Appendix — Coar v. Kazimir

APPENDIX

Filed April 15, 1993

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos. 92-5356, 92-5359, 92-5438, 92-5439

ROBERT J. COAR

V.

JOSEPH KAZIMIR, ROCCO MORONGELLO,

WILLIAM LEVINE, in his capacity as Trustee of the

Pension Fund-Mid Jersey Trucking Industry-Local 701;

DONATO DeSANTI, in his capacity as Trustee of the

Pension Fund-Mid Jersey Trucking Industry-Local 701;

ROBERT DUDIK, in his capacity as Trustee of the

Pension Fund-Mid Jersey Trucking Industry-Local 701;

PENSION FUND-MID JERSEY TRUCKING INDUS-

TRY LOCAL 701

Joseph Kazimir, Rocco Morongello, William Levine,

Donato DeSanti and Robert Dudik, in their capacity

as Trustees of the Pension Fund - Mid-Jersey Trucking

Industry - Local 701 and the Pension Fund - Mid

Trucking Industry - Local 701,

Appellants in Nos. 92-5356 and 92-5438

ROBERT J. COAR

V.

JOSEPH KAZIMIR, ROCCO MORONGELLO, in their

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Trucking Industry-Local 701; WILLIAM LEVINE, in

his capacity as Trustee of the Pension Fund-Mid Jer-

sey Trucking Industry-Local 701; DONATO DeSANTI,

in his capacity as Trustee of the Pension Fund-Mid

Jersey Trucking Industry-Local 701; ROBERT DUDIK,

in his capacity as Trustee of the Pension Fund-Mid

Jersey Trucking Industry-Local 701; PENSION FUND-

MID JERSEY LOCAL 701

Robert Coar,

Appellant in Nos. 92-5359 and 92-5439

On Appeal from the United States District Court

| for the District of New Jersey

(D.C. Civil No. 91-3116)

Argued March 9, 1993

BEFORE: BECKER, GREENBERG, and WEIS, Circuit

ludges

(Filed: April 15, 1993)

Michael R. Perle (argued)

Hayden, Perle & Silber

1500 Harbor Boulevard

Weehauken, N.J. 07087

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Attorneys for appellee-

cross-appellant Robert C.

Coar

Roger B. Kaplan (argued)

Wilentz, Goldman & Spitzer

90 Woodbridge Center Drive

P.O. Box 10

Woodbridge, N.J. 07095

Attorneys for appellants-

cross-appellees

OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. Factual and Procedural Background

Defendants Joseph Kazimir, Rocco Morongello,

William Levine, Donato DeSanti, and Robert Dudik, as

trustees of the Pension Fund of Mid-Jersey Trucking

Local 701 (the Pension Fund), and the Pension Fund

itself, together called the "Fund Defendants," appeal

from the district court’s order of June 23, 1992, granting

summary judgment to plaintiff Robert J. Coar, a former

trustee and a beneficiary of the Pension Fund, in his suit

seeking a declaration that the Pension Fund’s actions in

withholding his vested pension benefits and applying

them as a set-off to his liability to the fund violated the

anti-alienation provision of the Employee Retirement

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Income Security Act of 1974 (ERISA), section 206(d)(1),

29 U.S.C. § 1056(d)(1). Coar cross-appeals from the

district court’s denial of his motion for an award of

attorney’s fees. Because we conclude that Coar cannot

invoke ERISA’s anti-alienation provision to shield his

benefits from liability for breach of his duty to the

Pension Fund, we will reverse the district court’s grant

of summary judgment and dismiss his appeal of the

district court’s order denying attorney’s fees as moot.

The undisputed facts are as follows. In 1986,

Coar, a former trustee, and current participant, of the

Pension Fund was convicted, along with Frank Scotto,

his co-trustee, and Kenneth Zauber, the general counsel

to the Pension Fund, of engaging in a RICO conspiracy

to receive kickbacks in exchange for channeling $20

million from the Pension Fund's assets to Omni Fund-

ing Group, a Florida-based mortgage company.’ See

United States v. Zauber, 857 F2d 137, 140, 149-53 (3d

Cir. 1988), cert. denied, 489 U.S. 1066, 109 S.Ct. 1340

(1989). In October 1984, prior to the indictment, the

Pension Fund and its trustees had filed a civil case

against Coar, his co-conspirators, and certain other

defendants, alleging ERISA and RICO violations arising

from the Omni investment. On September 13, 1990, the

district court in the civil case granted summary judg-

ment on liability to the Pension Fund and the trustees

against Coar and certain of the other defendants.

Pursuant to its Findings of Fact and Conclusions

‘Coar’s conviction was affirmed on appeal, and he

served 18 months in prison.

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of Law Concerning Damages in the fund’s civil case, the

district court ultimately entered a final, unappealed

judgment against Coar for $25,535,887 for fiduciary duty

violations under ERISA sections 409(a) and 502(a)(3),

and a judgment for $96,607,661 for RICO violations.

The district court explained that the $25,535,887 figure

represented the difference between what the Pension

Fund recovered on its investment with Omni, or re-

ceived from settlements in litigation to recover its assets,

and what it would have earned "had those monies

continued to be invested with the Pension fund’s other

investment managers." On April 16, 1991, prior to the

entry of final judgment against Coar, but after the

district court found Coar liable, the Pension Fund

advised Coar that it would set off Coar’s liability to the

Pension Fund against his benefits from the fund,

beginning with the May 1991 benefits.”

