455 B.R. 273
Bankr. S.D. Ga.2011Background
- Volpitto was sole owner of APM and Trustee of the APM 401(k) Plan; Plaintiffs were APM employees seeking 2006–2007 employer contributions.
- APM’s Plan stated discretionary employer contributions; the Plan and summary labeled the plan a profit-sharing, not a money-purchase, plan.
- Trial record included contracts and attachments stating 12% employer contribution, but Plan language and IRS distinctions treated contributions as discretionary.
- APM faced financial distress in 2006–2007; by late 2007, subsidies ceased and Doctors Hospital contracts ended, triggering funding cessation.
- Volpitto argued contributions were discretionary and intended to be funded; Plaintiffs contended course of dealing meant a fixed 12% annual contribution.
- Court ultimately held the debt to Plaintiffs dischargeable under 11 U.S.C. § 523(a)(4).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Volpitto’s fiduciary acts as Plan Trustee produced a non-dischargeable debt under §523(a)(4). | Plaintiffs claim fraud/defalcation occurred while fiduciary. | Volpitto contends no fraud/defalcation; contributions discretionary. | No §523(a)(4) fraud/defalcation found. |
| Whether the Plan’s discretionary nature defeats nondischargeability despite past practice of 12% contributions. | Course of dealing implied fixed 12% contributions. | Plan language and summary make contributions discretionary. | Discretionary nature controls; no nondischargeable debt. |
| Whether failure to pursue litigation against APM for unpaid contributions constitutes fiduciary defalcation. | Fiduciary duty to sue for plan assets; breach. | Litigation discretion; not abuse of fiduciary duty. | Not a breach of fiduciary duty; no §523(a)(4) defalcation. |
| Whether Volpitto’s use of trust funds to pay his legal defense constitutes defalcation. | Trust funds used for defense; not permitted if claim is fiduciary breach. | Plan allows reimbursement of trustee's legal expenses; defense prevailed. | Plan language permits reimbursement; no defalcation. |
| Whether the purported retroactive termination of contributions was a Plan amendment or retroactive change. | Contributions retroactively terminated; breach of fiduciary duty. | No final payment due; not retroactive termination. | Not retroactive termination; no §523(a)(4) issue. |
Key Cases Cited
- Local Union 2134 v. Powhatan Fuel, Inc., 828 F.2d 710 (11th Cir. 1987) (fiduciary status hinges on activity and ERISA-regulated conduct, not all business decisions)
- Pegram v. Herdrich, 530 U.S. 211 (Supreme Court, 2000) (fiduciary function must exist when alleged breach occurs)
- ITPE Pension Fund v. Hall, 334 F.3d 1011 (11th Cir. 2003) (unpaid employer contributions are not plan assets unless clearly stated)
- In re Barrett, 410 B.R. 113 (Bankr.S.D.Fla. 2009) (fraud/defalcation standard under §523(a)(4) requires fiduciary breach with funds entrusted)
- In re Roberson, 231 B.R. 136 (Bankr.S.D.Ga. 1999) (defalcation requires entrustment of funds to fiduciary)
- In re Weaver, 174 B.R. 85 (Bankr.E.D.Tenn. 1994) (promissory actions alone not fraud/defalcation; breach of contract different)
- Bucci, Board of Trustees v. Bucci, 493 F.3d 635 (6th Cir. 2007) (employee-employer contracts alone do not create ERISA fiduciary duty for §523(a)(4))