Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-14-03215/USCOURTS-ca7-14-03215-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 

---

In the

United States Court of Appeals

For the Seventh Circuit ____________________

Nos. 14-3181, 14-3215 & 15-3740

CAROL CHESEMORE, et al., 

on behalf of themselves, 

individually, and on behalf 

of all others similarly situated,

Plaintiffs-Appellees/

Cross-Appellants,

v.

DAVID B. FENKELL,

Defendant-Appellant/

Cross-Appellee,

v.

ALLIANCE HOLDINGS, INC., et al.,

Defendants-Appellees.

____________________

Appeals from the United States District Court

for the Western District of Wisconsin.

No. 09-cv-413-wmc — William M. Conley, Chief Judge.

____________________

ARGUED MAY 18, 2015 — DECIDED JULY 21, 2016

____________________

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2 Nos. 14-3181, 14-3215 & 15-3740

Before KANNE and SYKES, Circuit Judges, and ELLIS, 

District Judge.*

SYKES, Circuit Judge. Trachte Building Systems, Inc., a 

Wisconsin manufacturer, established an employee stock 

ownership plan (“ESOP”) in the mid-1980s when ESOPs 

were a popular employee-benefits instrument. In the late 

1990s, David Fenkell and Alliance Holdings, Inc., a company 

he founded and controlled, developed a niche specialty in 

buying and selling ESOP-owned, closely held companies 

with limited marketability. In the typical transaction, Fenkell

would merge the ESOP of an acquired company into 

Alliance’s own ESOP, hold the company for a few years with 

its management in place, and then spin it off at a profit 

(assuming everything went as planned).

In accordance with this business model, Alliance acquired Trachte in 2002 for $24 million and folded its ESOP 

into Alliance’s ESOP. Fenkell projected that the company

would fetch around $50 million in five years. When the time 

came to sell, however, Trachte’s profits were flat, its growth 

had stalled, and no independent buyer would pay anywhere 

near that price. So Fenkell offloaded the company to its 

employees in a complicated leveraged buyout. Greatly 

simplified, the deal involved three steps. First, Fenkell

directed the creation of a new Trachte ESOP managed by

trustees beholden to him. Next, the accounts in the Alliance 

ESOP were spun off to the new Trachte ESOP. Finally, the 

new Trachte ESOP used the employees’ accounts as collateral 

to incur debt to purchase Trachte’s equity back from Alliance. Multiple interlocking transactions to that effect closed

 * Of the Northern District of Illinois, sitting by designation.

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Nos. 14-3181, 14-3215 & 15-3740 3

on the same day in August 2007. When all was said and 

done, Trachte and the new Trachte ESOP had paid 

$45 million for 100% of Trachte’s stock and incurred 

$36 million in debt.

The purchase price was inflated and the debt load was 

unsustainable. By the end of 2008, Trachte’s stock was worthless. The losers in this deal—the employee participants in the 

new Trachte ESOP—sued Alliance, Fenkell, his handpicked 

trustees, and several other entities alleging breach of fiduciary duty in violation of ERISA. The district court held a 

bench trial and issued a comprehensive opinion finding the 

defendants liable. Chesemore v. Alliance Holdings, Inc. 

(Chesemore I), 886 F. Supp. 2d 1007 (W.D. Wis. 2012). After an 

additional hearing, the judge crafted a careful remedial 

order making the class and a subclass whole. Chesemore v. 

Alliance Holdings, Inc. (Chesemore II), 948 F. Supp. 2d 928 

(W.D. Wis. 2013). The judge later awarded attorney’s fees 

and approved settlements among some of the parties. 

Fenkell appealed. He concedes liability but raises many 

objections to the remedial order, the award of attorney’s fees, 

and the settlements by his codefendants. The only substantial issue is a challenge to the judge’s order requiring him to 

indemnify his cofiduciaries. We held more than 30 years ago 

that ERISA allows this. Free v. Briody, 732 F.2d 1331, 1337–38 

(7th Cir. 1984). Since then a circuit split has arisen on this

subject, but we’re not persuaded that Free should be overruled. None of Fenkell’s other arguments has merit.

The plaintiffs filed a cross-appeal seeking a larger award 

of attorney’s fees and contesting the judge’s refusal to award 

costs against Fenkell. We reject these challenges. Finally, 

while we’ve had this case under advisement, the district 

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4 Nos. 14-3181, 14-3215 & 15-3740

court found Fenkell in contempt for failing to comply with 

the remedial order. Fenkell appealed that order as well, but 

his arguments are frivolous. Accordingly, we affirm in all 

respects.

I. Background

Trachte Building Systems designs and manufactures steel 

self-storage systems in Sun Prairie, Wisconsin. In the 1980s 

Stephen Pagelow, the son-in-law of Trachte’s founder, acquired a controlling interest in the company and took over 

as president and chairman of the board. In 1987 Pagelow

directed the establishment of an employee stock ownership 

plan, or ESOP, as a benefit to employees, selling some of his 

shares to the plan.1 Throughout the 1990s Trachte experienced significant growth in both sales and operations.