On July 17, 1991, Coar filed this action against the

Fund to obtain his benefits relying on section 502(a)(1)

of ERISA, 29 U.S.C. §1132(a)(1). Coar claimed that the

Pension Fund’s withholding of benefits violated the

non-forfeiture and anti-alienation provisions of ERISA,

sections 203(a) and 206(d)(1), 29 U.S.C. §§ 1053(a) and

1056(d)(1). The Fund Defendants answered and filed a

*We understand from the Fund Defendant's repre-

sentations at oral argument that this case concerns only

the monthly benefits due Coar during his lifetime,

because the Fund Defendants take the position that they

may not set off their claim against any benefits due

Coar’s survivors.

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counterclaim seeking a declaratory judgment that the

Pension Fund’s withholding of benefits under sections

409(a) and 502(a)(3) of ERISA, 29 U.S.C. §§ 1109(a) and

1132(a)(3), did not violate ERISA’s non-forfeiture and

anti-alienation provisions. The parties each subsequent-

ly moved for summary judgment.

On May 12, 1992, the district court filed an

opinion holding that, although the non-forfeiture

provision of ERISA did not bar the set-off, the anti-

alienation provision forbade an equitable set-off by the

Pension Fund of its damages against Coar. See Coar v.

Kazimir, 792 F Supp. 345 (D.N.J. 1992). While the

district court recognized that the Supreme Court's

holding in Guidry v. Sheet Metal Workers Nat’] Pension

Fund, 493 U.S. 365, 110 S.Ct. 680 (1990), expressly left

open the issue of whether section 206(d)(1) of ERISA

forecloses a pension fund from setting off benefits to a

beneficiary who breached a fiduciary duty to the fund,

it nevertheless found that Guidry’s "reasoning [coun-

seled] a strict application of the anti-alienation provi-

sion" precluding a set-off by the Pension Fund in this

case. Id. at 351. Accordingly, the district court denied

the Fund Defendants’ motion for summary judgment

and granted summary judgment to Coar. Id. The court

also awarded Coar attorney’s fees under section

502(g)(1) of ERISA, 29 U.S.C. §1132(g)(1), with the

amount to be fixed after an affidavit of services was

filed. Id. ## .11.

On May 20, 1992, pursuant to Fed. R. Civ. P. 59,

the Fund Defendants moved for reconsideration of the

summary judgment decision and the attorney’s fees

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award. In an order entered June 23, 1992, the district

court reaffirmed the summary judgment for Coar but,

on reconsideration, denied an award of fees. The

district court then entered judgment for Coar on June

23, 1992.

On June 29 and July 8, 1992, the Fund Defendants

and Coar respectively filed notices of appeal and cross-

appeal from the order of June 23, 1992. Coar filed his

cross-appeal notwithstanding his prior filing, on July 2,

1992, of a motion in the district court, pursuant to Rule

59(e), to have the court reconsider its denial of his

request for attorney’s fees. The district court denied

Coar’s motion for reconsideration on July 31, 1992. On

August 5 and August 11, 1992, the Fund Defendants

and Coar respectively filed second notices of appeal and

cross-appeal. On August 13, 1992, we consolidated all

four appeals.

II. JURISDICTION

We have jurisdiction pursuant to 28 U.S.C. §

1291. The district court had subject matter jurisdiction

pursuant to 29 U.S.C. § 1132(e) (ERISA) and 28 U.S.C. §

1331. We further note that our appellate jurisdiction

over the Fund Defendants’ first appeal from the summa-

ry judgment was not terminated when Coar served his

timely motion pursuant to Fed. R. Civ. P. 59(e), notwith-

’While the Fund Defendants also moved for relief

under Fed. R. Civ. P. 60, the court held that its motion

should be considered under Rule 59.

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standing Fed. R. App. P. 4(a)(4) which provides that "[a]

notice of appeal filed before the disposition of [such

motion] shall have no effect." In this case, Rule 4(a)(4)

does not impair our jurisdiction inasmuch as Coar’s

Rule 59(e) motion related exclusively to the district

court's denial of attorney’s fees, and did not concern the

merits of the final iudgment of the district court. See

Buchanan _v. Starships, Inc, 485 U.S. 265, 268-69, 108

S.Ct. 1130, 1132 (1988). Furthermore, though Coar’s first

notice of cross-appeal was ineffective because it was

filed while his motion for reconsideration was pending,

we nevertheless have jurisdiction over his cross-appeal

because he filed a timely second notice of cross-appeal

following the district court’s denial of his motion for

reconsideration.

Ill. STANDARD OF REVIEW

We exercise plenary review of the order granting

summary judgment to Coar and denying it to the Fund

Defendants. In most cases an appellate court reversing

an order granting summary judgment will not direct the

district court to enter judgment in favor of the appel-

lant, because a genuine issue of fact will remain.

Kreimer_v. Bureau of Police for Town of Morristown

958 F.2d 1242, 1250 (3d Cir. 1992); First Nat] Bank v.

Lincoln National Life Ins. Co., 824 F.2d 277, 281 (3d Cir.

