Justia ERISA Opinion Summaries

A privately held investment fund with ERISA plan investors (the Fund) contained provisions in its governing agreements granting indemnification and advancement rights to its general partner, management company, and their principals, all of whom served as ERISA fiduciaries. After these fiduciaries were removed in late 2023, the Fund sued them in the Delaware Court of Chancery, alleging breach of contract and violations of the fund’s governing documents for withholding information and assets. The defendants counterclaimed, seeking advancement of their litigation expenses, as provided in the fund’s agreements.The Fund argued that advancement from ERISA assets was barred by section 1110 of the Employee Retirement Income Security Act (ERISA), which voids contractual provisions that relieve fiduciaries from responsibility or liability for their ERISA duties. The Court of Chancery held that, even though advancement was permitted under Delaware law, ERISA section 1110 rendered these advancement provisions void because they would improperly relieve fiduciaries from ERISA liability. The court also noted that a bar on advancement was appropriate since the fiduciaries had not shown an ability to repay advanced funds. The defendants appealed this ruling.The Supreme Court of the State of Delaware reviewed the case. It held that advancement of litigation expenses for the defense of state-law claims, subject to a written undertaking to repay if indemnification is ultimately unwarranted, does not violate ERISA section 1110. The Court distinguished advancement from indemnification, emphasizing that advancement with an undertaking does not abrogate the fund’s right to recover from fiduciaries for ERISA breaches. The Court also found that neither statutory language nor relevant federal case law categorically barred such advancement under these circumstances. Accordingly, the Supreme Court of Delaware reversed the Court of Chancery’s decision and remanded the matter. View "Invictus Global Management, LLC v. Invictus Special Situations Master I, L.P." on Justia Law