David Fenkell established Alliance in 1994 and at all relevant times was its president, CEO, and sole director. Fenkell 

also was president, CEO, and sole director of two Alliance

subsidiaries, A.H.I., Inc., and AH Transition Corporation. 

(We’ll refer to these companies collectively as “Alliance” 

 

1 An ESOP is a trust into which the sponsoring company contributes 

stock, apportioning shares to its employees as a retirement benefit; on 

retirement the employee’s equity is repurchased by the ESOP. See, e.g., 

How an Employee Stock Ownership Plan (ESOP) Works, NAT’L CTR. FOR 

EMP. OWNERSHIP, https://www.nceo.org/articles/esop-employee-stockownership-plan (last visited July 14, 2016). In the past company contributions were tax-deductible to a point that made ESOPs popular as an 

employee-benefits instrument, but their popularity has diminished in 

recent years. See ESOP (Employee Stock Ownership Plan) Facts, NAT’L CTR.

FOR EMP. OWNERSHIP, http://www. esop.org (last visited July 14, 2016) 

(“Since the beginning of the 21st century there has been a decline in the 

number of plans but an increase in the number of participants.”). 

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Nos. 14-3181, 14-3215 & 15-3740 5

unless the context requires otherwise.) Alliance was in the 

business of buying and selling ESOP-owned, closely held

companies that might otherwise be difficult to sell. Alliance’s 

business model was to fold the acquired company’s ESOP 

into its own ESOP, leave the existing management in place, 

and spin off the company to another buyer a few years later, 

hopefully at a substantial profit. In short, Fenkell and Alliance made money by flipping ESOP-owned, closely held 

companies with limited marketability.

By 2002 Pagelow was looking for a way to gradually exit 

Trachte in anticipation of fully retiring in a few years. Enter 

Alliance, which that year acquired 80% of Trachte’s common 

stock for $24 million and all of its preferred stock for

$2 million. The 2002 transaction—more accurately, a series of 

interlocking transactions—involved folding the Trachte 

ESOP into Alliance’s own ESOP by transferring the employees’ accounts to the Alliance ESOP and exchanging the 

Trachte stock for Alliance stock. Trachte employees thus 

became participants in the Alliance ESOP, and the old Trachte ESOP was dissolved. Pagelow retained 20% of Trachte’s 

common stock and a 40% ownership interest in a subsidiary. 

He also agreed to stay on as chairman for five years. In 

exchange he received a put option giving him the right to 

tender his Trachte shares to the company in 2007 at a price 

keyed to the prior year’s appraised value. 

After the 2002 transaction, Pagelow resigned as Trachte’s 

president and was replaced by Jeffrey Seefeldt, a longtime 

Trachte manager. Pagelow immediately reduced his workweek and gradually began to cut back on his day-to-day 

management of the company. In the fall of 2005, Pagelow

exercised part of his put option early. In mid-2006 he broke 

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6 Nos. 14-3181, 14-3215 & 15-3740

his hip, which radically reduced his involvement with the 

company.

During this time, Trachte’s sales increased steadily but 

profits remained flat. Despite its stagnant profitability, the 

on-paper value of Trachte’s stock rose dramatically, from 

$25.4 million in 2003 to $44.9 million in 2006. Pagelow’s put 

option—coming due in 2007—was pegged to the 2006 

appraised value, but Alliance lacked the liquidity to satisfy 

it. Faced with the prospect of having to borrow to satisfy

Pagelow’s option and with serious doubts about Trachte’s 

future performance, Fenkell decided it was past time to sell.

At the time of the 2002 transaction, Fenkell had projected 

that Trachte would sell for as much as $50 million in 2007. 

Throughout 2006 he looked for a buyer at or near that price,

but he came up empty-handed. Failing to find an independent buyer at his desired price, Fenkell devised and implemented a complicated leveraged buyout to off-load the 

company onto Trachte’s employees. The district court’s 

opinion meticulously describes the history and details of this

transaction, as well as the lack of any truly independent due 

diligence on behalf of Trachte’s employees. Chesemore I, 

886 F. Supp. 2d at 1021–40. Because liability is uncontested

here, a radically simplified summary will suffice.

First, on August 22, 2007, Fenkell orchestrated the removal of Trachte’s entire board of directors and installed 

Seefeldt and James Mastrangelo, the chief operating officer, 

as the sole board members. Id. at 1036. Then, following a 

plan of Fenkell’s devising, Seefeldt and Mastrangelo directed 

the creation of a new Trachte ESOP, installing themselves 

and Pamela Klute, the company’s vice-president of human

resources, as trustees. Id.

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Nos. 14-3181, 14-3215 & 15-3740 7

The leveraged buyout itself involved 11 separate steps, 

each of which occurred sequentially and was conditioned on 

the completion of all previous and subsequent steps. The 

district judge grouped these steps into three baskets. First, in 

steps 1–3, the accounts of the Trachte employees in the 

Alliance ESOP were spun off to the new Trachte ESOP, and 

their Alliance shares were exchanged for Trachte shares held 

by A.H.I. Id. at 1037–38. Next, in Steps 4–7, Trachte used the

new Trachte ESOP accounts as collateral for loans to pay off 

the “phantom” stock plan of Alliance employees and redeem 

Trachte stock held by Alliance and Pagelow. Id. at 1038. 

