6.28.2006

E.D. Tenn. Discusses Split Re Right to Indemnity under ERISA

Per Henderlight v. Lay, Slip Copy, 2006 WL 1663695 (E.D. Tenn., June 14, 2006):

Finally, the Court turns to third-party defendant's argument that third-party plaintiff has failed to state a claim for which relief may be granted because there is no right to indemnity under ERISA. There are two lines of cases, neither of which clearly resolves whether there is such a right. …Considering the non-fiduciary line of cases first, there is very little law, but a right to contribution or indemnification from a non-fiduciary may not exist under ERISA. See Glaziers & Glassworkers v. Newbridge, 823 F. Supp. 1191, 1193–96 (E.D. Pa. 1993) (collecting cases). On the other hand, the Sixth Circuit has discussed the question without deciding it, and has suggested that a right to contribution from a non-fiduciary could only exist if the non-fiduciary shares common liability with the fiduciary in a direct suit by participants. See McDannold v. Star Bank, 261 F.3d 478, 486 (6th Cir.2001).

Turning to the co-fiduciary line of cases, the law in the Sixth Circuit is only slightly clearer in suggesting that contribution probably is not available from a co-fiduciaries in favor of a party that has breached its fiduciary duties to an ERISA plan. See Roberts v. Taussig, 39 F.Supp.2d 1010, 1012-13 (N.D.Ohio 1999); Williams v. Provident Inv. Counsel, Inc., 279 F.Supp.2d 894, 898 (N.D.Ohio 2003). On the other hand, the Sixth Circuit has not addressed the issue directly, and other circuits are split. Compare Chemung Coal Trust Co. v. Sovan Bank/Maryland, 939 F.2d 12 (2d Cir.1991) (recognizing right of contribution among co-fiduciaries in ERISA action) with Kim v. Fujikawa, 871 F.2d 1427, 1432-33 (9th Cir.1989) (concluding ERISA does not permit breaching fiduciary to claim right of contribution from co-fiduciary). See also Free v. Briody, 732 F.2d 1331, 1336-38 (7th Cir.1984) (holding fiduciary may make claim for contribution under ERISA). Although this area of the law is fraught with uncertainty, what is clear is that a starting point for determining whether there is a right to contribution, if such a right exists, may depend upon whether a party is a co-fiduciary or non-fiduciary under ERISA.

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