Court Opinion

ID: 4017903
Source: CourtListenerOpinion
Date Created: 2016-07-21 17:00:57.591672+00
Date Added: 2024-06-11T07:45:58.972171
License: Public Domain

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
                ____________________
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 ac-
quired 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 Alli-
ance. Multiple interlocking transactions to that effect closed

*   Of the Northern District of Illinois, sitting by designation.
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 worth-
less. 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 fiduci-
ary 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 substan-
tial 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 over-
ruled. 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
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, ac-
quired 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 experi-
enced significant growth in both sales and operations.
    David Fenkell established Alliance in 1994 and at all rele-
vant 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-stock-
ownership-plan (last visited July 14, 2016). In the past company contribu-
tions 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.”).
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 Alli-
ance 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 employ-
ees’ 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 Trach-
te 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 work-
week 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
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 independ-
ent buyer at his desired price, Fenkell devised and imple-
mented 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 re-
moval 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.
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 em-
ployees, 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
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 insist-
ed 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 ac-
        counts)] 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 deci-
        sion-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.
Nos. 14-3181, 14-3215 & 15-3740                               9

       transaction would remain answerable to Alli-
       ance 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 sub-
stantial 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. Alt-
hough 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 orchestrat-
ed 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’ fidu-
ciary 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 tremen-
dous 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
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 increas-
      ingly impressed by Fenkell’s complete recall of
      minor details and sophisticated understanding
      of ERISA transactions, as well as the law gov-
      erning those transactions. After Pagelow was
      sidelined by the 2002 sale, Fenkell was easily
      the smartest person in the room. He held be-
      tween a $2.5 and $3 million interest in the
      phantom stock plan for Alliance employees. He
      knew that under any alternatives to a lever-
      aged ESOP purchase, he was unlikely to re-
      ceive 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, award-
ed attorney’s fees, and approved settlements between the
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 re-
medial 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 ad-
visement, 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 consoli-
dated that appeal with the earlier ones.
                        II. Discussion
    Although Fenkell does not challenge his liability, his ap-
peal 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 indemni-
fication 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 ex-
ceeded 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 inexpe-
rienced 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 Alli-
ance ESOP assets to orchestrate the inflated leveraged buy-
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 co-
fiduciaries.
     Although ERISA contemplates the allocation of fiduciary
obligations among cofiduciaries (thereby limiting subse-
quent losses), see 29 U.S.C. § 1105(b)(1)(B), it doesn’t specifi-
cally mention contribution or indemnity as a remedy. In-
stead, 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 gener-
ally 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. &
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 responsibil-
ity.”).
    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 contrib-
ute 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
14                            Nos. 14-3181, 14-3215 & 15-3740

principles of trust law permit the courts to order contribu-
tion or indemnification among cofiduciaries based on de-
grees 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 indemnifica-
tion as allowed in the law of trusts. Id.
    We noted in Free that § 1105(b)(1)(B) expressly allows fi-
duciaries to allocate various responsibilities between them-
selves 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 pro-
vide 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 be-
tween 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.
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 [ques-
tion] 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 sup-
posed 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 de-
cided 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 uni-
form on the question of contribution and indemnification.
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 inter-
pret 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 con-
sistent 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
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 inexpe-
rienced 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 Fen-
kell 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.
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. Re-
call 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 Alli-
ance 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 partici-
pants 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 overpay-
ment 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.
Nos. 14-3181, 14-3215 & 15-3740                              19

The second is the loss suffered by the subclass: plan partici-
pants 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 overpay-
ment. 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 sepa-
rate 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
20                            Nos. 14-3181, 14-3215 & 15-3740

interest … is part of the actual damages sought to be recov-
ered.” 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 connec-
tion 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 prejudgment-
interest 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” damag-
es 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.
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 non-
settling party does not have standing to object to a settle-
ment between other parties. Particularly, non-settling de-
fendants in a [multi]defendant litigation context have no
standing to object to the fairness or adequacy of the settle-
ment 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 settle-
ments.
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
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 defend-
ants, 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 discre-
tion, award a reasonable attorney’s fee “as long as the fee
claimant has achieved ‘some degree of success on the mer-
its.’” 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 sec-
tion 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 rea-
sonable. He said that it would be difficult to differentiate
between fees incurred for claims against individual defend-
ants and also that fees were being paid through a complicat-
ed system of overlapping settlements and payments by
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 pre-
sumptively 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 con-
tempt order. As we’ve noted, the judge’s approval of the
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 pro-
tracted hearings, the judge found Fenkell in contempt. The
proceedings were interrupted by Fenkell’s premature ap-
peals 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 Fen-
kell had substantial assets and “was actually taking affirma-
tive 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 super-
sedeas 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
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 pro-
tections of state execution law. This argument too is frivo-
lous. It’s well established that an equitable decree of restitu-
tion 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 con-
tempt order was procedurally and substantively sound.
                                                      AFFIRMED.