Court Opinion

ID: 9473047
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:17:58.124276+00
Date Added: 2024-06-11T17:43:17.509126
License: Public Domain

COFFEY, Circuit Judge,
concurring in result.
I concur in the majority’s analysis that this court has jurisdiction of the appeal under 28 U.S.C. § 1292(a)(1). I further concur in the majority’s conclusion that the settlement agreement between the Department of Labor and the current trustees of the Central States, Southeast and Southwest Areas Health and Welfare Fund (“Fund”) has no effect upon the non-settling defendants, and thus should be approved by the district court. Unlike the majority, I reach this conclusion on the basis that the intent of Congress in enacting the Employee Retirement Income Security Act (“ERISA”) was to allow and encourage Federal courts to exercise their equitable powers and permit contribution among co-trustees of an ERISA plan who have been found in breach of their fiduciary duties. In accord with this reasoning, I refuse to join in the majority’s erroneous dicta concerning the application of the comparative-fault rule to damage awards under ERISA.
The sole issue presented in this appeal is whether the district court judge erred in failing to approve a settlement agreement because insufficient evidence was introduced concerning the reasonableness of the amount of that settlement. I am firmly convinced that this court’s well-reasoned and scholarly analysis in Free v. Briody, 732 F.2d 1331 (7th Cir.1984) (“Free”), provides the framework necessary to resolve the issue presented in this case. In Free the district court held two trustees of an ERISA plan jointly and severally liable for the breach of their fiduciary duties under the plan. One of the co-trustees, Briody, filed a counterclaim for indemnification against the other trustee, Hodgman, for his “nonfeasance and misfeasance in failing to perform his duties as a cofiduciary and trustee.” Free, 732 F.2d at 1333-34. The district court denied Briody’s counterclaim, reasoning that the “concept of passive liability is not applicable to a trust relationship and Briody may not avoid his liability to the trust or shift that liability to his co-trustee.” Id. at 1336. The issue, on appeal to this court, was whether a trustee of an ERISA plan, found in breach of his fiduciary duty, was entitled to indemnification from a co-trustee of the plan.
In analyzing this issue, we initially referred to the Supreme Court’s directive in Northwest Airlines, Inc. v. Transport Workers Union of America, 451 U.S. 77, 90, 101 S.Ct. 1571, 1580, 67 L.Ed.2d 750 (1981), and Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 638, 101 S.Ct. 2061, 2065, 68 L.Ed.2d 500 (1981), that a “joint tortfeasor’s right to contribution or indemnity must be found in the underlying statute or within the limited scope of the federal common law.” Free, 732 F.2d at 1336. Following a review of the applicable ERISA provisions, we stated that “Congress clearly did not intend trustees to act *1184as insurers of co-trustees’ actions, and the only question that remains is whether a co-trustee who has ... been required to make good a loss to a plan, can nonetheless recoup his loss from his more culpable co-trustee.” Id. at 1337. To answer this question, we turned to 29 U.S.C. § 1109 (1982) which provides in pertinent part:
“(a) Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this sub-chapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary.”
(Emphasis added.) Based upon this language we concluded that:
“ERISA grants the courts 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. An award of indemnification within the limited circumstances of this case appears to us to be properly within the court’s equitable powers.”
Free, 732 F.2d at 1337. We added that this interpretation of section 1109 was “based upon the legislative history of ERISA, which demonstrates 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. See also H.R.Rep. No. 93-533, 93d Code Cong., 1st Sess., reprinted in 1974 U.S.Cong. & Ad.News 4639, 4651; S.Rep. No. 93-127, 93d Code Cong., 1st Sess., reprinted in 1974 U.S.Cong. & Ad. News 4838, 4865; Freund v. Marshall & Ilsley Bank, 485 F.Supp. 629, 641-42 (W.D.Wis.1979). In Free, the relevant principle of trust law provided that:
“If one trustee was solely or principally active in the commission of the breach, and the other trustee was passive or only nominally a participant, the court may, in the exercise of its discretion, grant the latter a right of indemnity against the former and throw the entire burden on him who was most blameworthy.”
G. Bogert, Trust & Trustees § 862, at 24 (2d ed. 1962); Restatement (Second) of Trusts § 258, at 651 (1959). Accordingly, based upon the facts presented in Free, we held that the intent of Congress in enacting ERISA was to permit a trustee, found in breach of his fiduciary duty, to seek indemnification from a co-trustee.
In the present case, the district court judge and the non-settling defendants were concerned that the settlement agreement between the Department of Labor and the current trustees of the Fund did not accurately reflect the settling defendants’ degree of liability. In light of this court’s analysis in Free, I believe that this concern was completely unfounded. The relevant law of trusts provides that, “if one co-trustee has paid the entire judgment, or more than his equitable share, the court may accord to him a right of contribution from the co-trustees, so as to adjust the ultimate liabilities as the court deems just.” G. Bogert, Trust & Trustees § 862, at 24 (2d ed. 1962). See also Freund v. Marshall & Ilsley Bank, 485 F.Supp. at 635 n. 1; Aronson v. Servus Rubber Div. of Chromalloy, 566 F.Supp. 1545, 1556 (D.Mass.1983); Restatement (Second) of Trusts § 258, at 650 (1959). It is this very principle of equitable contribution among co-trustees that Congress intended to codify in ERISA. Indeed, as this court properly ruled in Free, 29 U.S.C. § 1109 authorizes Federal courts to allocate damages equitably among co-trustees of an ERISA plan who are found to be in breach of their fiduciary duty. In view of this express grant of authority in 29 U.S.C. § 1109, I am convinced that in the instant case the district court is entitled, following a trial on the merits, to exercise its equitable powers and award contribution, if necessary, to the non-settling defendants. Accord Alton Memorial Hospital v. Metropolitan Life Ins., 656 F.2d 245, 250 (7th Cir.1981) (ERISA “fiduciary may seek ... contribution from co-fidu*1185ciaries”). Accordingly, the issue of whether or not the settlement agreement accurately reflected the settling defendants’ degree of liability was of no consequence in this case and the district court erred in not approving the settlement between the Department of Labor and the current trustees of the Fund.
