The FIDUCIARY CORNER: Eighth Circuit Says No Finger Pointing Among Fiduciaries
Gregory L. Ash, Saturday, September 01, 2007 | Filed under: ERISA Litigation, Fiduciary Duties
It’s a practice first developed in the early stages of life, witnessed countless times by the parents of young children, and frequently associated with a distraught youngster wailing something like “It wasn’t my idea, Dad; it was his fault.” Such blame-shifting is so ubiquitous it has even found a place in the American judicial system. This right of “contribution” is a principle in which a wrong-doer who has paid the entire amount of a loss is allowed to seek reimbursement from another wrong-doer whose acts also contributed to the same loss. Although contribution is a liability-shifting measure commonly employed by defendants in other contexts, it is not a right that breaching fiduciaries have under ERISA, according to the United States Court of Appeals for the Eighth Circuit. (Travelers Casualty & Surety Co. v. IADA Services, Inc.)
Appellate courts have split on the question whether an ERISA fiduciary who is adjudged to have breached its duties may recover from another ERISA fiduciary who may also have contributed to the breach. In the Travelers case, the Eighth Circuit, whose jurisdiction includes Missouri, joined the Ninth Circuit in finding that ERISA does not afford this right to breaching fiduciaries. This leaves only the Second Circuit, whose jurisdiction includes New York, to allow breaching fiduciaries to shift blame among themselves under a theory of contribution.
It is unclear how the Eighth Circuit’s ruling might affect the litigation strategy of fiduciaries accused of violating their ERISA obligations. Because it will now be impossible for a breaching fiduciary to shift the burden of any judgment to another fiduciary, however, pretrial settlement may become more difficult. ERISA litigants therefore should carefully consider the Travelers decision in the early stages of litigation.