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MUTUAL LIFE INS. CO. v. YAMPOL

January 26, 1989

THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, assignee of the Director of Insurance of Illinois, Liquidator of NATIONAL HEALTH CARE TRUST, Plaintiff,
v.
HILLEL YAMPOL, JAY SHLOFROCH, MORRIS SHLOFROCH and BENEFIT CENTER, LTD., an Illinois corporation, Defendants. HILLEL YAMPOL, Counterplaintiff/Third Party Plaintiff, v. THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, Counterdefendant, and SHELDON ROBINSON and ASSOCIATED FINANCIAL CONSULTANTS, INC., Third Party Defendants


Harry D. Leinenweber, United States District Judge.


The opinion of the court was delivered by: LEINENWEBER

HARRY D. LEINENWEBER, UNITED STATES DISTRICT JUDGE

 This cause is before the court on the motion of plaintiff-counterdefendant, The Mutual Life Insurance Company of New York ("MONY"), to dismiss the counterclaim of defendant/counterplaintiff/third party plaintiff, Hillel Yampol ("Yampol"), and on the motion of third party defendants, Sheldon Robinson ("Robinson") and Associated Financial Consultants, Inc. ("AFC"), to dismiss Yampol's third party complaint. For the reasons herein stated, the motions are granted.

 MONY instituted this cause of action in 1983 alleging that defendants, Yampol, Jay Shlofroch, Morris Shlofroch, and Benefit Center, Ltd., breached their fiduciary duties to the National Health Care Trust ("Trust") in violation of the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. In filing suit MONY was acting as the assignee of the Illinois Director of Insurance who liquidated the Trust under a state court order. People of the State of Ill. ex rel O'Connor v. Natl. Health Care Trust, et al, No. 82 CH 14 (Order, Feb. 9, 1982). In March, 1986 Yampol filed a counterclaim against MONY and a third party complaint against Robinson and AFC. The counterclaim alleges that MONY had a fiduciary duty to the Trust, under ERISA, in its capacity as claims administrator of the Trust and that by increasing costs to the plan, mishandling claims administration and wasting Trust assets, MONY breached its fiduciary duty and violated provisions of ERISA. The counterclaim also alleges a breach of fiduciary duty in violation of Illinois common law and seeks contribution and punitive damages. The third party complaint also seeks contribution and punitive damages alleging that Robinson and AFC breached their fiduciary duties to the Trust in violation of both ERISA and Illinois state law. MONY has now moved to dismiss the counterclaim and Robinson and AFC have moved to dismiss the third party complaint.

 DISCUSSION

 Count I

 Count I of Yampol's counterclaim and third party complaint seeks contribution from his alleged co-fiduciaries, MONY, Robinson and AFC, pursuant to 29 U.S.C. § 1105 of ERISA. This necessarily raises the question of whether ERISA provides for a right of contribution. Without question ERISA does not expressly provide for such a right so the court must determine if an implied right exists.

 Two cases decided by the Supreme Court in 1981 highlight the court's reluctance to allow contribution under federal statutes that do not expressly provide for it. See Texas Industries, Inc. v. Radcliff Matls., Inc. 451 U.S. 630, 101 S. Ct. 2061, 68 L. Ed. 2d 500 (1981); NW Airlines v. Transport Workers Union, 451 U.S. 77, 101 S. Ct. 1571, 67 L. Ed. 2d 750 (1981). These cases establish criteria for determining whether a right to contribution is embodied in a particular federal statute. A right to contribution may arise in either of two ways: first, through the affirmative creation of a right of action by Congress, either expressly or by clear implication; or second, through the power of federal courts to fashion a federal common law of contribution. Texas Industries, 451 U.S. at 638, 101 S. Ct. at 2066. In determining whether a federal statute (such as ERISA) that does not expressly provide for a right of contribution nonetheless implicitly creates such a right, the court's inquiry must focus on whether Congress intended, by clear implication, to create such a right. Factors relevant to this inquiry are the language of the statute itself, its legislative history, and the underlying purpose and structure of the statutory scheme. NW Airlines, 451 U.S. at 91, 101 S. Ct. at 1580.

 As noted above, ERISA does not expressly create a right of contribution in favor of fiduciaries. This omission, although significant, is not dispositive if the language of the statute indicates that it was enacted for the special benefit of a class of which the claimant is a member. See NW Airlines, 451 U.S. at 91-92, 101 S. Ct. at 1580-81. The statutory language of ERISA however reflects Congress' intent to benefit participants in employee benefit plans and their beneficiaries:

 
"It is hereby declared to be the policy of this chapter to protect interstate commerce and the interests of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions and ready access to the Federal courts."

 29 U.S.C. § 1001(b). Yampol, as a fiduciary then, does not appear to be a member of a class for whose especial benefit ERISA was enacted.

 Yampol has relied on 29 U.S.C. § 1105(a) *fn1" as the basis for his claim for contribution against MONY, Robinson and AFC. This provision however merely creates joint and several liability among co-fiduciaries in certain circumstances and is silent on the issue of contribution. Moreover, the Supreme Court has rejected the equation of joint and several liability with a right of contribution. Texas Industries, 451 U.S. at 646, 101 S. Ct. 2069-70.

 While the statutory language of ERISA then provides little support for the contention that Congress intended by clear implication to create a right of contribution, ERISA's legislative history is also silent as to a right of contribution for a fiduciary or anyone else. See McClendon v. Continental Group, Inc., 7 Employee Benefits Cas. (BNA) 2403, 2407 (D.N.J. 1986). Indeed even where Congress addressed the issue of joint and several liability of fiduciaries, there is no mention of a right to contribution. See H.R.Rep., No. 1280, 93d Cong., 2d Sess. 299-300, reprinted in 1974 U.S. Code Cong. & Ad. News 4639, 5080.

 ERISA's structure and underlying purpose are wholly consistent with the legislative history in this regard. "The presumption that a remedy was deliberately omitted from a statute is strongest when Congress has enacted a comprehensive legislative scheme including an integrated system of procedures for enforcement." NW ...


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