482 B.R. 678
1st Cir. BAP2012Background
- Raso appeals a bankruptcy court summary judgment favoring Fahey on Count II of a § 523(a)(4) nondischargeability claim.
- Fahey was president, treasurer, and sole shareholder of Zani Tile; Raso was trustee of BAC Local 3 and treasurer of the related Funds.
- The Funds are ERISA multi-employer plans; Trust Agreements define assets to include plan assets and unpaid contributions.
- Fahey’s role gave him broad control over Zani’s operations, including payroll deductions and payment decisions to the Funds.
- The bankruptcy court held Fahey was not an ERISA fiduciary and thus not liable under § 523(a)(4); the panel reversed and remanded for defalcation analysis.
- The issue on appeal is whether Fahey acted as a fiduciary with respect to the Funds, making the debt to the Funds nondischargeable under § 523(a)(4).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Fahey was an ERISA fiduciary under § 1002(21)(A)(i). | Raso argues Fahey exercised control over plan assets, satisfying ERISA fiduciary status. | Fahey asserts his control was contractual, not discretionary management of plan assets, so not fiduciary. | Yes, Fahey acted as an ERISA fiduciary. |
| Whether Fahey was a fiduciary of a technical or express trust for § 523(a)(4). | ERISA creates a technical trust; funds assets entrusted to trustees establish fiduciary relation. | Argues no fiduciary status absent discretionary control over plan assets. | Fahey was ERISA fiduciary and the Funds constituted a technical trust. |
| Whether Fahey’s nonpayment of contributions constitutes defalcation. | Nonpayment of plan assets constitutes defalcation by a fiduciary. | Defalcation not proven since funds were not entrusted to Fahey in a fiduciary capacity. | Remanded for fact-finding on defalcation. |
| Whether ERISA fiduciary status alone satisfies fiduciary capacity under § 523(a)(4). | ERISA fiduciaries satisfy fiduciary capacity under § 523(a)(4). | ERISA fiduciary status may not automatically satisfy fiduciary capacity; must assess control over assets. | ERISA fiduciary status can satisfy fiduciary capacity; also supports common-law technical trust analysis. |
Key Cases Cited
- In re Bologna, 206 B.R. 628 (Bankr.D.Mass.1997) (technical trust elements and pre-existing trust preclude reference to wrong.)
- Mertens v. Hewitt Assocs., 508 U.S. 248 (U.S. 1993) (fiduciary defined by control and authority over the plan.)
- In re Duncan, 331 B.R. 70 (Bankr.E.D.N.Y.2005) (defines defalcation and fiduciary capacity elements; ERISA context.)
- 406 F.3d 1192, In re Luna (10th Cir.2005) (plan assets definition and control over collection rights affecting fiduciary status.)
- Blatt v. Marshall and Lassman, 812 F.2d 804 (2d Cir.1987) (actual control over plan assets establishes fiduciary duty.)
- In re Harwood, 637 F.3d 615 (5th Cir.2011) (ERISA fiduciary scope and dischargeability.)
- In re Brown, 131 B.R. 900 (Bankr.D.Me.1991) (trust relationship under nonbankruptcy law relates to fiduciary concepts.)
- In re Sullivan, 217 B.R. 670 (Bankr.D.Mass.1998) (common law technical trusts and fiduciary concepts.)
- In re Nielsen, 53 B.R. 289 (Bankr.N.D.Ala.1985) (ERISA does not automatically create fiduciary status for § 523(a)(4).)