Finally, in Steps 8–11, Trachte and the new Trachte ESOP

acquired all Trachte equity held by Alliance, Alliance employees, and Pagelow. Id. at 1038–39.

This series of interdependent transactions closed on 

August 29, 2007. By the end of that day, Trachte and the new 

Trachte ESOP had paid $45 million in consideration for 

Trachte’s total equity and incurred about $36 million in debt.

Id. at 1039.

Trachte did not flourish after the 2007 leveraged buyout. 

It held its own until May 2008, but at that point projected 

that it would not meet its loan covenants. By the end of 2008,

Trachte’s stock was worthless.

Their equity wiped out, a group of current and former 

Trachte employees filed this class action alleging breach of 

fiduciary duty in violation of ERISA. The class includes

current and former employees who participated in the old 

Trachte ESOP, the Alliance ESOP, and the new Trachte ESOP. 

A subclass comprises those participants in the new Trachte 

ESOP who would have remained employees of Alliance—

and thus participants in the Alliance ESOP—but for the 

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8 Nos. 14-3181, 14-3215 & 15-3740

August 2007 transaction. Fenkell and Alliance were the 

primary targets of the suit. The complaint also named the 

trustees of the new Trachte ESOP as defendants. Pagelow,

the new Trachte ESOP, and the Alliance ESOP were named 

as nominal defendants.2

After extensive litigation and a bench trial, the judge

found the defendants liable. Fenkell and Alliance had insisted that they were not fiduciaries because all they did was 

spin off the Alliance ESOP to the new Trachte ESOP. The 

judge was not persuaded. He found:

Fenkell and Alliance (1) arranged the 2007 

[t]ransaction so that it would only occur on 

terms favorable to them and disfavorable to a 

minority interest [(i.e., the Trachte legacy accounts)] in the Alliance ESOP; (2) ensured no 

one on the other side of the transaction would 

look out for those interests after the spinoff; 

and (3) ensured that those charged with decision-making authority on the other side of the 

 

2 The plaintiffs also sued Alpha Investment Consulting Group, LLC, a 

consulting firm retained by the trustees of the new Trachte ESOP just 

before the leveraged buyout closed. The trustees asked Alpha to evaluate 

the transaction when they realized they were potentially personally 

exposed. Fenkell worried that advice from Alpha would delay or derail 

the deal. To mollify him, the trustees strictly limited the scope of the 

engagement to valuation information provided by Alliance and asked 

the firm for a simple “yes or no” on the transaction. Based on this limited 

sphere of information, Alpha concluded that the deal was risky but not 

unreasonable and gave it thumbs up. The judge cleared Alpha of liability 

and that ruling has not been challenged. 

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Nos. 14-3181, 14-3215 & 15-3740 9

transaction would remain answerable to Alliance and Fenkell should they not go through 

with it. In short, it was a classic example of 

“heads I win, tails you lose.”

Chesemore I, 886 F. Supp. 2d at 1052. The judge continued:

“Fenkell and Alliance designed the transaction so that either 

the accounts of the Trachte participants in the Alliance ESOP 

would be used as leverage to buy Trachte from Alliance or 

the accounts would revert to their prior situation with no 

change.” Id. at 1053.

In other words, if there had been an actual independent 

fiduciary on the other side, Fenkell and Alliance wouldn’t 

have gotten away with it. They installed trustees who

“(1) had a conflict of interest that placed them under substantial duress during the negotiation and assessment of the 

deal; and (2) lacked the experience and the incentive to 

assess a deal of this type and complexity.” Id. at 1054. Although the trustees formally made the decision to use the 

new Trachte ESOP accounts as collateral for the buyout, 

Fenkell and Alliance controlled that decision and orchestrated the entire complex transaction. In exercising that control,

the judge concluded, they violated fiduciary duties owed to 

the plaintiffs. 

The judge also held, however, that the defendants’ fiduciary breach was not wholly responsible for Trachte’s total 

collapse; the 2008 financial crisis also played a role, although 

the inflated purchase price and excess debt placed tremendous pressure on the company and sealed its fate. In the end, 

and after an extensive additional hearing, the judge crafted 

an intricate remedial order making the class and the subclass 

whole. As relevant here, he ordered the trustees to restore 

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10 Nos. 14-3181, 14-3215 & 15-3740

$6,473,856.82 to the new Trachte ESOP, allocated to the class 

members’ accounts according to their shares as of the date of 

judgment. Chesemore II, 948 F. Supp. 2d at 950. He ordered 

Fenkell and Alliance to restore $7,803,543 to the Alliance 

ESOP, allocated to the subclass members’ accounts according 

to their holdings as of August 29, 2007. Id. And he ordered 

Fenkell to restore to Trachte the $2,896,000 he received in 

“phantom” stock proceeds from the 2007 transaction. Id.

