Attorney Liability under ERISA: Myth or Reality? Lawyers May Not Be "Fiduciaries," but That Won't Help Them Escape Non-Fiduciary Exposure, Particularly as Forecast by a Recent Decision

By Mallen, Ronald E.; Vallone, Paul E. | Defense Counsel Journal, October 2001 | Go to article overview

Attorney Liability under ERISA: Myth or Reality? Lawyers May Not Be "Fiduciaries," but That Won't Help Them Escape Non-Fiduciary Exposure, Particularly as Forecast by a Recent Decision


Mallen, Ronald E., Vallone, Paul E., Defense Counsel Journal


IN THIS new millennium, lawyers retained to perform services for a plan governed by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. [section] 1001 et seq., face the usual exposures from a client for professional errors. Lawyers can be liable if they negligently perform services for an ERISA-governed plan, just as in other areas of law. Liability under ERISA, however, is unlikely. Yet, a recent decision by the U.S. Supreme Court suggests that ERISA exposure could exist and be substantial. A related concern is that exposure under ERISA's remedial provisions is not likely to be covered under conventional professional liability insurance.

FIDUCIARY LIABILITY

The fundamental exposure under ERISA liability is for fiduciaries of an ERISA plan. A primary purpose of ERISA is to protect employee benefit plans by establishing standards of conduct, responsibility and obligations for fiduciaries of such plans. (1) Fiduciaries are personally liable under ERISA for breaches of fiduciary duty to an ERISA covered plan. 29 U.S.C. [section] 1109. A fiduciary who commits a breach is responsible for any resulting monetary losses to the plan. The fiduciary is also subject to "such other equitable or remedial relief as the court may deem appropriate." 29 U.S.C. [section] 1109(a).

Although attorneys occupy fiduciary relationships with clients, this does not confer ERISA fiduciary status on attorneys representing ERISA-governed plans. Under ERISA, a "fiduciary" is defined as one who (1) exercises discretionary authority or control over plan management, administration or disposition of plan assets, or (2) renders investment advice for a fee or other compensation. 29 U.S.C. [section] 1002(21)(A). ERISA fiduciary status in this latter category requires, according to the regulations issued pursuant to the statute, that the investment advice be rendered (1) by one having "discretionary authority or control ... with respect to purchasing or selling securities" or (2) on a "regular basis." 29 C.F.R. [section] 2510.3-21(c)(1). ERISA also creates fiduciary status for persons "named" as fiduciaries in the plan instrument or "identified" as such by an employer or employee organization. 29 U.S.C. [section] 1102(a)(2). Attorneys who perform services on behalf of a plan are seldom designated as fiduciaries in the plan documents.

Thus, attorneys must perform more than the "usual professional services" to be considered an ERISA fiduciary. (2) The inquiry requires a functional examination of the lawyer's services. For example, an attorney whose engagement is limited to counseling the plan on compliance issues or otherwise acting solely in an advisory capacity is not a plan fiduciary under ERISA. (3)

Although the usual retention will not create fiduciary status under ERISA, there are situations in which attorneys have "crossed the line." For example, in Mason Tenders District Council Pension Fund v. Massera, (4) because the attorney provided regular input concerning plan investments, there was an inference that he was a fiduciary under ERISA. Similarly, in Bouton v. Thompson, (5) a lawyer who had authority to make withdrawals from a bank account holding ERISA plan assets exercised the requisite degree of discretionary control over the plan to be a fiduciary.

Thus, attorneys are not completely insulated from fiduciary liability under ERISA, but the instances in which they are can be regarded as exceptions rather than the rule. Because ERISA defines a "fiduciary" in functional terms as one having discretionary control over plan assets, management or administration, and most engagements for a lawyer's legal services do not extend to such tasks, ERISA's fiduciary liability provisions portend minimal exposure for attorneys.

NON-FIDUCIARY LIABILITY

Another source of liability for attorneys retained by a plan is under ERISA's "party in interest" liability provisions. Attorneys do not need to be ERISA fiduciaries to trigger such exposure, because a "party in interest" is defined as "a person providing services" to a covered plan.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Attorney Liability under ERISA: Myth or Reality? Lawyers May Not Be "Fiduciaries," but That Won't Help Them Escape Non-Fiduciary Exposure, Particularly as Forecast by a Recent Decision
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.