U.S. at 228 (quoting Skidmore,
323 U.S. at 140). Because we owe no deference to the
Department’s nominal interpretation, we reject its argument
that the Plan falls short of this interpretation in some
undefined way.
After this appeal was decided, the Department attempted
to clarify its interpretation of the statute and regulation. In an
amicus petition for rehearing, the Department argued that
§ 1103 required “that the written document establishing the
trust must clearly label the trustees, beneficiaries, and trust
res, and thus in express and unambiguous terms establish the
intent to have a named or appointed trustee who formally
accepts such appointment and exclusively hold all plan assets
in trust for the beneficial interest of the plan participants and
beneficiaries.” But contrary to this labeling requirement, the
Department also stated in the same sentence of this petition
that it does not “take the position that the trust necessarily
must be established by using defined terms or any particular
word formulation.” As a result of this internal inconsistency,
we are left to guess what specific words or procedures are
required in order to ensure compliance with the statute as
interpreted by the Department.
BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 21
Even assuming that an agency’s interpretation first raised
in a petition for rehearing could be entitled to deference under
some circumstances, deference is not appropriate here. As
explained above, Auer deference is not warranted because the
Department’s regulation, 29 C.F.R. § 2550.403a-1(a), (c),
does little more than parrot 29 U.S.C. § 1103(a). Gonzales,
546 U.S. at 257. Moreover, because the Department’s
inconsistent views about labels and “particular word
formulation” do not inform regulated entities what words or
procedures are needed to meet the Department’s
requirements, affording Auer deference in these
circumstances “would seriously undermine the principle that
agencies should provide regulated parties fair warning of the
conduct [a regulation] prohibits or requires.” Christopher,
132 S. Ct. at 2167 (internal quotation marks omitted).
Applying Skidmore, we conclude that the Department’s
interpretation of § 1103(a) lacks persuasive power. As noted
above, the Department’s statements are internally
inconsistent, fail to provide clear direction to regulated
parties, and otherwise lack the “hallmarks of thorough
consideration.” Id. at 2169. Accordingly, we do not defer to
the Department’s belated interpretation in its petition for
rehearing.
We likewise reject Barboza’s remaining arguments on
this issue. Although Barboza argues that “a corporation like
CAPF is not a trust,” CAPF itself does not purport to be a
trust; rather, it serves as the trustee in the trust relationship
established by the written Plan Instrument.4 See, e.g.,
4
In the week before oral argument, the defendants filed a motion
requesting that we take judicial notice of IRS paperwork filed by CAPF
demonstrating that CAPF’s assets “currently are held in two trusts.”
Because it is not clear that these documents demonstrate matters
22 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS
Restatement (Third) of Trusts § 3(3) & cmt. e (noting that
both corporations and unincorporated associations can serve
as trustees in a trust relationship). Barboza also argues that
CAPF failed to maintain “exclusive authority and control”
over the assets of the Plan in violation of ERISA because the
Plan Instrument delegates the administration of the Plan to
CAISI. This argument fails because the Plan Instrument
entrusts CAISI with the administration of the Plan under the
management and supervision of CAPF’s board of directors.
Because the Plan here complies with the requirement that
“all assets of an employee benefit plan shall be held in trust
by one or more trustees,” 29 U.S.C. § 1103(a), we therefore
affirm the district court’s grant of summary judgment to the
defendants on this issue.
B
We next consider whether the district court erred in
granting summary judgment to the defendants on Barboza’s
claim that the defendants breached their fiduciary duties by
engaging in unlawful self-dealing. This dispute centers on
CAISI’s practice of paying its own fees and expenses from
the Plan’s assets held in the Wells Fargo account. Barboza
argues that this practice constitutes a per se violation of
ERISA’s prohibition against self-dealing under 29 U.S.C.
§ 1106(b)(1) because CAISI is a fiduciary dealing with the
assets of the plan for its own account. The parties do not
dispute that CAISI is a fiduciary of the Plan.
“generally known within the trial court’s territorial jurisdiction” we deny
this motion. See Fed. R. Evid. 201(b)(1).
BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 23
Section 1106 prohibits a number of transactions between
ERISA welfare benefit plans and other parties. First,
§ 1106(a) states that “[e]xcept as provided in section 1108,”
which establishes exemptions from the list of prohibited
transactions, a fiduciary cannot cause the plan to engage in a
number of transactions with “a party in interest.” 29 U.S.C.
§ 1106(a). A “party in interest” is defined in 29 U.S.C.
§ 1002(14) to include all “those entities that a fiduciary might
be inclined to favor at the expense of the plan’s
beneficiaries,” Harris Trust & Sav. Bank v. Salomon Smith
Barney, Inc., 530 U.S. 238, 242 (2000), including another
fiduciary or an administrator of an employee benefit plan.
Second, § 1106(b) prohibits a fiduciary from engaging in
certain types of transactions with respect to a plan:
A fiduciary with respect to a plan shall not—
(1) deal with the assets of the plan in his own
interest or for his own account,
(2) in his individual or in any other capacity
act in any transaction involving the plan on
behalf of a party (or represent a party) whose
interests are adverse to the interests of the
plan or the interests of its participants or
beneficiaries, or
(3) receive any consideration for his own
personal account from any party dealing with
such plan in connection with a transaction
involving the assets of the plan.
24 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS
29 U.S.C. § 1106(b). Finally, § 1106(c) prohibits any transfer
of real or personal property to a plan by a party in interest.
