An employer contributing to several sheet metal and related multiemployer benefit funds can avoid paying $1.4 million in delinquent contributions, a New York bankruptcy court judge ruled.
U.S. Bankruptcy Court Judge Alan S. Trust in New York said in his Dec. 10 order that while the U.S. Bankruptcy Code's defalcation exception bars fiduciaries from discharging debts incurred through fraudulent conduct, he cited a 2013 ruling that such a finding required intentional wrongdoing, which was not the case for Cool Sheetmetal Inc. owner Richard Kern. The funds had argued that any recovered money should go toward contributions due, but Mr. Trust said that such arguments “would essentially elevate the general unsecured right of the benefits funds over the rights of secured creditors.”
Mr. Trust did rule that because the owner had authority over the contributions, he was a fiduciary, a ruling that differs among circuits.
