Perez v. Kwasny

• Decision Date: 08 February 2016
• Docket Number: CIVIL ACTION NO. 14-4286
• Citation: 159 F.Supp.3d 565
• Parties: Thomas E. Perez, Secretary of Labor United States Department of Labor, Plaintiff, v. Richard J. Kwasny, et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

159 F.Supp.3d 565

Thomas E. Perez, Secretary of Labor United States Department of Labor, Plaintiff,

v.Richard J. Kwasny, et al., Defendants.

CIVIL ACTION NO. 14-4286

United States District Court, E.D. Pennsylvania.

Signed February 8, 2016

Filed February 9, 2016

Jessica Ruszkiewicz Brown, U.S. Department of Labor, Philadelphia, PA, for Plaintiff.

Richard J. Kwasny, Yardley, PA, pro se.

MEMORANDUM

EDUARDO C. ROBRENO, Judge

Presently before the Court are cross-motions for summary judgment filed by the parties. The Secretary of Labor (the “Secretary”) asserts in his motion that Richard Kwasny violated Title I of the Employee Retirement and Income Security Act of 1974, as amended 29 U.S.C. § 1001, et seq. (“ERISA”) by failing to deposit employee contributions into the Kwasny and Reilly, P.C., 401(k) Profit Sharing Plan (the “Plan”). In his cross-motion for summary judgment, Kwasny raises four defenses to the action. For the reasons set forth below, the Court will grant the Secretary's motion and deny Kwasny's motion.

I. FACTUAL BACKGROUND¹ AND PROCEDURAL HISTORY

The Secretary brought this action to restore $40,416.30 in losses (plus prejudgment interest) sustained by the Plan, an ERISA employee benefit plan.² Based upon the evidence, the Plan sustained these losses because Kwasny, a managing partner of the law firm of Kwasny & Reilly, P.C. (the “Firm”) and a trustee and fiduciary of the Plan³ , withdrew contributions from his employees' paychecks but purposefully failed to deposit those contributions into the Plan in a timely manner.⁴ See First Req. for Admis. (ECF No. 26-1, ¶¶ 1-2, 8-13).⁵ Moreover, Kwasny directed that the withheld contributions be commingled with the general assets of the Firm and be used for the benefit of the Firm. (Id. at ¶¶ 9-10).

After investigating a substantiated complaint from a Plan member in the fall of 2011, the Secretary filed this action on July 16, 2014 and the instant motion for summary judgment on August 12, 2015. (ECF Nos. 1 & 41). In his motion, the Secretary seeks the following relief: (1) restitution of the $40,416.30 in withheld employee contributions as well as interest on that amount; (2) removal of Kwasny as a Plan fiduciary and the appointment of an independent Plan fiduciary, paid for by Kwasny, to manage and dispose of the Plan assets; and (3) a permanent injunction against Kwasny ever serving as a fiduciary of any other ERISA plan. Kwasny has agreed to the injunctive relief and claims that restitution is the only remaining issue. Kwasny filed his response and cross-motion for summary judgment on September 23, 2015. (ECF No. 48).

II. STANDARD OF REVIEW

Summary judgment is appropriate if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). “A motion for summary judgment will not be defeated by ‘the mere existence’ of some disputed facts, but will be denied when there is a genuine issue of material fact.” Am. Eagle Outfitters v. Lyle & Scott Ltd. , 584 F.3d 575, 581 (3d Cir.2009) (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). A fact is “material” if proof of its existence or nonexistence might affect the outcome of the litigation, and a dispute is “genuine” if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson , 477 U.S. at 248, 106 S.Ct. 2505.

The Court will view the facts in the light most favorable to the nonmoving party. “After making all reasonable inferences in the nonmoving party's favor, there is a genuine issue of material fact if a reasonable jury could find for the nonmoving party.” Pignataro v. Port Auth. , 593 F.3d 265, 268 (3d Cir.2010). While the moving party bears the initial burden of showing the absence of a genuine issue of material fact, meeting this obligation shifts the burden to the nonmoving party who must “set forth specific facts showing that there is a genuine issue for trial.” Anderson , 477 U.S. at 250, 106 S.Ct. 2505 (quoting First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968) ) (internal quotation marks omitted).

The standard for summary judgment is identical when addressing cross-motions for summary judgment. See Lawrence v. City of Phila. , 527 F.3d 299, 310 (3d Cir.2008). When confronted with cross-motions for summary judgment, “[t]he court must rule on each party's motion on an individual and separate basis, determining, for each side, whether a judgment may be entered in accordance with the Rule 56 standard.” Schlegel v. Life Ins. Co. of N. Am. , 269 F.Supp.2d 612, 615 n. 1 (E.D.Pa.2003) (quoting 10A Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2720 (3d ed. 1998) ).

