In Schafer v. Multiband Corp., 2013 WL 607910 (E.D. Mich. Feb. 19, 2013), a district court vacated the decision of an arbitrator who concluded that indemnification agreements executed in connection with the establishment of an employer stock ownership plan and an employee stock ownership trust violated ERISA § 410(a), 29 U.S.C. § 1110(a). The agreements indemnified the plaintiffs for losses arising from their acts as directors of the ESOP’s sponsor and as trustees of the ESOP, but the agreements did not indemnify plaintiffs for losses caused by intentional misconduct or gross negligence. The court found that the arbitrator manifestly disregarded clearly established legal precedent. Indemnification agreements such as the one at issue are enforceable and do not violate ERISA Section 410’s prohibition of exculpatory provisions because the agreements did not relieve plaintiffs of liability for any losses.
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