540 B.R. 154
Bankr. W.D. Pa.2015Background
- Superior Specialty Company (Superior) operated a profit-sharing plan (converted from an ESOP) whose primary asset was Superior stock; annual per-share valuations funded participant distributions.
- Marc Presutti purchased a 78% stake in Superior in 2005, became CEO, deferred much of his salary, and later oversaw the company’s wind-up and sale of its real estate in 2010.
- Karen, George, and Brendan Sibbet were long-time employees and Plan participants; they submitted distribution requests after termination in May–June 2009 and never received distributions.
- The Sibbets sued in state and federal court asserting ERISA fiduciary claims and later filed this adversary proceeding in Presutti’s bankruptcy seeking nondischargeability under 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(4) and to pierce the corporate veil.
- The bankruptcy court held an evidentiary trial, addressed whether ERISA’s statute of limitations (29 U.S.C. § 1113) barred the underlying ERISA claims, and considered whether independent fraud claims supported nondischargeability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ERISA statute of limitations (29 U.S.C. § 1113) bars ERISA fiduciary claims | Sibbets: claims timely because breach discovered June 2010 or tolling for concealment applies | Presutti: three-year limitations applies because plaintiffs had actual knowledge earlier | Court: three-year period applied; actual knowledge accrued by Dec. 31, 2009; ERISA claims time-barred (complaint filed May 29, 2013) |
| Whether fraud/concealment tolled the ERISA limitation period | Sibbets: Presutti/Superior misled them about valuations, delaying suit | Presutti: no affirmative concealment of the failure to pay; statements were not false when made | Court: no actual concealment; plaintiffs knew distributions were not made and had counsel; tolling not warranted |
| Whether debts are nondischargeable under § 523(a)(4) (fiduciary fraud/defalcation) | Sibbets: fiduciary breaches under ERISA (Plan/Superior/Presutti) should except debts from discharge | Presutti: ERISA claims are time-barred and thus cannot support § 523(a)(4) relief | Court: § 523(a)(4) claims derive from ERISA and fail because underlying ERISA claims are barred; Count I denied |
| Whether debts are nondischargeable under § 523(a)(2)(A) (fraud) and veil-piercing to reach Presutti | Sibbets: Superior made material misrepresentations about valuations and concealed conversions of assets; seek to pierce veil to hold Presutti liable | Presutti: communications were accurate when made; challenged expenses were disclosed or not proven fraudulent; veil-piercing not warranted | Court: no actionable false representation and no proof of actual fraud to meet § 523(a)(2)(A); veil-piercing unnecessary; Count II and veil claim denied |
Key Cases Cited
- Kurz v. Philadelphia Elec. Co., 96 F.3d 1544 (3d Cir. 1996) (ERISA statute of limitations framework; three- vs six-year rule and fraud exception)
- Gluck v. Unisys Corp., 960 F.2d 1168 (3d Cir. 1992) (definition of "actual knowledge" for § 1113 three-year rule)
- Roush v. New England Mut. Life Ins. Co., 311 F.3d 581 (3d Cir. 2002) (heightened standard for actual knowledge applied)
- Montrose Med. Grp. Participating Sav. Plan v. Bulger, 243 F.3d 773 (3d Cir. 2001) (fraudulent concealment tolling under § 1113 requires affirmative concealment)
- Brown v. Owens Corning Inv. Review Comm., 622 F.3d 564 (6th Cir. 2010) (ERISA fraud exception requires conduct to conceal wrongdoing and due diligence by plaintiffs)
- Grogan v. Garner, 498 U.S. 279 (U.S. 1991) (burden of proof in nondischargeability actions; exceptions construed narrowly)
- Boston Univ. v. Mehta (In re Mehta), 310 F.3d 308 (3d Cir. 2002) (nondischargeability exceptions construed narrowly against creditors)
- Lumax Indus. v. Aultman, 543 Pa. 38, 669 A.2d 893 (Pa. 1995) (strong presumption against piercing the corporate veil)