By: Richard Loebl and Mark Casciari,
Another court has weighed in on the question whether ERISA provides a cause of action for contribution or indemnification among co-fiduciaries. In Guididas v. Community National Bank Corp., No. 8:11-cv-2545-T-30TBM (M.D. FL, 11/5/2012), the district court held that the “federal common law” under ERISA provides for such causes of action.
In Guididas, a group of employees sued their employer and its directors and officers for breaches of fiduciary duty relating to an employee stock ownership plan. The defendants brought a counterclaim for contribution and/or indemnification against three of the named plaintiffs, alleging that they had served on the plan’s administrative committee and thus were also fiduciaries of the plan. The employees sought to dismiss the counterclaim arguing that, even if they were plan fiduciaries, under ERISA there is no cause of action for contribution and/or indemnification among co-fiduciaries.
ERISA itself does not provide a statutory right to contribution or indemnification among co-fiduciaries, to afford protection to plan fiduciaries. The Supreme Court has not addressed the issue, and there is a split in the few Circuit Courts that have addressed the question. After determining that this was a question of first impression in the Eleventh Circuit, the court considered the meaning of “appropriate equitable relief” under ERISA 502(a)(3) as explained in CIGNA Corp. v. Amara, 563 U.S. ___, 131 S.Ct. 1866 (2011), and found that contribution or indemnification would not qualify as such relief under ERISA 502(a)(3).
The court then discussed whether such relief was available under the trust law principles that were the foundation of ERISA. The court held that the Eleventh Circuit has accepted those trust law underpinnings and thus would follow the approach laid out by the Second Circuit in Chemung Canal Trust Co. v. Sovran Bank/Maryland, 939 F.2d 12 (2nd Cir. 1991). In Chemung, the Second Circuit held that an action for contribution and indemnity represented a “fundamental principle of equity jurisprudence” and provided a means for “equitably distributing responsibility for plaintiff’s losses proportionally among those responsible for the losses”; accordingly, such an action was included in the federal common law of ERISA.
The court reviewed Eighth and Ninth Circuit decisions that had rejected the inclusion of a cause of action for contribution or indemnification under the common law of ERISA, but thought those decisions too narrow in their view of the applicability of trust law principles. Further, as ERISA itself was silent on the matter, accepting such a cause of action was not inconsistent with the statutory scheme.
The court thought policy considerations also favored such a course of action, as otherwise a fiduciary could immunize itself by being the first to file a claim. Also, because such a cause of action sought relief in an individual capacity, the relief sought on behalf of the plan would not be diminished.