participate in a fiduciary's breach of fiduciary duty. The Court left undecided, however, the question of whether a nonfiduciary could be sued for equitable relief, including restitution. 113 S. Ct. at 2072.
In the wake of Mertens, several courts have held that nonfiduciaries who are unjustly enriched as a result of a breach of fiduciary duty can be compelled to make restitution. For example, in Landwehr v. DuPree, 72 F.3d 726 (9th Cir. 1995), for example, the court held that the statement in Mertens that "nonfiduciary service providers 'must disgorge assets and profits obtained through participation as parties-in-interest in transactions prohibited by [ 29 U.S.C. § 1106],' ... reaffirmed the principle that ERISA plaintiffs may obtain equitable relief, including restitution, from service providers who engage in prohibited transactions." Id. at 734 (quoting Mertens, 113 S. Ct. at 2071-72. See also Concha v. London, 62 F.3d 1493, 1504 (9th Cir. 1995) (fiduciaries stated cause of action for equitable relief against attorneys who were retained by plan, based on allegations that attorneys had provided services to plan, and hence were parties in interest, and that attorneys had engaged in prohibited transactions, including receiving excessive compensation), cert. denied, 134 L. Ed. 2d 772, 116 S. Ct. 1710 (1996).
A "party in interest" is defined by ERISA as "any fiduciary (including, but not limited to, any administrator, officer, trustee, or custodian, counsel, or employee of such benefit plan, ... [or] a person providing services to such plan ..." 29 U.S.C. § 1002(14) (emphasis added). It is clear that O'Connell falls within this definition. The minutes of the Board meetings from January 5, 1989 and August 15, 1989, which are attached to O'Connell's summary judgment motion, identify him as "Fund counsel." ERISA specifically prohibits any transaction that would constitute a "transfer to, or use by or for the benefit of, a party in interest, of any assets of the plan ..." 29 U.S.C. § 1106(a)(1). The granting of pension benefits to O'Connell in contravention of the terms of the Agreement plainly falls within this prohibition. See New York State Teamsters Council v. Estate of DePerno, 18 F.3d 179, 182 (2d Cir. 1994) (former fund attorney was party in interest under 29 U.S.C. §§ 1002(A) and 1002(B)); Nieto v. Ecker, 845 F.2d 868, 873 (9th Cir. 1995) (lawyers who had been retained by plan who had failed to prosecute lawsuits and had been paid for services they did not render could be held liable for equitable relief as parties in interest).
The Ninth Circuit's view expressed in Landwehr was echoed by the Tenth Circuit in Reich v. Stangl, 73 F.3d 1027 (10th Cir. 1996), petition for cert. filed, No. 95-1631, 64 U.S.L.W. 3709 (Apr. 9, 1996). In Stangl, the court held that the Mertens "Court's definition of appropriate equitable relief under [ 29 U.S.C. § 1132(a)(5)] is surely broad enough to include the recovery of the fruits of a prohibited transaction from a party in interest." Id. at 1032. The court added that "the circuits that have discussed the issue after Mertens have not found that the Supreme Court's decision bars equitable actions seeking restitution from parties in interest." Id. (citing cases). See also Reich v. Compton, 57 F.3d 270, 286 (3d Cir. 1995) ("nonfiduciaries may be held liable for their participation in prohibited transactions").
Several district courts from this and other circuits have reached similar conclusions. See, e.g., Cosgrove v. Circle K Corp., 915 F. Supp. 1050, 1065 (D.Ariz. 1995) (action for restitution can be maintained pursuant to 29 U.S.C. § 1132(a)(3) against nonfiduciary party in interest to disgorge ill-gotten gains procured through prohibited transaction); DeLaurentis v. Job Shop Technical Serv., Inc., 912 F. Supp. 57, 62 (E.D.N.Y. 1996) (claim for restitution under 29 U.S.C. § 1132(a)(3) may be available against nonfiduciary who is enriched as result of violation of ERISA); Gruby v. Brady, 838 F. Supp. 820, 834 n. 15 (S.D.N.Y. 1993) (Mertens did not affect rule set forth in Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d 270, 280 n. 12 (2d Cir. 1992), that "parties who knowingly participate in fiduciary breaches may be liable under ERISA to the same extent as the fiduciaries").