1987). However, when the appeal concerns only issues

of law, and there are no material facts in dispute as in

this case, we are free to enter an order directing entry of

summary judgment in favor of the appellant. Kreimer

958 F.2d at 1250; Nazay v. Miller, 949 F2d 1323, 1328

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(3d Cir. 1991); First Natl Bank, 824 F.2d at 281.

IV. DISCUSSION

In enacting ERISA, Congress established a

comprehensive remedial scheme for the protection of:

the interests of participants in employee

benefit plans and their beneficiaries . . . by

establishing standards of conduct, respon-

sibility, and obligation for fiduciaries of

employee benefit plans,and by providing

for appropriate remedles, sanctions, and

ready access to the Federal courts.

ERISA § 2(b), 29 U.S.C. § 1001(b).

Section 409(a) of ERISA, mandates that a person

breaching duties to a pension plan "shall be personally

liable to make good to such plan any losses to the plan

resulting from each such breach . . . and shall be subject

to such other equitable or remedial relief as the court

may deem appropriate." 29 U.S.C. § 1109(a). Section

502(a) in turn authorizes the Secretary of Labor and any

plan participant, beneficiary, or fiduciary to bring a civil

action "for appropriate relief under section [409]" or to

obtain an injunction or “other appropriate equitable

relief" to redress a fiduciary violation. 29 U.S.C. §

1132(a).

However, ERISA’s anti-alienation provision,

section 206(d)(1), requires, "Each pension plan shall

provide that benefits provided under the plan may not

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be assigned or alienated.“ 29 U.S.C. § 1056(d)(1). Coar

argues that this provision prevents the Pension Fund

from setting off his benefits pursuant to section 409(a).

Thus, he contends that the issue before us is whether

section 409(a) overrides section 206(d)(1).°

We start our analysis with the Supreme Court’s

opinion in Guidry. Guidry, the chief executive officer

of a union and the trustee of its pension plans, pled

guilty to embezzling funds from the union. The union

subsequently brought a civil action in which Guidry

was found liable. In formulating a remedy, the district

court imposed a constructive trust on Guidry’s pension

benefits and the court of appeals affirmed, in reliance on

section 409(a) of ERISA. The Supreme Court reversed.

“Express exceptions to this provision allow assign-

ment for a "qualified domestic relations order" and "a

voluntary and revocable assignment of not to exceed 10

percent of any benefit payment." 29 U.S.C. § 1056(d)(2),

(3).

*Coar does not dispute that he was a fiduciary who

owed a duty to the Pension Fund, nor does he deny that

he breached that duty. Furthermore, Coar does not

contend that the anti-alienation provision of the Pension

Fund plan was broader than required by section

206(d)(1) and he does not seek to uphold the judgment

by contending that the district court erred in its holding

with regard to the anti-forfeiture provision. Section

203(a) of ERISA, 29 U.S.C. § 1053(a) ("each pension plan

shall provide that an employee's right to his normal

retirement income is nonforfeitable upon the attainment

of normal retirement age... ").

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The Court stated that because the union and

pension plans were distinct legal entities and Guidry

was found liable only for his breach of duty to the

union, "[w]e need not decide whether the remedial

provisions contained in § 409(a) supersede the bar on

alienation in § 206(d)(1), since [Guidry] has not been

found to have breached any fraudulent duty to the

pension plans." 110 S.Ct. at 685 (emphasis in original).

Thus, the Court held that "the Court of Appeals erred in

invoking § 409(a)’s remedial provisions." 110 S.Ct. at

686. The union, recognizing that section 409(a) could

not serve as the basis for the set-off in the absence of a

breach of duty owed to the pension plan, instead relied

on the remedial provisions of the Labor-Management

Reporting and Disclosure Act (LMRDA). Section 501(a)

of the LMRDA states that a union’s officers “occupy

positions of trust in relation to such organization and its

members as a group" and therefore have a duty "to hold

its money and property solely for the benefit of the

organization and its members." 29 U.S.C. § 501(a).

Section 501(b) creates a private right of action for union

members "to recover damages or secure an accounting

or other appropriate relief for the benefit of the labor

organization." 29 U.S.C. § 501(b). The union argued

that this provision authorized the imposition of a

constructive trust which supersedes ERISA’s prohibition

on the alienation of pension benefits. 110 S.Ct. at 686.

In rejecting this argument, the Court stated that

[i]t is an elementary tenet of statutory construction that

‘[w]here there is no clear intention otherwise, a specific

Statute will not be controlled or nullified by a general

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one... .’" 110 S.Ct. at 687 (quoting Morton v. Mancari

417 U.S. 535, 550-51, 94 S.Ct. 2474, 2483 (1974)). The

Court therefore did "not believe that congressional

intent would be effectuated by reading the LMRDA’s

general reference to ‘other appropriate relief’ as overrid-

ing an express, specific congressional directive [in

ERISA] that pension benefits not be subject to assign-

ment or alienation." Id. Rather, it reconciled the two

statutes by holding that "the LMRDA determined what

sort of judgment the aggrieved party may obtain," while

ERISA’s section 206(d)(1) related only to "the narrow

question of whether that judgment may be collected

through a particular means -- a constructive trust placed

on the pension." 110 S.Ct. at 687 (emphasis in original).

