Fifth Circuit Affirms Summary Judgment Holding Company Owner a Functional ERISA Fiduciary Personally Liable for Diverted Employee Contributions and Unpaid Health Claims

In Sonderling v. Sills, No. 26-30272, 2026 WL 3001434 (5th Cir. Oct. 6, 2026) (Before: Davis, Stewart, and Duncan, Circuit Judges), the Acting Secretary of Labor sued Kelly Sills, president and sole owner of Coastal Bridge Company, L.L.C., for breaching his fiduciary duties under ERISA by withholding employees’ plan contributions from their paychecks without remitting them to insurers and by failing to pay employee claims billed under the company’s self-funded health plan. The district court granted summary judgment for the Secretary, and the Fifth Circuit affirmed in all respects.

Coastal sponsored an employee welfare benefit plan that offered fully-insured dental and vision coverage through Ameritas, fully-insured cancer, accident, and critical-illness coverage through Guardian, and self-insured medical coverage administered by Blue Cross Blue Shield of Louisiana under an Administrative Services Agreement. Under that agreement, Blue Cross processed and paid employee medical claims, then billed Coastal monthly for reimbursement and administrative fees. Employees paid their share of these coverages through payroll withholdings. Sills was an authorized signatory on Coastal’s bank account and directed the company’s finances, including disposition of Plan assets, and Coastal’s CFO identified him as the ultimate decision-maker concerning which bills were paid and which went unpaid. In 2019, Coastal stopped forwarding employee contributions to Ameritas and Guardian, the insurers terminated coverage in August and November 2019, and Coastal continued withholding employee contributions through December 27, 2019. Coastal also sporadically failed to reimburse Blue Cross, and in December 2019 it withheld $19,618.23 in employee contributions for medical coverage but did not forward that amount, prompting Blue Cross to suspend claim payments. On January 6, 2020, Sills terminated the Plan’s coverages retroactive to December 27, 2019, and did not timely execute a run-out agreement that would have allowed Blue Cross to process claims incurred before the termination date but received afterward. Months later, Sills signed a $78,119.85 check reimbursing Blue Cross for claims it had already processed and paid, but that amount did not cover run-out claims or claims denied during the agreement’s other suspensions. At least 78 participants had claims denied, leaving $172,351.35 in unpaid medical expenses.

The Secretary served Sills with requests for admission to which he never responded, thereby admitting that he had and exercised discretionary authority, control, and responsibility over Plan management and administration and exercised actual control over Plan assets, and that he was a fiduciary and a party in interest within the meaning of 29 U.S.C. § 1002(14) and (21)(A). Sills never moved to withdraw these admissions. The district court treated the Secretary’s statement of undisputed material facts as admitted under its local rule, found each fact supported by record evidence, and entered judgment for the Secretary in the amount of $209,466.34 plus interest. It also permanently enjoined Sills from serving as a fiduciary to any ERISA-covered employee benefit plan, denied his request for additional discovery under Rule 56(d) because he submitted no supporting affidavit or declaration, and rejected his Rule 59(e) motion as duplicative.

Reviewing the grant of summary judgment de novo, the Fifth Circuit first rejected Sills’s contention that the district court had entered summary judgment by default through its application of the local rule. The court explained that the local rule does not create a novel means of entering summary judgment by default but instead implements Federal Rule of Civil Procedure 56. Because Sills did not controvert the Secretary’s statement of material facts at all, the district court properly treated those facts as undisputed, confirmed that each was supported by record citations, and assessed whether they entitled the Secretary to judgment.

The court next rejected Sills’s argument that he was not a functional fiduciary as a matter of law. Citing Pegram v. Herdrich, 530 U.S. 211 (2000), the court framed the threshold question as whether Sills was performing a fiduciary function when he took the actions subject to the complaint, namely the decisions not to remit employee contributions and not to pay Blue Cross’s invoices. The uncontroverted evidence established that he was: the admissions established his authority and status, and the deemed-admitted statement of facts attributed the challenged actions to him. The court held it was of no moment that the Administrative Services Agreement was signed by Coastal’s human-resources director and identified Coastal as Plan sponsor and named fiduciary, and that Sills’s professed delegation of Plan-related tasks did not absolve him of his fiduciary obligations.

Turning to Sills’s challenges to the substance of the judgment, the court rejected his causation argument that a third-party surety controlling Coastal’s receivables caused the Plan’s losses, explaining that neither the insolvency of a plan sponsor nor a third party’s control of its receivables excuses a fiduciary’s failure to remit employee contributions, and noting that the surety played no role in the Plan’s medical claims. The court found the record supported each component of the $209,466.34 award, consisting of $172,351.35 in denied Blue Cross claims and $37,114.99 in unremitted employee contributions ($19,618.23 for Blue Cross coverage, $7,760.17 for Guardian, and $9,736.59 for Ameritas). The court rejected Sills’s request for a credit for his $78,119.85 payment because that payment reimbursed Blue Cross for claims it had already processed and paid, which were not part of the denied-claims component of the judgment, so no offset was due. Because Sills’s challenge to the permanent injunction depended entirely on vacatur of the liability judgment, it failed as well. Finally, the court found no abuse of discretion in the denial of relief under Rule 56(d), given the absence of the required affidavit, or in the denial of the Rule 59(e) motion, which merely reiterated Sills’s summary-judgment arguments.