Chesemore v. Fenkell

Dist. Ct. did not err in finding that defendant was liable to plaintiffs-employee participants in ESOP created by defendant, where defendant had breached his fiduciary duty to plaintiffs by orchestrating purchase of company stock (that had been controlled by defendant) at inflated prices with ESOP funds under circumstances that resulted in said stock becoming subsequently worthless. Ct. rejected defendant’s claim that Dist. Ct. violated ERISA by directing him to indemnify other defendants who played minor role in said purchase, since, under Free, 732 F.2d 1331, Dist. Ct.’s remedial authority under ERISA includes indemnification and contribution. Moreover, said order was proper, even though defendant was not named trustee of relevant ESOP, since defendant exercised control over trustees of ESOP and functionally acted in fiduciary capacity. Ct. also held that defendant could properly be required to pay $7,803,534 to subclass of plaintiffs, which represented loss of value of their ESOP accounts, as well as $6,473,850.32 to main class of plaintiffs, which represented amount plaintiffs’ ESOP overpaid for company stock, minus percentage representing interests that subclass had already received.