The Court also declined to accept the union’s

position that equitable principles might support the

establishment of the constructive trust:

Nor do we think it appropriate to approve

any generalized equitable exception—either

for employee malfeasance or for criminal

misconduct--to ERISA’s prohibition on the

assignment or alienation of pension bene-

fits. Section 206(d) reflects a considered

congressional policy choice, a decision to

safeguard a stream of income for pension-

ers (and their dependents, who may be

and perhaps usually are, blameless), even

if that decision prevents others from se-

curing relief for the wrongs done to them.

If exceptions to this policy are to be made,

it is for Congress to undertake that task.

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Id. at 687.

The Court predicated its holding in this regard

On its treatment of section 206(d)(l) as an

antigarnishment provision and its view of the construc-

tive trust imposed by the district court as a form of

garnishment. Furthermore, the Court thought that an

equitable exception would eviscerate the provision for

it would be difficult to refuse to recognize other excep-

tions, as courts almost always would think it equitable

to garnish the benefits of a wrongdoer on behalf of an

innocent creditor. The Court explained:

As a general matter, courts should be

loath to announce equitable exceptions to

legislative requirements or prohibitions

that are unqualified by the statutory text.

The creation of such exceptions, in our

view, would be especially problematic in

the context of an antigarnishment provi-

sion. Such a provision acts, by definition,

to hinder the collection of a lawful debt.

A restriction on garnishment therefore can

be defended only on the view that the

effectuation of certain broad social policies

sometimes takes precedence over the

desire to do equity between particular

parties. It makes little sense to adopt such

a policy and then to refuse enforcement

whenever enforcement appears inequita-

ble. A court attempting to carve out an

exception that would not swallow the rule

would be forced to determine whether

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application of the rule in particular cir-

cumstances would be ‘especially’ inequita-

ble. The impracticability of defining such

a standard reinforces our conclusion that

the identification of any exception should

be left to Congress.

110 S.Ct. at 687 (emphasis in original).

The few cases, both before and after Guidry,

considering the relationship between section 409(a) and

section 206(d)(1) have come to conflicting results.

Before Guidry the Court of Appeals for the District of

Columbia Circuit held that the rule against alienation

was not "immutable" where a plan trustee breached his

fiduciary duty to the plan. Crawford v. La Boucherie

Bernard Ltd., 815 F.2d 117 (D.C. Cir. 1987), cert. denied

484 U.S. 943, 108 S.Ct. 328 (1988). In reaching this

conclusion, the court turned first to the language in

section 409(a), finding it to have given courts “broad

authority . . . to fashion remedies redressing any breach

and for protecting the interests of participants and

beneficiaries." Id. at 119. Crawford also relied on

ERISA’s legislative history, which indicated that ERISA’s

remedial provisions were intended to "make applicable

the law of trusts; . . . to establish uniform fiduciary

standards to prevent transactions which dissipate or

endanger trust assets." Id. at 120 (citing 120 Cong. Rec.

S-15737, Aug. 22, 1974, reprinted in 1974 U.S.C.C.A.N.

4639, 5177, 5186). Having determined from the legisla-

tive history that the common law of trusts applied, the

court then cited the well-established principle that when

a trustee who also is a beneficiary of the trust breaches

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ieee

his fiduciary duty to the trust, the other beneficiaries

can force the trustee to make good his breach from his

beneficial interest in the trust. 815 F.2d at 120 (citing

Bogert, Trusts & Trustees, § 191 at 484 (2d. ed. 1979); III

Scott on Trusts § 257, at 2201 (3d ed. 1967)).

Finally, the Crawford court relied on several

cases which had recognized exceptions to section

206(d)(1) based on equitable principles. For example, it

noted that the Court of Appeals for the Eleventh Circuit

had excepted from section 206(d)(1)’s reach liabilities

arising from the employee’s criminal conduct towards

his employer, see St. Paul Fire & Marine Ins. Co. v. Cox

752 F.2d 550, 552 (11th Cir. 1985), and that other cases

had permitted garnishment of benefits to satisfy family

support and community property obligations. See, e.g.,

AT & T v. Merry, 592 F.2d 118 (2d Cir. 1979); Stone v.

Stone, 450 F. Supp. 919 (N.D. Cal. 1978), aff'd, 632 F.2d

740 (9th Cir. 1980), cert. denied, 453 U.S. 922, 101 S.Ct.

3158 (1981).

After Guidry, a district court agreed with

Crawford that section 409(a) authorizes a set-off not-

withstanding section 206(d)(1). Pension Benefit Guar.

Corp. v. Solmsen, 743 F. Supp. 125 (E.D.N.Y. 1990).° In

solmsen a trustee/beneficiary was found liable to the

fund for failing to forward employee and employer

contributions to the plan. In formulating a remedy, the

district court ordered a set-off of the trustee’s benefits.

‘Further post-Guidry support for this result also

may be found in New Jersey v. Pulasty, 612 A.2d 952

(N.J. Super. Ct. App. Div. 1992).

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In so doing, the court cited Crawford for the proposition

that "[t]he remedy of set-off in fiduciary breach cases

has been recognized as a narrow exception to the anti-

alienation provision." Id. at 129. The court commented

further:

ERISA’s legislative history and common

sense suggest that set off is permissible.

No good reason appears as to why [the

plan] should have to pay benefits to a

person who has wronged the Plan, and

the beneficiaries of it, before he made

good the wrong.

Id.

