USCA1 Opinion

UNITED STATES COURT OF APPEALS

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
____________________

No. 95-1363

ARTHUR T. COTTRILL,

Plaintiff, Appellant,

v.

SPARROW, JOHNSON & URSILLO, INC., ET AL.,

Defendants, Appellees.

_____________________

No. 95-1434

ARTHUR T. COTTRILL,

Plaintiff, Appellee,

v.

SPARROW, JOHNSON & URSILLO, INC., ET AL.,

Defendants, Appellants.

____________________

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. Ernest C. Torres, U.S. District Judge]

___________________

____________________

Before

Torruella, Chief Judge,

___________

Aldrich, Senior Circuit Judge,

____________________

and Selya, Circuit Judge.

_____________
____________________

____________________

Jeffrey S. Brenner and Corrente, Brill & Kusinitz, Ltd. on

__________________
_________________________________

br

for Arthur T. Cottrill.

Edward C. Roy, Jr. and Roy & Cook on brief for
__________________
__________
Ursillo, Inc., et al.

____________________

January 23, 1996

____________________

Sparrow, Johnso

ALDRICH, Senior Circuit Judge.

____________________

(Cottrill)

sued

several

defendants:

Arthur T. Cottrill

Sparrow,

Johnson

&

Ursillo, Inc. (SJU), a Rhode Island accounting firm with whom

he was

employed as

Johnson &

Plan,

a certified public

Ursillo, Inc. Profit

or Plan), and Steven J.

and stockholder of

Cottrill

sought,

SJU and

inter

accountant; Sparrow,

Sharing Plan and

Ursillo (Ursillo), an officer

a "named Trustee"

alia,1

Trust (SJU

pursuant

to

of SJU

the

Plan.

Employee

_____

Retirement Income

____

Security Act,

(ERISA), to vacate revocation

interest

of

the

acting

of $18,775.52.

SJU

in

29 U.S.C.

by the Plan of

his beneficial

alleging

fiduciary relationship,

losing an investment

et seq.,
__ ___

Ursillo, in his capacity as trustee

Plan, counterclaimed,

1001

was

of $130,000 of Plan's

that Cottrill,

responsible

for

assets, and thus

owed it full recompense.

A magistrate

judge,

in a

detailed

opinion,

had

recommended ruling in Cottrill's favor on motions for summary

judgment, but

trial,

the district

a bench

held that Cottrill was a fiduciary of the Plan within

the meaning of ERISA,

was

court, after conducting

responsible

29 U.S.C.

to Plan

for the

1002(21)(A), and therefore

loss.

It

dismissed the

counterclaim, however,

sides

appeal.

for failure

We reverse

to prove damages.

and remand for

Both

entry of judgment

____________________

1.

Two

further counts

have been

which SJU is no longer a party.

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dropped,

as a

result of

for Cottrill on his complaint, and

affirm, on other grounds,

dismissal of the Plan's counterclaim.

In

assets were

December of

1988, $130,000

invested, through

Main Street Associates One, in

in

group

Mortgage

of

second

Company.

of the

a partnership known

Unhappily

mortgages

Cottrill

held

effected

Cottrill obtained

seemingly, any other documentation

Security

paid interest

as North

which Cottrill was a partner,

by First

the

investment, as authorized by Ursillo, a named

Plan.

SJU Plan's

to North

Security

SJU

Plan's

trustee of the

no promissory

note or,

of the investment.

Main for

a while,

First

but by

December of 1990, the assets had apparently disappeared.2

Because

both the

claim and

counterclaim turn

on

whether Cottrill was a fiduciary with respect to the $130,000

investment

support

at issue, we focus solely on the grounds given to

the

court's

conclusion.

The

court

found

that

Cottrill was a fiduciary because he exercised "both effective

and

actual authority

disposition of

definition of a

and

control over

the $130,000,"

the management

which brought him

fiduciary under ERISA as one

and

within the

who "exercises

any authority or control respecting management or disposition

____________________

2.

Perhaps

record is

the mortgages
silent.

In

simply

became

any event, the

investment was lost.

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worthless --

the

court found that

the

of

[a plan's]

based

assets."

this conclusion

including

in

recommended

the

reporting

on a

that Cottrill

participant

29 U.S.C.

the SJU

was

looked good; that he

had

number of

a "principal"

to

Ursillo,

looked into

it

It

subsidiary findings,

profit-sharing

investment

that he

1002(21)(A)(i).3

of

Plan;

SJU, and

that he

specifically

and the

had

by

investment

had assumed responsibility for managing

the

investment and

$130,000

to

obtaining documentation,

the

mortgagee

generated; that he was

for

and

disbursing the

collecting

a partner in North Main,

the

income

the vehicle

making the investment, and listed himself on its account

record as the partner in charge of the investment.