Because Fenkell and Alliance were most at fault, the 

judge ordered them to indemnify the trustees. Id. at 950. In 

particular, the judge had this to say about Fenkell:

Each time he testified, the court was increasingly impressed by Fenkell’s complete recall of 

minor details and sophisticated understanding 

of ERISA transactions, as well as the law governing those transactions. After Pagelow was 

sidelined by the 2002 sale, Fenkell was easily 

the smartest person in the room. He held between a $2.5 and $3 million interest in the 

phantom stock plan for Alliance employees. He 

knew that under any alternatives to a leveraged ESOP purchase, he was unlikely to receive any immediate phantom stock payments 

and his interest in the phantom stock plan 

would follow Trachte to what he expected to be 

an unhappy ending. 

Id. at 946. Accordingly, the judge found that Fenkell “was far 

and away the most culpable party.” Id.

Finally, the judge assessed prejudgment interest, awarded attorney’s fees, and approved settlements between the 

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Nos. 14-3181, 14-3215 & 15-3740 11

plaintiffs and the Trachte ESOP trustees, and between the 

plaintiffs and Alliance.

Fenkell appealed, challenging various aspects of the remedial order, the award of attorney’s fees, and the judge’s 

approval of the settlements. The plaintiffs cross-appealed

seeking a larger award of fees and costs against Fenkell.

In the meantime while we’ve had this case under advisement, Fenkell failed to comply with the order to restore

the Alliance ESOP, so the judge found him in contempt.

Fenkell appealed the contempt order as well. We’ve consolidated that appeal with the earlier ones.

II. Discussion

Although Fenkell does not challenge his liability, his appeal contests aspects of the judge’s remedial order in an 

attempt to zero out the actual cost of his liability. The only 

significant legal issue is his challenge to the judge’s indemnification order. The remaining issues, the issues raised in the

plaintiffs’ cross-appeal, and the challenge to the contempt 

order are more straightforward.

A. Indemnification/Contribution

The judge ordered Fenkell to indemnify Seefeldt, 

Mastrangelo, and Klute because his culpability vastly exceeded theirs. The judge found that Fenkell orchestrated 

their installation as trustees and directed their actions. And

they in turn did his bidding, both because they were inexperienced as fiduciaries and because he called the shots as 

controlling owner, sole director, president, and CEO of 

Alliance. In short, Fenkell had authority over the Trachte 

trustees and used that authority and his control of the Alliance ESOP assets to orchestrate the inflated leveraged buyCase: 14-3215 Document: 83 Filed: 07/21/2016 Pages: 25
12 Nos. 14-3181, 14-3215 & 15-3740

out. As the judge analogized, “Fenkell was the unquestioned 

conductor and the Trachte [t]rustees mere musicians.”

Chesemore II, 948 F. Supp. 2d at 949.

Fenkell doesn’t meaningfully contest the judge’s factual 

findings. He argues instead that ERISA doesn’t permit the 

court to order indemnification or contribution among cofiduciaries.

Although ERISA contemplates the allocation of fiduciary 

obligations among cofiduciaries (thereby limiting subsequent losses), see 29 U.S.C. § 1105(b)(1)(B), it doesn’t specifically mention contribution or indemnity as a remedy. Instead, it broadly permits the court to fashion “appropriate 

equitable relief” in response to a claim “by a participant, 

beneficiary, or fiduciary.” Id. § 1132(a)(3). The Supreme 

Court has explained that “appropriate equitable relief” here 

means “those categories of relief that, traditionally speaking 

(i.e., prior to the merger of law and equity) were typically

available in equity.” CIGNA Corp. v. Amara, 563 U.S. 421, 439 

(2011) (internal quotation marks omitted).

In this context the Court has interpreted ERISA as generally incorporating the law of trusts. See id. (noting that 

ERISA “typically treats” a plan fiduciary “as a trustee” and a 

plan “as a trust”); see also Tibble v. Edison Int’l, 135 S. Ct. 1823, 

1828 (2015) (“In determining the contours of an ERISA 

fiduciary’s duty, courts often must look to the law of 

trusts.”); Varity Corp. v. Howe, 516 U.S. 489, 497 (1996) (“[W]e 

believe that the law of trusts often will inform, but will not 

necessarily determine the outcome of, an effort to interpret 

ERISA's fiduciary duties.”); Firestone Tire & Rubber Co. v. 

Bruch, 489 U.S. 101, 110 (1989) (“ERISA abounds with the 

language and terminology of trust law.”); Cent. States, Se. & 

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Nos. 14-3181, 14-3215 & 15-3740 13

Sw. Areas Pension Fund v. Cent. Transp., Inc., 472 U.S. 559, 570 

(1985) (“[R]ather than explicitly enumerating all of the 

powers and duties of trustees and other fiduciaries [in 

ERISA], Congress invoked the common law of trusts to 

define the general scope of their authority and responsibility.”).