The court also concluded that Guidry did not

compel a contrary result given the Supreme Court's

express refusal to decide whether a fund could set off

from pension payments its claim against a beneficiary.

Although the Solmsen court did not discuss the lan-

guage in Guidry regarding the undesirability of creating

an equitable exception to section 409(a), it evidently did

not consider that language directed to a circumstance in

which the trustee/beneficiary was liable to the fund.

However, unlike the Solmsen court, the United

States Court of Appeals for the Fifth Circuit, predicted

that "[b]ased upon Guidry’s strict application of the

anti-alienation provision" the Supreme Court would not

find the language in section 409(a) expansive enough to

supersede the anti-alienation provision. Herberger v.

Shanbaum, 897 F.2d 801, 804 (Sth Cir.) cert. denied, 498

U.S. 817, 111 S.Ct. 60 (1990). That court thus declined

to follow Crawford as it considered that Guidry had

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undermined much of the reasoning in Crawford. Id. In

particular, Herberger found Crawford’s reliance on

ERISA’s legislative history no longer to be persuasive,

given that Guidry found no justification to create an

exception to the anti-alienation provision. Herberger

deduced that if the Supreme Court believed that the

legislative history warranted an equitable exception to

the anti-alienation provision, it would have said as

much.

Herberger also observed that the Supreme Court

in Guidry rejected holdings in some of the cases relied

on by Crawford to support the proposition that the anti-

alienation provision is not "immutable." For example,

Guidry stated that an employee’s criminal misconduct

cannot be the basis for a set-off, which is contrary to the

holding in St. Paul Fire & Marine, upon which

Crawford relied. In addition, Guidry recognized that

“qualified domestic relations orders" now are authorized

by an express statutory anti-alienation exception.

Therefore, in the Herberger court’s view, the domestic

relations cases cited by Crawford no longer supported

the Crawford court’s decision to create a judicial

exception to the anti-alienation provision. "To the

contrary, the fact that Congress amended the statute to

allow this exception lends support to the notion that

Congress will create exceptions where it sees fit and

courts should not do so." 897 F.2d at 804.

In the case before us, the district court agreed

with Herberger that Guidry’s discussion of the anti-

alienation provision essentially had overruled Crawford

suggesting that the provision was indeed immutable.

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4

First, the district court observed that LMRDA section

501(b) ("or other appropriate relief") was similar to

ERISA’s section 409(a)("and shall be subject to such

other equitable or remedial relief as the court may deem

appropriate"). 792 F. Supp. at 349. The district court

inferred from this similarity that if the Supreme Court

did not find LMRDA’s language expansive enough to

supersede the anti-alienation provision, it would be

unlikely to find section 409(a)’s language sufficient

either. Second, the district court felt bound by the

Supreme Court's declaration that in passing the anti-

alienation provision Congress had made a considered

and clear decision to safeguard pension rights. In this

regard, the district court, closely tracking Herberger,

cited the amendment to ERISA excepting certain domes-

tic relations orders from the anti-alienation provision as

evidence that Congress will create policy-oriented

exceptions where appropriate. The court found its

refusal thus far to do so in cases of the type before us

leads to a negative inference. Id. at 350. The court,

therefore, declared that "despite the natural distaste for

permitting a beneficiary who has wronged the pension

fund to collect benefits, a legislative policy determina-

tion has been made and the statute . . . is clear." Id. at

351.

We decline to follow this reasoning because we

think it construes Guidry’s holding too broadly and

places insufficient emphasis on the wording of sections

409(a) and 206(d)(1) and ERISA’s legislative history.

This case fundamentally differs from Guidry for here,

unlike the Supreme Court in Guidry, we are analyzing

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two provisions in the same statute. We therefore are

obliged to reconcile these provisions and to apply both

without undermining either’s purpose for, "In interpret-

ing language in one section of a statute in conjunction

with language of other sections, [a] court strives to find

a reading that is consistent with the purposes of the

entire statute considered as a whole." Pyramid Lake

Paiute Tribe of Indians v. United States Dep’t of Navy,

898 F.2d 1410, 1416 n.15 (9th Cir. 1990).

Nothing in section 206(d)(1) suggests that Con-

gress intended that provision to limit the remedies

afforded to beneficiaries under section 409(a) or in any

way to protect unscrupulous fiduciaries. Neither does

the legislative history of section 206(d)(1), which courts

have described as "sparse," Ellis Nat/] Bank v. Irving

Trust Co., 786 F.2d 466, 470 (2d Cir. 1986), and inconclu-

sive, General Motors Corp. v. Buha, 623 F.2d 455, 460

(6th Cir. 1980), indicate that a dishonest trustee should

be shielded from the consequences of a breach of

fiduciary duty. On the contrary, the "only available

[legislative] history," Northwest Airlines, Inc. v. Roemer,

603 F. Supp. 7, 9 (D. Minn. 1984), states that the objec-

tive of the provision was "[t]o further ensure that the

employee’s accrued benefits are actually available for

retirement purposes ...." H.R. Rep. No. 807, 93d

Cong., 2d Sess. (1974), reprinted in 1974 U.S.C.C.A.N.