Rather than adopt this clear and concise line of legal reasoning, the majority embarks upon an erroneous and completely unnecessary discussion of the comparative-fault rule. The majority asserts, in dicta, that the comparative-fault rule “provides a neat solution” to the problems of settling defendants and contribution in an ERISA action. According to the majority’s example, “if the judgment is for $12 million and the settling defendants are found to be one-third responsible, the non-settling defendants will have to pay the plaintiff only $8 million, regardless of the amount of the settlement, and thus will be unaffected by its terms.” According to this example, if the plaintiff settled for less than $4 million with those defendants eventually found to be liable for one-third of the damages, the plaintiff would be unable to recover his full $12 million in damages.
This result directly conflicts with the accepted law of trusts that “[i]f several trustees unite in a breach of trust, they are jointly and severally liable, and the entire claim ... may be satisfied from the property of one trustee.” G. Bogert, Trust & Trustees § 862, at 22-23 (1962) (emphasis added). See also Restatement (Second) of Trusts § 258 comment a, at 651 (1959). The purpose of imposing joint and several liability upon co-trustees is to ensure that the plaintiff “will be able to recover the full amount of damages from some, if not all, participants.” Texas Industries, Inc. v. Radcliffe Materials, Inc., 451 U.S. at 646 [101 S.Ct. at 2070] (emphasis added). In 29 U.S.C. § 1105 (1982), Congress provides that:
“(a) In addition to any liability which he may have under any other provision of this part, a fiduciary with respect to a plan shall be liable for a breach of fiduciary responsibility of another fiduciary with respect to the same plan in the following circumstances:
(1) if he participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other fiduciary, knowing such act or omission is a breach;
(2) if, by his failure to comply with section 1104(a)(1) of this title in the administration of his specific responsibilities which give rise to his status as a fiduciary, he has enabled such other fiduciary to commit a breach; or
(3) if he has knowledge of a breach by such other fiduciary, unless he makes reasonable efforts under the circumstances to remedy the breach.”
The legislative history of section 1105 clearly reveals that Congress intended to adopt the trust law principle of joint and several liability for ERISA, and thereby allow ERISA plaintiffs to collect their full amount of damages from any or all co-trustees found to be in breach of their fiduciary duty. According to the Senate Report, “[a]ny fiduciary who breaches his trust is personally liable for losses resulting from such breach, and co-fiduciaries are jointly and severally liable____” S.Rep. No. 93-127, 93d Cong., 1st Sess., reprinted in 1974 U.S.Code Cong. & Ad.News 4838, 4882 (emphasis added). See also S.Rep. No. 93-383, 93d Cong., 2d Sess., reprinted in 1974 U.S.Code Cong. & Ad.News 4890, 4989. Similarly, the House Conference Report states that “a fiduciary who breaches the fiduciary requirements of the bill is to be personally liable for any losses to the plan resulting from this breach.” H.R. Conf.R. No. 83-1280, 93d Cong., 2d Sess., reprinted in 1974 U.S.Code Cong. & Ad. News 5038, 5100. See also Donovan v. Mazzola, 716 F.2d 1226, 1230 (9 Cir.1983), cert. denied, — U.S. —, 104 S.Ct. 704, 79 L.Ed.2d 169 (1984); Donovan v. Bryans, 566 F.Supp. 1258, 1269 (1983). The joint and several liability provision not only ensures ERISA plaintiffs that they will receive a full damage award but it also fosters congressional policy to protect “the interests of participants in employee bene*1186fit plans and their beneficiaries.” 29 U.S.C. § 1001(b) (1982). See also H.R.Rep. No. 93-533, 93d Cong., 1st Sess., reprinted in 1974 U.S.Code Cong. & Ad.News 4639.
Applying the settled trust law principle of joint and several liability to the majority’s example, the plaintiff would be entitled to the full amount of damages from the non-settling defendants, less the amount of the settlement entered into with the settling defendants. Once the plaintiff is made completely whole, it would be for the defendants to determine among themselves, the extent of their individual liability. The majority’s comparative-fault rule does not ensure ERISA plaintiffs, who settle with one or more co-trustees, that they will receive the full amount of damages awarded by the court. Such a result directly conflicts with congressional intent that ERISA plaintiffs be protected and paid in full. I believe that the majority’s erroneous, unnecessary reference to the comparative-fault rule, in dicta, does nothing more than create chaos and confusion for members of the Federal bench and bar. Accordingly, for the reasons expressed in this concurrence, I agree only with the majority’s analysis that we have jurisdiction of this case under 28 U.S.C. § 1292(a)(1) and that the district court erred in not approving the parties’ settlement agreement.