159 F. Supp. 3d 565
E.D. Pa.2016Background
- Secretary of Labor sued Richard Kwasny (managing partner, Plan trustee/fiduciary) for failing to timely deposit employee 401(k) contributions into the Kwasny & Reilly, P.C. Plan, resulting in $40,416.30 in losses.
- Kwasny admitted (deemed admissions) that he withheld employee contributions between 2007 and 2009, commingled them with firm assets, and directed their use for the firm; some late contributions ($2,099.06) were later forwarded without interest.
- Secretary investigated after a Plan participant provided documentary evidence in fall 2011 and filed suit in July 2014; summary judgment motions were submitted by both parties.
- Court treated Kwasny’s requests for admissions as conclusively established and found his contrary, self-serving declaration insufficient to create a genuine dispute of material fact.
- Secretary sought restitution with prejudgment interest, removal and replacement of Kwasny as Plan fiduciary (at Kwasny’s expense), and a permanent injunction barring future fiduciary service; Kwasny agreed to the injunction but disputed restitution and raised several defenses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of limitations under 29 U.S.C. § 1113 (3‑year actual knowledge bar) | Secretary lacked actual knowledge before fall 2011; suit timely filed July 2014 | Kwasny: EBSA had actual knowledge in 2010 (investigator visited firm), so claims time‑barred | Court: EBSA did not have actual knowledge before fall 2011; 3‑year period did not begin earlier; claims timely |
| Res judicata / claim or issue preclusion (Haft judgment) | Secretary: not precluded; government interest distinct from private plaintiff | Kwasny: Haft previously litigated and recovered same sums; Secretary barred | Court: No privity between Secretary and private plaintiff; doctrines do not bar Secretary’s independent enforcement action |
| Failure to join indispensable party (co‑trustee Mark Reilly) | Secretary: not required; trustees can be held jointly and severally; Reilly not indispensable | Kwasny: Reilly made plan decisions and should have been joined | Court: Reilly not indispensable; Kwasny’s deemed admissions establish his own fiduciary breaches; dismissal not warranted |
| Appropriate relief (restitution, interest, removal, fees for independent fiduciary) | Secretary: restitution of withheld contributions + prejudgment interest (IRS underpayment rate), removal, independent fiduciary paid by Kwasny, permanent injunction | Kwasny: disputes restitution amount and unclear on paying independent fiduciary; agreed to injunction | Court: Grants restitution of $40,416.30 plus interest at IRS rate, orders removal and appointment of independent fiduciary at Kwasny’s expense, and injunction; Secretary entitled to equitable relief to restore Plan |
Key Cases Cited
- Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575 (3d Cir. 2009) (summary judgment genuine‑issue standard)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (summary judgment standard and materiality/genuineness definitions)
- Pignataro v. Port Auth., 593 F.3d 265 (3d Cir. 2010) (view facts in light most favorable to nonmoving party)
- Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156 (3d Cir. 2009) (conclusory self‑serving affidavits insufficient to defeat summary judgment)
- Gluck v. Unisys Corp., 960 F.2d 1168 (3d Cir. 1992) (ERISA § 1113 requires actual, not constructive, knowledge to trigger three‑year limitations)
- Fitzsimmons v. Sec’y of Labor, 805 F.2d 682 (7th Cir. 1986) (government not in privity with private ERISA plaintiffs; broader public interest permits independent suit)
- Donovan v. Cunningham, 716 F.2d 1455 (5th Cir. 1983) (Secretary’s enforcement interest broader than private plaintiffs’ recovery)
- Struble v. New Jersey Brewery Employees’ Welfare Trust Fund, 732 F.2d 325 (3d Cir. 1984) (trustees may be held jointly and severally liable)