January 29, 2022

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U.S. Supreme Court Seeks Solicitor General’s Input on Co-fiduciary Indemnification

Earlier this month, the U.S. Supreme Court invited the Solicitor General to file a brief expressing the government’s views on a petition for certiorari asking the Court to decide whether ERISA permits a cause of action for indemnity or contribution by an individual found liable for breach of fiduciary duty.  The underlying dispute resulted from the merger of two companies’ employee stock ownership plans (ESOPs), and the subsequent spin-off of part of the surviving ESOP into the ESOP of a company that ultimately collapsed, rendering the value of the employees’ plan accounts worthless.  The Western District of Wisconsin concluded, among other things, that two of the plan fiduciaries, including the petitioner, were the most culpable parties and ordered them to indemnify their co-fiduciaries.  The Seventh Circuit, citing the Supreme Court’s decision in CIGNA Corp. v. Amara, 563 U.S. 421 (2011), affirmed the district court’s decision and held that the remedy of indemnification is within the court’s equitable powers consistent with ERISA and trust law.  A petition for a writ of certiorari was filed on the principal ground that the Supreme Court should resolve a circuit split on the issue of whether an ERISA fiduciary can seek indemnity or contribution from a co-fiduciary.  According to the petition, the Second and Seventh Circuits have recognized such a cause of action, but the Eighth and Ninth Circuits have rejected such claims.  Stay tuned for further developments . . . .  The case is Fenkell v. Alliance Holdings, Inc., U.S., No. 16-473, invitation to solicitor general filed Jan. 9, 2017.

© 2022 Proskauer Rose LLP. National Law Review, Volume VII, Number 20
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