Can someone direct me to code sections on this.

A custodian receives a rollover distribution request and does not process the distribution for over 3 months.

1) Can the custodian be sued?
2) Can the plan sponsor?
3) What if the distribution instructions lacked a required letter of acceptnace by the new carrier, and delayed in notifying the participant of the incomplete forms, thereby delaying the processing of the distribution for over 3 months? Anyone liable? The letter of acceptance is an aknowledgement by the new carrier of the participant, what plan it is, and acceptance of the impending distribution.

Under the US justice system anyone can sue any one else. Prevailing on a claim is another story. A three month delay in payment is hardly unusual. Claims for benefits are brought under ERISA not the IRC and the participant would have to pay an attorney to file a claim in federal court, which will be very expensive. The best solution is to find out what needs to be done to transfer the funds, not to look for legal citations.