Thus, the district court’s remedial authority under ERISA 

includes the power of courts under the law of trusts, which 

vests in them the authority to fashion “traditional equitable 

remedies.” CIGNA, 563 U.S. at 440. Indemnification and 

contribution are among those remedies. See, e.g., Marine & 

River Phosphate Mining & Mfg. Co. v. Bradley, 105 U.S. 175, 182

(1881) (“[T]he necessity of enforcing[] a trust, marshalling 

assets, and equalizing contributions[] constitutes a clear 

ground of equity jurisdiction.”); Hatch v. Dana, 101 U.S. 205, 

208 (1879) (“[I]f the capital stock should be divided, leaving 

any debts unpaid, every stockholder receiving his share of 

the capital would in equity be held liable pro rata to contribute to the discharge of such debts out of the funds in his own 

hands. This, however, is a remedy which can be obtained in 

equity only ... .”); Dupont De Nemours & Co. v. Vance, 60 U.S. 

162, 175–76 (1856) (explaining the common-law development 

of contribution as a remedy in equity).

On the other hand, on the subject of fiduciary liability,

ERISA says only that a fiduciary “shall be personally liable 

to make good to such plan” for a breach of his duties. 

29 U.S.C. § 1109(a) (emphasis added). If a fiduciary is liable 

to restore an injured plan, this might imply that he cannot be 

liable to a cofiduciary. After all, a cofiduciary is not a plan.

We addressed this issue long ago and held that ERISA’s 

grant of equitable remedial power and its foundation in 

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14 Nos. 14-3181, 14-3215 & 15-3740

principles of trust law permit the courts to order contribution or indemnification among cofiduciaries based on degrees of culpability. Free, 732 F.2d at 1137. Free involved a 

profit-sharing plan with two trustees; one fleeced the plan

and the other did nothing. Id. The district court found the 

trustees jointly and severally liable because they both had 

breached their fiduciary duty. Id. But the court declined to 

order indemnification. We reversed, holding that ERISA 

includes the authority to order contribution or indemnification as allowed in the law of trusts. Id.

We noted in Free that § 1105(b)(1)(B) expressly allows fiduciaries to allocate various responsibilities between themselves and thereby insulate themselves from “liability for 

breaches of duties allocated to another trustee.” Id. at 1337.

This demonstrates, we said, that “Congress clearly did not 

intend trustees to act as insurers of co-trustees’ actions.” Id. 

The disputed question was not whether cofiduciaries may 

explicitly allocate and limit their liability under ERISA (they

may), but rather whether the protections of § 1105 are the

exclusive means of doing so. We concluded that they were

not exclusive. We reasoned that “Congress intended to 

codify the principles of trust law with whatever alterations 

were needed to fit the needs of employee benefit plans.” Id.

at 1337–38. Because “[g]eneral principles of trust law provide for indemnification under appropriate circumstances,” 

id. at 1338, we concluded that “courts [have] the power to 

shape an award so as to make the injured plan whole while 

at the same time apportioning the damages equitably between the wrongdoers,” id. at 1337.

Fenkell argues that Free was “implicitly overturned” in 

Summers v. State Street Bank & Trust Co., 453 F.3d 404 (7th Cir. 

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Nos. 14-3181, 14-3215 & 15-3740 15

2006). We disagree. True, Summers said in passing that “a 

right of contribution” under ERISA “remains an open [question] in this circuit.” Id. at 413. But Summers did not mention 

Free, let alone disturb or overturn it. Summers apparently 

overlooked Free, which had already considered and decided 

the question. Regardless, Summers specifically said that the 

issue was “academic” in the context of that case, making its 

passing reference to contribution pure dicta. Id. at 412.

One judge in the Northern District of Illinois has supposed in dicta that Free has been overturned by the Supreme 

Court in Massachusetts Mutual Life Insurance Co. v. Russell, 

473 U.S. 134 (1985). See BP Corp. N. Am. Inc. Sav. Plan Inv. 

Oversight Comm. v. N. Tr. Invs., N.A., 692 F. Supp. 2d 980 

(N.D. Ill. 2010). In Russell the Court held that section 409 of 

ERISA entitles claimants to equitable relief making them 

whole under their benefits plan but does not allow recovery

of extracontractual damages. The specific issue in Russell

was whether a court may award damages for “mental or 

emotional distress” due to an ERISA violation. 473 U.S. at 

138. The Court said it may not.

Nothing in Russell undermines Free. Indeed, Free was decided specifically in the context of a section 409 action, 

through which the court fashioned an appropriate equitable

remedy keyed to the plan in question. A cofiduciary seeking 

contribution or indemnification for a plan-related award is not 

analogous to a plan participant seeking extracontractual 

damages under an implied right of action for, say, emotional 

distress or pain and suffering. We think the district court in 

BP simply overread Russell.

We acknowledge, however, that the circuits are not uniform on the question of contribution and indemnification. 

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16 Nos. 14-3181, 14-3215 & 15-3740

Consistent with our holding in Free, the Second Circuit has 

long maintained that ERISA permits contribution. See 

Chemung Canal Trust Co. v. Sovran Bank/Maryland, 939 F.2d 12, 

15–16 (2d Cir. 1991). The Eighth and Ninth Circuits disagree. 