4639, 4734. If, as indicated by the legislative history, the

anti-alienation provision is intended "to protect plan

beneficiaries by ensuring that plan assets are used only

for payment of benefits" we think that Congress’s

purpose "would be undermined, not advanced, by an

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interpretation that prohibited offset under these circum-

stances," because the Pension Fund’s assets would be

dissipated further through payments to those who had

looted the fund rather than being preserved for the

beneficiaries’ use. Crawford, 815 F.2d at 122.

We note further that Guidry did not state that

section 206(d)(1) is immutable. Rather, the Court’s main

reason for not overriding the anti-alienation provision

through the LMRDA was that the LMRDA’s provision

was general whereas the anti-alienation provision in

ERISA was specific. This reasoning, however, does not

support the district court’s conclusion in this case, and

actually suggests the opposite result, because section

409(a) is more specific than both the anti-alienation

provision in ERISA and the LMRDA provision. Section

409(a) expressly states that the trustee who violates a

fiduciary duty to the plan must make good to the plan.

It therefore imposes a specific obligation upon the

trustee to return misappropriated assets to the beneficia-

Ties. Section 409(a) also directs \the courts to ensure that

the wayward trustee fulfills this obligation to make

restitution through whatever remedy the court deems

appropriate in the circumstances ("such other equitable

or remedial relief as the court might deem appropri-

ate"). In contrast, the anti-alienation provision speaks

only in the most general terms.

Consequently, under Guidry’s reasoning, the

more specific language of section 409(a) serves as a

better indicator of congressional intent than the general

language of section 206(d)(1). Thus, section 409(a)

should "not be controlled or nullified" by the anti-

-Pa20-

ee

alienation provision. See also Clifford F MacEvoy Co.

v. United States ex rel. Calvin Tompkins Co., 322 USS.

102, 64 S.Ct. 890 (1944) (applying rule that when a

specific and general provision conflict, the specific terms

and language prevail); Gallenstein v. United States, 975

F.2d 286, 290 (6th Cir. 1992) (holding that when constru-

ing a general enactment and a more particular enact-

ment within the same statute, and when the plain

language of the two subsections cannot be otherwise

reconciled, the more specific subsection should be given

effect); Markair, Inc. v. Civil Aeronautics Bd., 744 F.2d

1383, 1385 (9th Cir. 1984) (reciting “the well-settled rule

of statutory construction that specific terms of a statute

override the general terms").

Therefore, given section 409(a)’s express mandate

that trustees undo any harm they have done to the

pension plan, and the absence of any language in

section 206(d)(1) or its legislative history limiting the

range of options granted to the courts under ERISA to

see that this is done, we do not believe that Congress

intended the anti-alienation provision to dilute the

potential relief available to pension beneficiaries.

Instead, we read section 206(d)(1) and, by extension

Guidry, as shielding only the beneficiaries’ interest

under the pension plan from third-party creditors.

We also find it significant that the legislative

history to section 206(d)(1) speaks of "a garnishment or

levy," H.R. Conf. Rep. No. 1280, 93d Cong., 2d Sess.

(1974), reprinted in 1974 U.S.C.C.A.N. 5038, 5061, and

that Guidry, as we have indicated, refers to section

206(d)(1) as an "anti-garnishment provision." Garnish-

-Pa21-

ment connotes a triangular relationship among a debtor,

creditor, and third party, in which the creditor levies on

some asset owed to the debtor by a third party. See,

e.g., Western v. Hodgson, 494 F.2d 379, 382-83 (4th Cir.

1974) (finding that "[u]Jnder most State statutes, the term

‘garnishment’ denotes a proceeding whereby a plaintiff

seeks to subject to his claim property of the defendant

in the hands of a third person, or money owed by a

third person to the defendant") (emphasis added);

Atwater v. Roudebush, 452 F. Supp. 622, 631 (N.D. Ill.

1976) (distinguishing between set-off and garnishment);

Black’s_ Law Dictionary 680 (6th ed. 1990) (defining

garnishment as "[a] proceeding whereby a plaintiff

creditor, i.e., garnishor seeks to subject to his or her

claim the property or money of a third party, i.e.,

garnishee, owed by such party to defendant debtor, i.e.,

principal defendant"); 7 C.J.S. Attachment § 2 (1980)

("Generally speaking, garnishment is but a form of

attachment .... However, attachment and garnishment

differ in character in that attachment is directed against

property of the principal defendant which is his posses-

sion or under his control, while the object of garnish-

ment is to reach an indebtedness due to the principal

defendant by a third person, or property in the posses-

sion or control of a third person, which belongs to the

principal defendant.") (emphasis added)).’

7Contrary to Coar’s argument, Patterson v. Shumate

112 S.Ct. 2242 (1992), does not suggest an opposite

interpretation of Guidry. It is true that the Court in

(continued...)

-Pa22-

2 eEEE—E———

Courts therefore usually would not understand

"garnishment" as meaning a set-off of a trustee’s benefits

by a pension plan itself. For this reason, we believe that

Congress and the Supreme Court intended that the term

"garnishment" have its usual meaning as an action taken

against an asset by a third-party creditor, and not as an

action taken by a creditor itself to set off its own

7(...continued)

Patterson stated that "this Court itself vigorously has

enforced ERISA’s prohibition on the assignment or

alienation of pension benefits, declining to recognize

any implied exceptions to" section 206(d)(1). 112 S.Ct.

at 2247 (citing to Guidry). Further, the Court also

declared, "We have previously declined to recognize any

exceptions to ERISA’s anti-alienation provision outside

the bankruptcy context." Id. at 2250 (citing to

Guidry)(emphasis in original). But, again as with

Guidry, Patterson did not deal with a trustee who

breached a fiduciary duty to the pension fund. Instead,

it concerned a claim by a bankruptcy trustee who

sought to have the debtor’s pension benefits paid to the

estate rather than to the debtor himself. Section

541(c)(2) of the Bankruptcy Code provides that a restric-

tion on the transfer of a beneficial interest of a debtor in

a trust enforceable under nonbankruptcy law is enforce-

able in a bankruptcy proceeding. 11 U.S.C. § 541(c)(2).

