Secretary United States Department of Labor v. Kwasny
853 F.3d 87
| 3rd Cir. | 2017Background
- Richard Kwasny was a managing partner and trustee/fiduciary of Kwasny & Reilly, P.C.’s 401(k) Profit Sharing Plan.
- Between Sept. 2007 and Nov. 2009 employee payroll withholdings intended for the Plan were commingled with the Firm’s general assets and not timely deposited, producing a shortfall (~$40,416.30 unrepaid; additional late payments).
- The DOL (Secretary of Labor) sued to recover plan losses, remove Kwasny as trustee, and enjoin future fiduciary service; both parties moved for summary judgment.
- The District Court treated Kwasny’s failures to respond to requests for admission as conclusive admissions under Fed. R. Civ. P. 36(b) and relied on the Firm bookkeeper’s declaration.
- The District Court granted the Secretary’s motion and denied Kwasny’s; Kwasny appealed, arguing (inter alia) statute of limitations and res judicata defenses and requesting offset for a prior state-court judgment.
Issues
| Issue | Plaintiff's Argument (Secretary) | Defendant's Argument (Kwasny) | Held |
|---|---|---|---|
| 1) Breach of ERISA fiduciary duties by directing employee contributions into firm assets | DOL: Kwasny, as trustee, directed withholdings to be commingled/used for firm benefit and thus breached duties and is liable for restitution | Kwasny: Disputes or minimizes factual responsibility; offers a self-declared account contesting bookkeeper’s statements | Held: Summary judgment for Secretary — admissions and bookkeeper affidavit establish breach; trustee liability is joint and several |
| 2) Statute of limitations under 29 U.S.C. § 1113 | DOL: Suit timely; enforcement referral and substantiating complaint occurred in 2011, within limitations | Kwasny: EBSA/firm employees had actual knowledge earlier (2006–2010), so claims are time-barred | Held: Rejected — earlier calls/employee awareness did not give Secretary actual knowledge; 2011 substantiated complaint triggered enforcement within limitations |
| 3) Res judicata / claim preclusion based on prior private plaintiff (Haft) state-court judgment | DOL: Secretary’s enforcement interests are broader than private litigant’s; not in privity with private plaintiff, so not barred | Kwasny: State-court judgment against him on related withholding claims should preclude or bar this suit | Held: Rejected — under Full Faith & Credit and PA law, Secretary is not in privity with private litigants in ERISA enforcement; claim preclusion does not apply |
| 4) Offset for prior Bucks County judgments arising from Haft’s suit | DOL: Agrees offset may be appropriate if prior judgments recovered the same withheld contributions | Kwasny: Seeks full offset/credit for amounts recovered in state proceedings | Held: Remanded — appellate record unclear whether and to what extent the Bucks County default/judgment recovered the same withheld contributions; district court to determine proper offset |
Key Cases Cited
- Santini v. Fuentes, 795 F.3d 410 (3d Cir. 2015) (standard of appellate review for summary judgment)
- Struble v. N.J. Brewery Emps.’ Welfare Trust Fund, 732 F.2d 325 (3d Cir. 1984) (trustee liability; withheld but misdirected funds are plan assets and trustees are jointly and severally liable)
- Montrose Med. Grp. Participating Sav. Plan v. Bulger, 243 F.3d 773 (3d Cir. 2001) (definition of actual knowledge for ERISA § 1113 limitations)
- Gluck v. Unisys Corp., 960 F.2d 1168 (3d Cir. 1992) (actual knowledge requires knowledge of material facts sufficient to understand a claim exists)
- Sec’y of Labor v. Fitzsimmons, 805 F.2d 682 (7th Cir. 1986) (Secretary’s enforcement interests differ from private plaintiffs; lack of privity)
- Beck v. Levering, 947 F.2d 639 (2d Cir. 1991) (offset of Secretary’s judgment appropriate only when private plaintiffs have actually recovered concurrent judgments)