See Travelers Cas. & Sur. Co. of Am. v. IADA Servs. Inc., 497 

F.3d 862, 864–66 (8th Cir. 2007); Kim v. Fujikawa, 871 F.2d 

1427, 1432–33 (9th Cir. 1989).

Fenkell hasn’t given us any argument that wasn’t already 

addressed in Free and resolved against his position. And 

overruling circuit precedent simply to move from one side of 

a circuit split to the other is disfavored. Buchmeier v. United 

States, 581 F.3d 561, 566 (7th Cir. 2009). Moreover, we’re not

convinced that Free was wrongly decided. If we are to interpret ERISA according to the background principles of trust 

law—as the Supreme Court has repeatedly instructed us to

do—then indemnification and contribution are available 

equitable remedies under the statute.

Accordingly, the district court had the authority to order 

Fenkell to indemnify the new Trachte ESOP trustees. That 

remedy is within the court’s equitable powers and is consistent with principles of trust law within which ERISA 

operates.

B. Fenkell’s Fiduciary Status

Fenkell argues in the alternative that he can’t be ordered 

to indemnify the trustees because he wasn’t a cofiduciary. 

This argument is highly formalistic. It’s true that Fenkell 

wasn’t a trustee or other named fiduciary of the new Trachte 

ESOP. But the judge found that Fenkell used his position of 

authority over the Trachte trustees to control the assets spun 

off from the Alliance ESOP. He orchestrated the resignation 

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Nos. 14-3181, 14-3215 & 15-3740 17

of the old Trachte board, directed the creation of the new 

Trachte ESOP, and installed trustees who were both inexperienced and beholden to him. He then used his control over 

the trustees to implement a leveraged buyout at an inflated 

price, saddling Trachte with more debt than it could bear. 

The whole scheme was set up to ensure that the trustees 

would do his dirty work and he would keep his hands clean, 

at least as a formal matter. The judge saw through it, finding 

that the spin-off “was atypical both in its terms and the 

position of the parties.”

Determining fiduciary status under ERISA is a functional 

inquiry. Larson v. United Healthcare Ins. Co., 723 F.3d 905, 916 

(7th Cir. 2013) (“ERISA ... defines ‘fiduciary’ not in terms of 

formal trusteeship, but in functional terms of control and 

authority over the plan, thus expanding the universe of 

persons subject to fiduciary duties.”) (citations omitted). 

Even if Fenkell kept himself at a safe distance on paper, the 

whole of the deal was designed to occur only on terms 

favorable to him. It was arranged so that no one on the other 

side of the deal would look out for the interests of Trachte or 

its employees post-spin-off; indeed, the trustees of the new 

Trachte ESOP reported to Alliance and Fenkell. While Fenkell may not have been a fiduciary on paper, he effectively 

controlled both sides of the transaction. Either the spin-off 

and the leveraged buyout would go through together or 

neither would. That’s why any involvement by a truly

independent fiduciary looking after the Trachte interests

would have scuttled the deal.

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18 Nos. 14-3181, 14-3215 & 15-3740

As a functional matter, then, Fenkell and Alliance were 

acting in a fiduciary capacity for the whole of the 2007 

transaction, as the judge found. There was no error.3

C. Restoration Order

Fenkell also challenges the court’s restoration order. Recall that there are really two classes of plaintiffs here. The 

main class consists of all participants in the new Trachte 

ESOP at any time from the transaction on August 29, 2007, to 

the time of class certification. The subclass comprises Alliance employees who participated in the Alliance ESOP at the 

time of the 2007 transaction and whose accounts were 

transferred to the new Trachte ESOP. The judge ordered 

restitution to the subclass in the amount of $7,803,543, which 

represents the value of the subclass’s Alliance ESOP accounts 

as of the closing in 2007. Restitution to the main class was set 

at $6,473,856.82, which represents the amount the participants in the new Trachte ESOP overpaid for the Trachte 

stock minus the percentage representing the interests of the 

subclass (because their interests were accounted for in the 

separate restitution order). 

The theory behind the judge’s order was that there were

two losses that needed restoration. The first is the overpayment in the leveraged buyout, which harmed the entire class.

 3 Fenkell also asserts in passing that he doesn’t owe indemnification 

because the Trachte trustees were insured and paid the settlement with 

insurance proceeds. He raised this point only briefly in the district court 

when he objected to the settlement, but the argument was factually and 

legally undeveloped. The judge took note of a possible subrogation claim 

lurking in the background but said the issue was not properly before the 

court. Because the issue wasn’t adequately developed either in the 

district court or here, we do not address it. 

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Nos. 14-3181, 14-3215 & 15-3740 19

The second is the loss suffered by the subclass: plan participants who would have stayed with the Alliance ESOP or 

been rolled into a third-party buyer but for the spin-off to the 

new Trachte ESOP. In either alternative scenario, these 

participants would still have pension plans. For the subclass

the 2007 transaction was the factual cause of their total loss, 

which is why the court ordered them restored to their 2007 

level in the Alliance ESOP.

