In a recent case, Sec’y United States Dep’t of Labor v. Kwasny,
No. 16-1872, __F.3d__, 2017 WL 1244852 (3d Cir. Apr. 5, 2017), the Third Circuit Court of Appeals determined that held that the Secretary of the Department of Labor is not bound by the results reached in a private lawsuit, for purposes of claim preclusion. The Third Circuit reasoned that the Secretary’s interest in maintaining the integrity and public confidence in the pension
system outweighs the interests of private litigants. Kwasny involved a managing partner in a law firm that has since dissolved. The partner was the trustee and a fiduciary of the firm’s 401(k) profit-sharing plan. He violated his fiduciary duty to the plan by directing employee contributions into the firm’s general assets instead of the plan. The Third Circuit remanded the case to the district court, for the lower court to consider whether the Secretary’s judgment should be offset by the judgment obtained by the former employee.
Moreover, the Third Circuit addressed the issue of whether the action was timely brought. The Court held that the Secretary’s claim for breach of fiduciary duty began to accrue when the Department of Labor received a complaint by an employee in 2011 that included corroborating evidence and the plan was sufficiently identified. This was despite the fact that the Department of Labor received complaints in both 2006 and 2010. The Court reasoned that the two earlier complaints were not accompanied by evidence and did not identify the plan.