Court Finds Attorney's Opinion Letter Is Not Fiduciary Breach

August 8, 2003 ( - Performing usual professional functions that do not include a controlling interest in a plan governed by ERISA does not subject an attorney to fiduciary liability.

The US 3rd Circuit Court of Appeals, in affirming a lower court’s opinion, found that an attorney who issued an opinion letter on an ERISA-governed profit sharing plan’s proposed sale did not assume the fiduciary mantle for the plan.    Circuit Judge Robert Nygaard, writing for the court, made the determination on the basis that the Department of Labor (DoL), via ERISA, does not view attorneys as fiduciaries when they are “performing their usual professional functions.”

In this case, all the attorney did was render a legal opinion with the knowledge that “the opinion affected the trustee’s ability to purchase property,” the court said, and in doing so did not exhibit in control over the plan. “Short of a nonsensical reading of the complaint” the appellant failed to demonstrate that the attorney in this case had demonstrated any control over the plan’s assets and thus, the attorney was deemed to not be a fiduciary, the court found.

Case History

>Weiss Packing Company maintained an ERISA-governed Profit Sharing Plan.   In 1989, the then-trustees of the plan – Selwyn, Seymour, and Wilfred Weiss – sold property to the plan in the amount of $450,000.   Included in this deal was the plan taking out a loan and mortgage against the property for the $450,000.   

>However, before loaning money to the profit sharing plan, the transacting bank requested an attorney’s opinion assuring the sale did not violate any state or federal laws, since the sale involved a transaction from Selwyn Weiss, as owner of the property, to the plan, for which Selwyn was a co-trustee.  

>Appellee, Melvin Levy, an attorney for both Selwyn Weiss and the plan, wrote an opinion letter to the bank concluding the planned sale did not violate state or federal law in any way that would impair the mortgage.   The bank accepted the opinion and loaned the necessary funds to the plan in exchange for a mortgage on the property.

>Later it was determined that the sale was in violation of ERISA because a fiduciary cannot cause the plan to sell or exchange property between the plan and a party-in-interest.   Thus, the plan became subject to back taxes and penalties for the failure to properly classify the transaction and pay taxes on the rental income.

>Then in 2001, Mellon Bank, the appellant, was appointed the new trustee of the plan and upon learning of the ERISA violating transaction, filed a lawsuit against Levy.   In the suit, Mellon contended that Levy’s role in the transaction and his control over the opinion letter subjected him to liability as a fiduciary to the plan, or at least as a party-in-interest to the transaction.

>A judge in the US District Court for the Western District of Pennsylvania dismissed the suit, finding that Levy was not a fiduciary.  

Appeals Court

>In addition to finding did not have fiduciary responsibility in the plan, the appeals court also found Mellon’s complaint  barred by the applicable statute of limitations. The court found that under ERISA, Mellon had either the earlier between six years from the time the alleged fiduciary breach occurred or three years when it became aware of the breach.

>Mellon contended it was not aware of the action in 1989 because it was not appointed trustee of the plan until 1997.   However the court found that even with knowledge of the alleged breech in 1997, Mellon’s case was still not within the necessary statute of limitations since it was filed in 2001.

The case isMellon Bank N.A. v. Levy,3rd Circuit, No. 02-2734.