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Supremes Pondering Co-Fiduciary Liability Case

The U.S. Supreme Court has been asked to resolve issues regarding co-fiduciary liability – and it’s looking for help.

The Court has 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 case under consideration, Fenkell v. Alliance Holdings, Inc., involved 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. An analysis by Proskauer Rose LLP notes that 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 7th 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.

Subsequently, a petition for a writ of certiorari was filed on the principal ground that the Supreme Court should resolve the difference in decisions between circuit courts on this issue of whether an ERISA fiduciary can seek indemnity or contribution from a co-fiduciary. According to the petition, the 2nd and 7th Circuits have recognized such a cause of action, but the 8th and 9th Circuits have rejected such claims.

And now the Supreme Court has invited the Solicitor General to file a brief expressing the government’s views…

Stay tuned.

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