None

or

of these subsidiary findings, however, singly

collectively, amount

management

to "authority or control over the

___________________________

or disposition" of the funds in question.

On the

contrary, this was twice contradicted by Ursillo himself, who

stated that he, as a Plan trustee, authorized the investment.

The

of

court's reference to Cottrill as a "principal"

SJU overlooks

the

____________________

undisputed testimony

that this

was,

3.

The statue reads, in relevant part:

[A] person is a fiduciary with respect to a plan to

the

extent

authority

(i)
or

management of
or

he

discretionary

any

discretionary

control

respecting

such plan or exercises any authority

control respecting management or disposition of

its assets . . . .

29 U.S.C.

exercises

1002(21)(A).

-5-

literally,

quite

As a

"letterhead" title

aside from that, SJU

amount to

client

itself did not

"participant" in the Plan

did not

for

purposes, but

manage the Plan.

Cottrill had no powers.

"authority

over the

management" of

It

the

assets for Cottrill, with no power to invest, to recommend an

investment to Ursillo as sound; nor were powers

him

as a gratuitous advisor4

opinion.

Schloegel v.
_________

conferred on

by the trustee's accepting his

Boswell, 994
_______

F.2d 266,

271-72 (5th

Cir.), cert. denied, ___ U.S. ___, 114 S.Ct. 440, 126 L.Ed.2d
____________

374 (1993)

("[m]ere influence over

the trustee's investment

decisions . . .

is not effective control over

where

decision-making

ultimate

(citing cases).

The court

plan assets,"

authority rests

made no finding,

elsewhere)

nor could

the

record

support

one,

that

authority or

control

was

ever

delegated or "relinquished" to Cottrill in authorizing him to

execute

the management and

disposition decision of Ursillo.

See id. at 271-72.

___ ___

The

court's

finding

"vehicle" for the investment

the

driver, not

that

North

Main

was

was exactly correct, but

the vehicle,

that chooses

the

it is

the route.

In

collecting and disbursing money due, Cottrill (by North Main)

was simply

a conduit, performing a

by Ursillo.

ministerial act directed

Under ERISA, "the existence of discretion [is] a

____________________

4.

No claim has been

Cottrill
Plan.

was at

made, nor is there any

any time

Compare 29 U.S.C.
_______

a specially

evidence, that

paid advisor

1002(21)(A)(ii).

to the

-6-

sine qua non of

fiduciary duty."

Consultants, Inc., 956

_________________

plan

mechanical duty

it

was

to

National Benefits
_________________

F.2d 126, 129 (7th Cir.

administrator function

ministerial,

Pohl v.
____

not

was

1992) (where

clerical, mechanical,

discretionary).

acquire "documentation"

and

Cottrill's

evidencing

the

mortgage assignments and

securing the authorized transaction

between First Security and the Plan entailed no discretionary

involvement in management of the assets.

language

So

much for

of

subsection

authority or

control

plan's] assets."

management.

(i),

concerning

respecting .

29 U.S.C.

assets?

Security.

The

Did this

Again,

. disposition

of "any

of

[a

True, Cottrill

he forwarded the $130,000 to

constitute "disposition"

meaning of disposition

companion words.

the further

exercise

1002(21)(A)(i).

exercised physical control when

First

We turn to

is to be judged

these indicate that

of the

by its

the fiduciary

exercise authority or control, i.e., discretion and judgment,

over the disposition, not simply perform a transfer specified

by the trustee --

a purely administrative act.

See Sommers
___ _______

Drug Stores v.
____________

1460

Corrigan Enterprises, Inc., 793

___________________________

F.2d 1456,

(5th Cir. 1986), cert. denied, 479 U.S. 1034, and cert.
____________
_____

denied,
______

479

U.S. 1089

fiduciaries with

(1987)

respect to

(defendants

sale of

they controlled trustees' decision

could be

trust's stock

only if
____

to sell; such control not

inferable from defendants' power to appoint trustees).

-7-

found

In sum, there was no possible basis for the court's

conclusion that Cottrill

was a fiduciary.

basis for assigning him personal

Absent

any other

liability for the loss, his

funds in the Plan should not have been offset against it.

We

conclude

there was

to

preclude

judgment in

no

issue as

favor

to

any material

of Cottrill.

fact

We reverse

and

remand for entry of judgment in his favor on the complaint.

A word about the counterclaim.

The court found for

Cottrill on the ground that, given his $18,775.52 interest in

the Plan was

offset against

been satisfied by Ursillo,

the loss, and

the balance

there had been no showing

had

of any

damages suffered by the Plan.

what

More to the point, in view of

we have already held, there was no valid demand against

Cottrill in the first place.

On this latter basis we affirm

the judgment dismissing the counterclaim.

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