Default judgment awarded to Department of Labor against Yardley law firm

By Nicholas Malfitano | Feb 18, 2016

U.S. District Court for the Eastern District of Pennsylvania  

PHILADELPHIA – A federal judge has awarded a default judgment to the Department of Labor, against a Yardley law firm that allegedly did not forward its employees’ 401K payments, in violation of Title I of the Employee Retirement Income Security Act of 1974 (ERISA).

Judge Eduardo C. Robreno granted default judgment to Thomas E. Perez, Secretary of the Department of Labor, against both Richard J. Kwasny and the law firm of Kwasny & Reilly.

Perez initiated action against the defendants in July 2014, to which the defendants answered that November that neither the firm nor its employee plan had the assets to defend itself in the litigation and requested judgment not be entered against them.

Perez filed a motion for default judgment in August 2015. According to Robreno, “The firm failed to respond to the motion and at no time has it entered an appearance, filed a pleading, or participated in the litigation in any way.”

Along with the default judgment, Perez seeks “(1) Restitution of the $40,416.30 in withheld employee contributions as well as $9,798.85 in pre-judgment interest for a total of $50,215.15; (2) Removal of the firm as a plan administrator and the appointment of an independent plan fiduciary, paid for by the firm, to manage and dispose of the plan assets; and (3) A permanent injunction against the firm ever serving as a fiduciary of any other ERISA plan.”

Perez asserted beginning January 2007 through 2009, the defendants “withdrew contributions from employees’ paychecks but purposefully failed to deposit those contributions into the plan in a timely manner.” Perez alleged the employee contributions were combined with firm’s general assets and used to pay firm expenses.

Perez also claimed the firm “exercised authority and control respecting management and disposition of the plan’s assets and had discretionary authority and discretionary responsibility in the administration of the plan.”

In his decision, Robreno and the Court agreed with Perez’s estimation that the allegations described illustrate the defendants breached their duties under ERISA to: “(1) Ensure that plan assets are held in a trust account; (2) Act solely in the interest of the plan participants and their beneficiaries; (3) Act prudently; (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 and (5) Refrain from dealing with the plan’s assets for the fiduciary’s own interest.”

Further, after considering the Poulis factors (six factors to be evaluated in cases where default judgment is sought), Robreno said the instant case would qualify for an issuing of default judgment. Robreno termed the defense’s conduct as “willful” and “dilatory”, through its non-response to the lawsuit.

“No other alternative sanctions appear appropriate, in that the firm has not entered an appearance, responded to any motion or pleading, or in any way been involved in the case. There is a complete history of dilatoriness,” Robreno said. “Finally, based on the Secretary’s allegations, it appears that his claim is meritorious while the firm lacks a valid defense.”

Moreover, Robreno concluded all of the punitive financial sanctions Perez outlined above as accompanying a default judgment were appropriate and applicable in this matter.

“For the reasons set forth above, the Court will grant the Secretary’s motion for default judgement, entering judgment in his favor and against the firm, and award the remedies discussed above,” Robreno said.

The plaintiff is represented by Jessica Ruszkiewicz Brown of the U.S. Department of Labor’s Office of the Solicitor, in Philadelphia.

The defendant is represented by Richard J. Kwasny of Kwasny & Reilly, in Yardley.

U.S. District Court for the Eastern District of Pennsylvania case 2:14-cv-04286

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at

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