Compliance

Participants Suing Plan Fiduciaries Sued As Co-Fiduciaries

By Rebecca Moore editors@plansponsor.com | November 15, 2012
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November 15, 2012 (PLANSPONSOR.com) - Retirement plan fiduciaries found to have violated federal law claim some of the plaintiffs that sued them are also liable.

A federal district court agreed, in part, and moved forward some of the defendant’s claims.   

U.S. District Judge James S. Moody Jr. of the U.S. District Court for the Middle District of Florida granted the counter-defendants’ motion to dismiss based on a lack of a statutory right to contribution and indemnification. Moody noted that § 502(a)(3) of the Employee Retirement Income Security Act (ERISA) refers to equitable remedies for violations of ERISA or enforcement of a plan’s terms, not to the equitable remedies available to a breaching fiduciary against another fiduciary. He also pointed out that the Supreme Court previously held that, in order to recover for a violation of § 409 which makes fiduciaries “subject to such other equitable or remedial relief as the court may deem appropriate,” the relief must “inure to the benefit of the plan as a whole” and “Congress did not intend that section to authorize any relief except for the plan itself.”   

However, Moody denied the counter-defendants’ motion to dismiss based on lack of a federal common law right to contribution and indemnification. According to the court opinion, other circuit courts have found that Congress could not have inadvertently omitted a right to contribution under ERISA because of its detailed remedial scheme, but Moody disagreed.   

He noted that the Supreme Court has stated that traditional trust law principles are a “starting point for analysis of ERISA” and inform ERISA to the extent they are consistent “with the language of the statute, its structure, or its purposes.” Congress has made clear that ERISA’s purpose is to protect plan participants and beneficiaries; fiduciaries’ rights are not the purpose. “Thus, fear of intruding on Congress’ remedial scheme is not warranted given that allocation of fiduciary liability is not within the scope of ERISA nor is it inconsistent with its structure,” Moody concluded.