Duty to Recover Fund Assets

• "A fiduciary has a duty to 'take reasonable steps to realize on claims' that are property of the trust, including claims in tort..."*
• "A fiduciary 'cannot properly abandon claims affecting the trust property unless it reasonably appears that a suit would be futile or the expense of the litigation or the character of the claim would make it reasonable not to bring suit.'"**

* E. Weiss & J. Beckerman, "Let the Money Do the Monitoring. How Institutional Investors Can Reduce Agency Costs in Securities Class Actions". 104 Yale L.J. 2053-2113 (1995) quoting Restatement (Second) of Trusts Sec. 177 (1959).

Duty to Investigate

• "... trustees have a duty to investigate the relevant facts, to explore alternative courses of action and, if in the best interests of the plan participants, to bring suit against the employer."*
• "If a third person commits a tort against trust property, the trustee has a duty to take reasonable steps to compel the tortfeasor to redress the injury..."**
• The court in that case recognized that "[w]hen the trustee fails to bring suit against a third party tortfeasor, the beneficiaries may properly bring an action against the trustees and third parties as co-defendants."***

* McMahon v. McDowell, 794 F.2d 100, 112 (3rd Cir. 1986).

** Witzman v. Gross, 148 F.3d 988, 990 (8th Cir. 1998) quoting Uselman v. Uselman, 464 N.W.2d 130, 137 (Minn. 1990); see also Anoka Orthopaedic Associates, P.A. v. Mutschler, 773 F. Supp 158, 168 n. 16 (D. Minn. 1991).

*** Witzman, 148 F.3d at 991, citing Uselman, 464 N.W.2d at 137-38; see also Anoka Orthopaedic, 773 F.Supp. at 168.

The Fiduciary Duty to Investigate Whether to Become Involved in Litigation

• "Not only is a fiduciary not prohibited from serving as a lead plaintiff, the Secretary believes that a fiduciary has an affirmative duty to determine whether it would be in the interest of the plan participants to do so. The Secretary has previously taken the position that it may not only be prudent to initiate litigation, but also a breach of a fiduciary's duty to not pursue a valid claim."*
• The U.S. Department of Labor's View:

  "[A] fiduciary may have a duty to serve as lead plaintiff where no single individual has sufficient interest or resources to serve in such capacity or where, as a large stakeholder, the fiduciary has an interest in assuring that an alternate class representative with a less substantial stake in the outcome does not unduly compromise the interests of the class in settlement, fail to vigorously prosecute the actions, or fail to protect the interests of the class vis a vis its attorneys"*

* Secretary of Labor’s Memorandum of Law as Amicus Curiae in Support of FSBA’s Motion For Appointment As Lead Plaintiff in the Bragdon v. Telxon Corporation litigation, Civ. A. No. 5:98-CV-2876 (N.D. Ohio), at p. 7.

Exclusive Purpose Rule

1. The "Exclusive Purpose" Rule. Fiduciaries have a duty to operate a Plan for the "exclusive" benefit of employees and their beneficiaries. Specifically, fiduciaries must act for the "exclusive purpose" of providing benefits to plan participants and beneficiaries and defraying the costs of running the plan.*
   
   
2. "[A]t the heart of the fiduciary relationship is the duty of complete and undivided loyalty to the beneficiaries of the trust." **

* ERISA, Sec. 404(a)(1)(A). Martin v. Feilen, 965 F.2d 660, 665 (8th Cir. 1992).

** Donovan v. Mazzola, 716 F.2d, 1226, 1238 (9th Cir. 1983) quoting Freund v. Marshall & Ilsley Bank, 485 F. Supp. 629, 639 (W.D. Wis. 1979).

Best Interest Rule

The "Best Interest" Rule. A fiduciary must discharge his duties respecting the plan "solely in the interests" of plan participants and beneficiaries. ERISA, Sec. 404(a)(1)(A). Decisions must be always evaluated against the "best interests of plan participants" standard.

Prudent Person Standard

The "Prudent Person" Standard. A fiduciary must discharge his/her duties in a prudent fashion.* Fiduciaries means that they must act "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims."**

---

* Sec. 404(a)(1)(A)–ERISA. Martin, 965 F.2d at 665, 670. See also Donovan v. Bierwirth, 680 F.2d 263, 271 (2d Cir. 1982).

** Sec. 404(a)(1)(B)-ERISA. See also Central States, Southeast and Southwest Areas Pension Fund v. Central Transport, Inc., 472 U.S. 559, 569-70 (1985).