The bankruptcy trustee argued that "non-bankruptcy

law" only referred to state law and not to trusts gov-

erned by ERISA. The Court disagreed and further held

that the anti-alienation provisions of section 206(d)(1) of

ERISA satisfied the literal terms of section 541(c)(2) of

the Bankruptcy Code. Thus, the debtor’s interest in the

ERISA plan was excluded from the estate.

-Pa23-

a

obligation against a debt due it. This construction is

supported by AT & T v. Merry, 592 F.2d at 124, which

indicated that the purpose of section 206(d)(1) "is to

protect an employee from his own financial imprudence

in dealings with third parties."

The controlling "“anti-alienation" regulations

issued by the Internal Revenue Service and relied on by

Guidry, 110 S.Ct. at 685 n.10 (quoting 26 C.ER. §

1.401(a)-13(b)(1) (1989)), further clarify this distinction

between a set-off of benefits by the plan and a garnish-

ment of benefits by an outsider. The regulations define

alienation or garnishment as "[a]ny arrangement provid-

ing for the payment to the employer of plan benefits

which otherwise would be due to the participant under

the plan," or "whereby a party acquires from a partici-

pant or beneficiary a right or interest enforceable against

the plan in, or to, ... a plan benefit payment." See 26

C.FR. § 1.401(a)-13(c)(1) (1992) (emphasis added).

Furthermore, they specifically exclude from ERISA’s

anti-alienation bar actions by the pension plan itself to

apply or set off vested pension benefits to recover debts

owed by the participant to the plan as a result of a prior

overpayment of benefits or as a result of the failure by

a participant to repay a debt to the plan. See 26 C.FR.

§§1.401(a)-13(c)(2)(iii) and (d)(2) (1992). Hence, the

regulations clearly comprehend "garnishment" or

“alienation” as referring to actions by third parties, such

as a beneficiary's employer or creditors, and not as

recoupment by the pension plan.®

*The regulations do treat a voluntary assignment to

(continued...)

-Pa24- -

liicscieeeeneemnsieneninee eae

The fact is that under the construction in the IRS

regulations of the anti-alienation provision we are not

even concerned with section 409(a), for when the

Pension Fund, without Coar’s consent, set off the

benefits due to him against his debt to it there was

simply not an alienation within section 206(d)(1).°

Indeed, it seems to us that a court would have to stretch

section 206(d)(1), which merely requires that the plan

provide that benefits "not be assigned or alienated," to

encompass a set-off which in the context of this case

was nothing more than the Pension Fund's refusal to

make payments.

We note also that from a policy point of view our

reading of section 206(d)(1), as barring only the alien-

ation of benefits to third parties, is not inconsistent with

the Supreme Court's concern in Guidry against creating

any equitable exceptions to an "anti-garnishment" rule.

If the Supreme Court ruled otherwise, it would have

invited all sorts of third-party claims against pension

§(...continued)

the plan as security for a loan from the plan as an

alienation but we are not concerned with that provision

in this case which, of course, deals with an involuntary

set-off. 26 C.F.R. § 1.401(a)-13(d)(2) (1992).

*It seems to us that if section 206(d)(1) is not applica-

ble, then as a matter of federal common law under

ERISA, a concept we discuss below, a court would

allow the set-off by following established trust law. As

we indicated in footnote 8, supra, we are not concerned

with whether a voluntary assignment is an alienation.

-Pa25-

funds. Courts would have found it impossible to

distinguish the equities of one claim from any other,

and ultimately would have rendered the anti-garnish-

ment provision nugatory. No such danger exists here.

A holding that section 409(a) trumps the "anti-garnish-

ment" rule in this case, which as we have explained is

not even necessary to sustain the Fund Defendants’

position, would create only one narrowly defined class

of excepted claimants-namely, the fund and thus

effectively the beneficiaries themselves, the very persons

ERISA was designed to protect." Such a holding

certainly would not "approve any generalized equitable

exception" to section 206(d)(1). Guidry, 110 S.Ct. at 687.

The legislative history discounted by Herberger

also leads us to read Guidry as we do. The Herberger

court stated that Guidry undermined the notion that the

legislative history of ERISA supports the application of

trust law to authorize a set-off through section 409(a).

‘The parties understandably do not focus on the

distinction between the amounts Coar owes under the

ERISA and RICO judgments. Neither will we because

the description given by Coar of his limited assets and

income convinces us that it would be unrealistic to

anticipate that he ever will pay the $25,535,887 ERISA

judgment. We acknowledge, however, that there might

in theory be a distinction between the judgments to the

extent that the set-off is justified by section 409(a). Of

course, if the action of the fund in setting off Coar’s

benefits against his debt was not an alienation, then

there would not even be a theoretical distinction be-

tween the two aspects of the judgment.