Fenkell argues that the subclass was only entitled to 

$1,893,650.61—its share of the leveraged buyout overpayment. He says that any more would be a “windfall.” This 

argument simply confuses the nature of the respective 

restitution orders. The subclass restitution order was separate from the class restitution order; the judge subtracted the 

subclass’s share from the overpayment award precisely to 

avoid double recovery and windfalls. 

D. Prejudgment Interest

Moving along, Fenkell mounts two feeble challenges to 

the award of prejudgment interest. His first claim is that 

because the plaintiffs assigned their rights to Alliance as part 

of their settlement and the settlement occurred before final 

judgment was entered, he is wrongly being required to pay 

prejudgment interest to a liable party. In other words, he 

argues that the award of prejudgment interest isn’t actually 

making the plaintiffs whole because the interest accrued to 

Alliance from the time of settlement until the judgment was 

entered. 

Fenkell cites no authority in support of the proposition 

that a prejudgment assignment of recovery halts the accrual 

of prejudgment interest. As a general matter, “[p]rejudgment 

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20 Nos. 14-3181, 14-3215 & 15-3740

interest ... is part of the actual damages sought to be recovered.” Cement Div., Nat’l Gypsum Co. v. City of Milwaukee, 

144 F.3d 1111, 1117 (7th Cir. 1998) (quoting Monessen Sw. Ry. 

Co. v. Morgan, 486 U.S. 330, 335 (1988)) (emphasis added); see 

also Morrison Knudsen Corp. v. Ground Improvement Techniques, 

Inc., 532 F.3d 1063, 1077 (10th Cir. 2008) (calling prejudgment 

interest “an integral element of compensatory damages”).

Here the award of prejudgment interest was a routine 

part of the plaintiffs’ restitution remedy. The plaintiffs, in 

turn, assigned their right of recovery to Alliance in connection with the court-approved settlements. Alliance now 

stands in the plaintiffs’ shoes. Nothing about the settlement 

or assignment halted the accrual of prejudgment interest.

Alternatively, Fenkell argues that the prejudgmentinterest award amounts to overcompensation because the

plaintiffs “reduced” their recovery when they settled. He 

insists that he should only be held liable for interest on the 

total damages minus the settlement amount—that is, interest 

on only about $60,000, which he says is the “actual” damages award. 

Fenkell provides no support for this claim. The cases he 

cites—Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 

321 (1971), and Sands, Taylor & Wood Co. v. Quaker Oats Co., 

978 F.2d 947 (7th Cir. 1992)—stand for the unremarkable 

proposition that plaintiffs can’t recover more than their 

actual total damages. The plaintiffs assigned their whole 

recovery to Alliance. The award of prejudgment interest 

does not violate this principle. 

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Nos. 14-3181, 14-3215 & 15-3740 21

E. Settlement

Fenkell also objects to the settlements, arguing that the 

assignment of the plaintiffs’ recovery affects his position in 

future litigation. “The general rule, of course, is that a nonsettling party does not have standing to object to a settlement between other parties. Particularly, non-settling defendants in a [multi]defendant litigation context have no 

standing to object to the fairness or adequacy of the settlement by other defendants.” Agretti v. ANR Freight Sys., Inc., 

982 F.2d 242, 246 (7th Cir. 1992) (internal quotation marks 

omitted). A nonsettling party has standing to object only 

“when the nonsettling party ‘can show plain legal prejudice 

resulting from the settlement.’” Jamie S. v. Milwaukee Pub.

Sch., 668 F.3d 481, 501 (7th Cir. 2012) (quoting Agretti, 

982 F.2d at 246). “That a settling defendant creates a tactical 

disadvantage for another defendant is not sufficient to 

support standing to object; the prejudice to the nonsettling 

defendant must be legal, such as (for example) interference 

with contractual or contribution rights or the stripping away 

of a cross-claim.” Id.

The settlements do not prejudice Fenkell’s interests in the 

sense required for standing to object. They do not interfere 

with any contractual or contribution rights he may have, nor 

do they eliminate any claim he has asserted in this suit. 

Fenkell has not established standing to challenge the settlements.

F. Attorney’s Fees and Costs

We have cross-appeals before us on the issue of attorney’s

fees. The judge approved as reasonable almost $8 million in 

fees and ordered Fenkell to pay about $1.8 million of that 

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22 Nos. 14-3181, 14-3215 & 15-3740

total. This figure represents the portion of the approved fees 

that remained unpaid after the settlements, which included 

negotiated fee amounts to be paid by the Alliance defendants, the Trachte trustees, and the common settlement fund.

These negotiated amounts covered some but not all of the $8 

million in approved fees. Fenkell, the remaining liable 

defendant, was ordered to pay the balance.

District judges have considerable discretion in awarding 

attorney’s fees under ERISA. Hardt v. Reliance Standard Life 

Ins. Co., 560 U.S. 242, 245 (2010). A court may, in its discretion, award a reasonable attorney’s fee “as long as the fee 

claimant has achieved ‘some degree of success on the merits.’” Id. (quoting Ruckelshaus v. Sierra Club, 463 U.S. 680, 694 

(1983)).