Thus, whether O'Connell exercised sufficient authority or control over the Plan to render him a fiduciary need not be decided here. As counsel to the Fund, O'Connell was clearly a party in interest, and since he was not eligible for benefits under the Agreement, the issuance of benefits to him was a violation of 29 U.S.C. § 1106(a)(1). Because trustees have a duty under 29 U.S.C. § 1104(a) to act "solely in the interest of the participants and beneficiaries" of the plan, and because 29 U.S.C. § 1132 empowers them to bring an action "to enjoin any act or practice which violates ... the terms of the plan," or "to enforce ... the terms of the plan ...," plaintiffs can properly seek restitution from O'Connell to disgorge all benefits that he wrongfully received. See Dardaganis v. Grace Capital Inc., 889 F.2d 1237, 1241 (2d Cir. 1989) (trustees may maintain action to recover, on behalf of the plan, losses caused by actions of other fiduciaries).
VI. Effect of the Settlement Agreement
O'Connell also claims that plaintiffs have released him from liability by virtue of the settlement agreement between plaintiffs and the other defendants. O'Connell bases this assertion on a statement in paragraph 8 of the agreement that the plaintiffs agreed to release "all past trustees of the Pension Fund ..." O'Connell states that he is covered by this provision because he was a trustee of the Fund from 1981 until 1986.
O'Connell's assertion is meritless. The parties and the court have always understood, and the settlement agreement reflects, that plaintiffs' claims against O'Connell were not included in the settlement. For example, the settlement agreement states at paragraph 3 that "the parties are desirous of settling the claims against the Defendant Trustees and Defendant Bianchi," and that the parties agreed that "in the event that the Plaintiffs obtain a judgment against Defendant Thomas O'Connell, Esq.," the Aetna Casualty and Surety Company ("Aetna") would pay to the Fund the amount determined to have been wrongfully paid to O'Connell. Paragraph 4 then states that upon such payment by Aetna, Aetna would "be able to pursue Mr. O'Connell" to recoup the amount of the payments. In addition, paragraph 17 states that "nothing in this Agreement shall alter or affect in any way any claim which the Plaintiff Trustees or the Pension Fund have or may have against Thomas O'Connell." In short, O'Connell was not a party to, or covered by, the settlement, and his assertions to the contrary are without merit.
VII. O'Connell's Counterclaim
In his answer to the complaint, O'Connell asserted a counterclaim against plaintiff Thomas Roth, alleging that he has sought to prevent O'Connell from receiving pension benefits, and that he instigated this lawsuit, out of personal malice toward O'Connell. My finding in favor of plaintiffs on their claims against O'Connell establishes that this counterclaim is without merit, and it is therefore dismissed.
Plaintiffs' motion for summary judgment (Item 9) is granted in part and denied in part. Defendant Thomas O'Connell's cross-motion for summary judgment (Item 34) is granted in part and denied in part.
Plaintiffs' motion for summary judgment is granted to the extent that they claim that defendant Thomas O'Connell improperly received pension benefits from December 31, 1991 to the date of entry of this Decision and Order. Plaintiffs, as representatives of Roofers Local Union No. 22 Pension Fund, are therefore entitled to recover and recoup from defendant Thomas O'Connell such improper payments, plus interest. If the parties cannot agree on the amount of recovery to be reduced to judgment, the matter will be scheduled before the Court for an inquest on damages; and it is further
ORDERED that the trustees and managers of Roofers Local No. 22 Pension Fund are hereby enjoined from making any further pension benefit payments to defendant Thomas O'Connell.
IT IS SO ORDERED.
DAVID G. LARIMER
UNITED STATES DISTRICT COURT
Dated: Rochester, New York
August 7, 1996.