29 U.S.C. § 1106(c). These prohibited transactions constitute
“per se violations of ERISA.” Waller v. Blue Cross of Cal.,
32 F.3d 1337, 1345 (9th Cir. 1994).
ERISA carves out a number of exemptions to these broad
prohibitions. See 29 U.S.C. § 1108. Among others,
§ 1108(c)(2) states that “[n]othing in section 1106 of this title
shall be construed to prohibit any fiduciary from . . . receiving
any reasonable compensation for services rendered, or for the
reimbursement of expenses properly and actually incurred, in
the performance of his duties with the plan . . . .” 28 U.S.C.
§ 1008(c)(2). This exemption for reasonable compensation
under 29 U.S.C. § 1008(c) does not apply, however, to a
fiduciary who engages in a prohibited transaction under
29 U.S.C. § 1106(b)(1) by paying itself from the assets of a
welfare benefit plan. Patelco Credit Union v. Sahni, 262 F.3d
897 (9th Cir. 2001). In other words, while a plan may pay a
fiduciary “reasonable compensation for services rendered”
under 29 U.S.C. § 1108, the fiduciary may not engage in self-
dealing under 29 U.S.C. § 1106(b) by paying itself from plan
funds. See Patelco, 262 F.3d at 910–11. Such conduct
constitutes a per se violation of § 1006(b)(1). See Patelco,
262 F.3d at 911.
Here, CAISI is a fiduciary that paid its own fees from
Plan assets, and thus engaged in a prohibited transaction
under 29 U.S.C. § 1106(b)(1). See Patelco, 262 F.3d at 911.
Because § 1108(c)(2)’s safe harbor for fiduciary
compensation is not applicable in this context, we conclude
that CAISI breached its fiduciary duties. See Patelco,
BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 25
262 F.3d at 911.5 We therefore reverse the district court’s
order granting summary judgment to the defendants, and
remand with instructions to enter summary judgment in favor
of Barboza on this issue.
C
Finally, we consider Barboza’s claim that the defendants
breached their fiduciary duties by failing to distribute a
summary annual report. Under the regulations promulgated
by the Department, an administrator of an employee benefit
plan is required to provide a summary annual report to each
Plan member annually under 29 C.F.R. § 2520.104b-10(a)
unless the administrator is otherwise exempt from doing so
under 29 C.F.R. § 2520.104b-10(g). 29 C.F.R. § 2520.104b-
10(g) exempts, among other plans, a “totally unfunded
welfare plan described in 29 C.F.R. § 2520.104-44(b)(1)(i),”
from this summary annual report requirement.
A “totally unfunded welfare plan described in 29 C.F.R.
§ 2520.104-44(b)(1)(i),” is “[a]n employee welfare benefit
plan under the terms of which benefits are to be paid . . .
[s]olely from the general assets of the employer or employee
organization maintaining the plan.” 29 C.F.R. § 2520.104-
44(b)(1)(i). An “employee organization” is defined in ERISA
as “any employees’ beneficiary association organized for the
purpose in whole or in part, of establishing” an “employee
benefit plan.” 29 U.S.C. § 1002(4). An “employee benefit
plan” is defined in turn as “an employee welfare benefit plan
5
Because fiduciary self-dealing under 29 U.S.C. § 1106(b)(1) is a per
se violation of ERISA, it is irrelevant that CAISI was authorized to pay its
own fees and expenses from Plan assets pursuant to its administrative
services agreement with CAPF.
26 BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS
or an employee pension benefit plan or a plan which is both
an employee welfare benefit plan and an employee pension
benefit plan.” 29 U.S.C. § 1002(3). Accordingly, 29 C.F.R.
§ 2520.104b-10(g) exempts an employee welfare benefit plan
that pays benefits from the general assets of an employee
organization, which includes an employees’ beneficiary
association organized for the purpose of establishing such a
plan.
The Plan at issue here meets the definition of “a totally
unfunded welfare plan.” See 29 C.F.R. § 2520.104b-10(g)(1).
First, the Plan is an employee welfare benefit plan because it
is a plan established “for the purpose of providing for its
participants or their beneficiaries” long-term disability
benefits. 29 U.S.C. § 1002(1)(A). Second, CAPF is an
“employee organization” as defined in 29 U.S.C. § 1002(4)
because, according to its bylaws, it was incorporated
specifically for the purpose of establishing and maintaining
a long-term disability benefits plan. Finally, under the terms
of the Plan Instrument, benefits are paid solely from the
general assets of CAPF, which is the employee organization
that maintains the Plan. Accordingly, the Plan is exempt
from the summary annual report requirement.6
6
The Plan is also exempt from the summary annual report requirement
as a “dues financed welfare plan which meets the requirements of
29 C.F.R. 2520.104-26.” 29 C.F.R. § 2520.104b-10(g). “Dues financed
welfare plans” are “welfare benefit plans maintained by an employee
organization, as that term is defined in [29 U.S.C. § 1002(4)], paid for out
of the employee organization’s general assets, which are derived wholly
or partly from membership dues, and which cover employee organization
members and their beneficiaries.” Id. § 2520.104-26(b). As explained
supra, the Plan is a welfare benefit plan under 29 U.S.C. § 1002(1)(A)
because it is a plan established “for the purpose of providing for its
participants or their beneficiaries” long-term disability benefits; it is
BARBOZA V. CAL. ASS’N OF PROF. FIREFIGHTERS 27
We therefore reverse the district court’s order granting
summary judgment to Barboza, and remand with instructions
to grant the defendants’ motion for summary judgment on
this issue.7
AFFIRMED IN PART, REVERSED IN PART, AND
REMANDED.
maintained by CAPF, an employee organization as defined by 29 U.S.C.
§ 1002(4); and these benefits are paid for out of CAPF’s general assets,
which are derived in part from membership dues, to covered Plan
members and their beneficiaries.
7
Each party shall bear its own costs on appeal.