Fenkell makes no independent argument on the issue of 

attorney’s fees. Instead, his challenge rests entirely on the 

success of his other claims of error. We’ve rejected every one 

of these arguments and need say no more.

The plaintiffs, for their part, argue that the judge’s order 

shortchanges them because it confuses fees under section 502(g) of ERISA, which belong to prevailing plaintiffs, 

and class fees, which belong to their attorneys. See FED. R.

CIV. P. 23(h). To the contrary, the judge plainly understood 

the distinction. Indeed, he said he appreciated the plaintiffs’

argument in this regard but would not authorize recovery of 

fees in excess of the total amount he had approved as reasonable. He said that it would be difficult to differentiate

between fees incurred for claims against individual defendants and also that fees were being paid through a complicated system of overlapping settlements and payments by

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Nos. 14-3181, 14-3215 & 15-3740 23

multiple parties. He thought it best to play it safe and avoid 

redundant recovery. 

It’s clear to us that the judge fully grasped the difference 

between ERISA section 502(g)(1) awards and class-counsel

awards under Rule 23(h) but simply decided not to award 

fees according to their separate legal bases because of the 

remedial complexities of the case. Instead, he set a total 

reasonable fee award—nearly $8 million—and ordered 

Fenkell to pay the amount that remained unpaid after the 

settlements. That cautious approach was not an abuse of 

discretion.

The same is true of the judge’s refusal to assess costs 

against Fenkell. The plaintiffs asked for costs under ERISA 

section 502(g) and under Rule 54(d) of the Federal Rules of 

Civil Procedure. Under the rule “prevailing parties presumptively recover their costs.” Loomis v. Exelon Corp., 

658 F.3d 667, 674 (7th Cir. 2011). But as we noted in Loomis,

“[b]oth [Rule 54(d)] and [section 502(g)] give the district 

judge discretion to decide whether an award of costs is 

appropriate,” and costs and attorney’s fees need not be 

awarded in tandem. Id. at 675.

Here, although the judge held Fenkell responsible for the 

attorney’s fees that remained unpaid after the settlements, he 

declined to tax costs against him because the settlements had 

already covered the plaintiffs’ costs in full. In other words, 

there were no unsatisfied costs to be paid. That was hardly 

an abuse of discretion.

G. Contempt

Finally, we come to Fenkell’s appeal of the judge’s contempt order. As we’ve noted, the judge’s approval of the 

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24 Nos. 14-3181, 14-3215 & 15-3740

settlements resulted in some adjustments to the restoration 

order. As relevant here, the final judgment ordered Fenkell

to restore $2,044,014.42 to the Alliance ESOP as restitution to 

the subclass. (This figure accounts for the portion covered by 

the settlements.) Fenkell neither complied with this order 

nor posted a bond. So while we’ve had this case under 

advisement, Alliance and the Alliance ESOP returned to the 

district court and initiated contempt proceedings.

After contentious discovery, extensive briefing, and protracted hearings, the judge found Fenkell in contempt. The 

proceedings were interrupted by Fenkell’s premature appeals of several intermediate orders, which we dismissed for 

lack of jurisdiction. The contempt order is now final, so the

issue is properly before us.

Based on abundant evidence, the judge found that Fenkell had substantial assets and “was actually taking affirmative steps to put his assets (at least technically) outside the 

reach of the [p]lan and other creditors.” The evasive steps 

consisted mainly of transferring ownership of various 

accounts to his wife. But Fenkell maintained full control over 

these assets via power of attorney, and his wife testified that 

she was almost entirely ignorant of their financial affairs. 

Because Fenkell was fully capable of making the ordered 

restitution and persisted in failing to do so, the judge found 

him in contempt, gave him a deadline to comply, and backed 

up his order with a fine of $500 per day, doubling every 

seven days. The parties then negotiated the terms of a supersedeas bond, and Fenkell appealed the contempt order.

Fenkell does not challenge the judge’s factual findings. 

Rather, he lodges a host of procedural objections to the 

contempt proceedings. He argues, for example, that Alliance 

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Nos. 14-3181, 14-3215 & 15-3740 25

and the Alliance ESOP lacked standing to pursue contempt 

sanctions. This argument is frivolous. The judgment requires 

Fenkell to restore money to the Alliance ESOP, and Alliance 

is the administrator of the plan. He also argues that it was 

error for the court to proceed under Rule 70(e) of the Federal 

Rules of Civil Procedure, which governs contempt, rather 

than Rule 69, which governs the enforcement of money 

judgments and incorporates the procedural and other protections of state execution law. This argument too is frivolous. It’s well established that an equitable decree of restitution in an ERISA case may be enforced by contempt. See 

Cent. States, Se. & Sw. Areas Pension Fund v. Wintz Props., Inc., 

155 F.3d 868, 876 (7th Cir. 1998); Donovan v. Mazzola, 716 F.2d 

1226, 1239 n.9 (9th Cir. 1983).

Fenkell’s remaining arguments have been considered, are 

likewise frivolous, and do not require comment. The contempt order was procedurally and substantively sound. 

AFFIRMED.

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