III. DISCUSSION

A. The Secretary's Motion for Summary Judgment (ECF No. 41)

Based primarily upon the deemed admissions, it is clear that there are no genuine disputes as to any material facts regarding the Secretary's motion for summary judgment. The Secretary contends that the admissions establish violations of Kwasny's duties under ERISA to: (1) ensure that Plan assets are held in a trust account, 29 U.S.C. § 1103 ; (2) act solely in the interest of the Plan participants and their beneficiaries, 29 U.S.C. § 1104(a)(1)(A) ); (3) act prudently, 29 U.S.C. § 1104(a)(1)(B) ; (4) prevent the Plan from engaging in a direct or indirect transfer of Plan assets for the benefit or use of a party in interest, 29 U.S.C. § 1106(a)(1)(D) ; and (5) refrain from dealing with the Plan's assets for the fiduciary's own interest, 29 U.S.C. § 1106(b)(1). The evidence and deemed admissions support the Secretary's allegations.

Specifically, Kwasny's admissions provide, inter alia, that: (1) Kwasny was a trustee of the Plan; (2) between September 7, 2007 and November 13, 2009, $41,936.73⁶ was withheld from employee paychecks but not deposited into the Plan; (3) Kwasny directed that the withheld employee contributions be commingled with the general assets of the Firm; (4) he directed that the employee contributions be used for the benefit of the Firm; and (5) he was responsible for determining if the employees' payroll checks and contribution checks were issued by Paychex, the company that prepared the Firm's payroll. (ECF No. 26-1, ¶¶ 1-2, 8-10).

The Secretary also relies on the declaration of Kathleen Meske, a bookkeeper at the Firm. She declared that Kwasny instructed her to send the employee contribution checks to TD Ameritrade, the Plan asset custodian, only after he paid employee wages, himself, and the firm's outstanding bills; and that Kwasny was the only person at the Firm with the ability to withhold payments from the Plan. (ECF No. 41-11, ¶¶ 7-8). Kwasny argues that Meske's declaration should be ignored because she was not privy to all of the discussions among the Firm partners. However, even if that were true, she certainly is capable of declaring what Kwasny instructed her to do. Whether Kwasny was the only person with the ability to withhold Plan payments is not important. It is only important that Kwasny so instructed Meske.

In light of this evidence, the Court will grant the Secretary's motion for summary judgment as there are no genuine disputes as to any material facts. Other than to deny certain facts established by his admissions,⁷ Kwasny does not provide any significant defense against this motion. His self-serving conclusory declaration does not amount to a scintilla of evidence which would create a genuine dispute, especially in light of the contradictory deemed admissions. See Kirleis v. Dickie, McCamey & Chilcote, P.C. , 560 F.3d 156, 161 (3d Cir.2009) (providing that “conclusory, self-serving affidavits are insufficient to withstand a motion for summary judgment”) (internal quotation marks omitted); Mangual , 53 F.R.D. at 303. Instead, Kwasny relies primarily on his cross-motion for summary judgment asserting several defenses discussed below. Thus, unless one of his defenses were to be viable, the Secretary is entitled to an entry of judgment in his favor and against Kwasny.

B. Kwasny's Cross-Motion for Summary Judgment (ECF No. 48)

In his cross-motion, Kwasny raises four defenses which he claims defeat the Secretary's action: (1) statute of limitations; (2) res judicata; (3) failure to join an indispensable party; and (4) latches.⁸

1. Three Year Statute of Limitations

ERISA bars actions for breach of fiduciary duty “after the earlier of (1) six years after...the date of the last action which constituted a part of the breach or violation...or (2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation....” 29 U.S.C. § 1113. Here, Kwasny contends that the Secretary had actual knowledge of the breaches more than three years before filing the complaint.⁹

Specifically, Kwasny asserts that in 2010, after Larry Haft, an employee of the Firm and member of the Plan, complained to the Department of Labor about alleged breaches of fiduciary duty regarding the Plan, a Department of Labor investigator came to the Firm office and reviewed the ERISA books and records, making copies of them. His only evidence of this assertion is his own declaration. (ECF No. 48-3, ¶ 41). However, Kwasny does not assert that he saw the investigator or that he provided any materials to him. Indeed, he provides no basis for this statement.

The Secretary relies on two declarations for his argument that he lacked actual knowledge of the duty breaches in or before 2010: one from Trudy Logan, a benefits adviser in the Philadelphia Regional Office of Employee Benefits Security Administration (“EBSA”), (ECF No. 49-1); and one from Norman Jackson, Deputy Regional Director of the EBSA. (ECF No. 49-2).

Logan declared that in 2006 and 2010, the EBSA received complaints regarding a failure to remit employee contributions to a 401(k) plan that was not identified at the time as the Plan. (ECF No....