-Pa26-

_

Yet, Guidry did nothing of the sort. Because Guidry

did not concern a breach of duty to a trust, the Supreme

Court had no reason to consider the traditional principle

that a beneficiary and trustee who breaches a fiduciary

duty to the trust may forfeit his or her benefits, and did

not even mention the legislative history cited by

Crawford. Moreover, the Supreme Court previously

has read the legislative history of ERISA as requiring

the application of traditional trust law in the administra-

tion of the statute, see Firestone Tire & Rubber Co. v.

Bruch, 489 U.S. 101, 110, 109 S.Ct. 948, 954 (1989), and

has anticipated that "a federal common law of rights

and obligations under ERISA-regulated plans would

develop.” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56,

107 S.Ct. 1549, 1559 (1987). Accord Metropolitan Life

Ins. Co. v. Taylor, 481 U.S. 58, 65-66, 107 S.Ct. 1542,

1547-48 (1987); Franchise Tax Bd. v. Construction

Laborers Vacation Trust, 463 U.S. 1, 24 n.26, 103 S.Ct.

2841, 2854 n.26 (1983). Therefore, the legislative history

relied on by Crawford continues to have relevance on

the issue of whether section 409(a) authorizes a set-off

of the benefits of a trustee who is liable to the fund.

In this regard, the Report of the Senate Commit-

tee on Labor and Public Welfare states:

The enforcement provisions have been

designed specifically to provide both the

Secretary and participants and beneficia-

ries with broad remedies for redressing or

preventing violations .... The intent of

the committee is to provide the full range

of legal and equitable remedies available

-Pa27-

in both state and federal courts.

S. Rep. No. 93-127, 93d Cong., 1st Sess. (1974), reprinted

in 1974 U.S.C.C.A.N. 4639, 4838, 4871 (emphasis added).

Similarlly, Senator Harrison A. Williams expressly

stated that the congressional intent was for ERISA to

codify the principles of traditional trust law:

The objjectives of these provisions are to

make applicable the law of trusts; . . . to

establish uniform fiduciary standards to

prevent transactions which dissipate or

endanger plan assets, and to provide

effective remedies for breaches of trust.

120 Cong. Rec. S-15737, Aug. 22, 1974, reprinted in 1974

U.S.C.C.A.N. 5177, 5186 (emphasis added).

Thus, permitting the set-off in this case would

effectuate Congress’s intent, by making available to the

Pension Fund a common law remedy utilized in pre-

ERISA days by state and federal courts for breaches of

trust. See, e.g., In re Watson, 449 N.E.2d 1156 (Ind. Ct.

App. 1983) (holding that successor trustee properly

applied former trustee’s undistributed income to satisfy

prior judgment for improper distribution of trust

corpus); In re Van Nostrand’s Will, 29 N.Y.S.2d 857, 865

(N.Y. Sur. Ct. 1941) (placing equitable lien upon the

beneficial interest of a trustee/beneficiary who had

embezzled trust property to compensate wronged

beneficiaries of the trust); In re Burr’s Estate, 257 N.Y.S.

654 (N.Y. Sur. Ct. 1932) (holding that a trustee properly

withheld trust payments owed to a prior trustee who

had misappropriated trust funds), aff’d, 263 N.Y.S. 945

-Pa28-

(N.Y. App. Div. 1933);" Restatement (Second) of Trusts

§ 257 (1959) ("If a trustee who is also one of the benefi-

ciaries commits a breach of trust, the other beneficiaries

are entitled to a charge upon his beneficial interest to

secure their claims against him for the breach of trust,

unless the settlor manifested a different intention.").

Considering that Congress stated that it wanted

pre-ERISA trust law applied to ERISA’s remedial

provisions; that this pre-ERISA law provides for a set-

off in the circumstances of our case; and that the

remedial provision at issue, section 409(a), expressly

requires the trustee breaching his or her fiduciary duty

to make good to the plan, we believe that Congress did

not intend to allow an individual such as Coar to collect

pension benefits prior to satisfying his liabilities to the

fund. Indeed, a contrary reading would permit dishon-

est trustees, such as Coar, “who repeatedly and indeed

blatantly breached their fiduciary duties to the pension

plan" to evade their obligations to the fund and would

result in "[pJlan members and their families [having] to

watch their pension monies disappear once again into

the [dishonest trustees’] pockets." Crawford, 815 F.2d at

"Interestingly, in reaching this conclusion, the Burr

court held that a state law similar to section 206(d)(1) of

ERISA, precluding the assignment of a beneficiary's

interest, did not apply because "[i]t was not intended to

protect a dishonest fiduciary in the retention of income

otherwise payable to [the beneficiary] from the trust."

257 N.Y.S. at 657.

-Pa29-

121. We cannot understand how such a result would

protect funds from being "dissipated" or "endangered."

See also United States v. Huff, 873 E2d 709, 713 (3d Cir.

1989) (refusing to construe sentencing guidelines "in a

manner which may lead to an absurd consequence");

Government of Virgin Islands v. Berry, 604 F.2d 221, 225

(3d Cir. 1979) (“All laws should receive a sensible

construction. General terms should be so limited in

their application as not to lead to injustice, oppression,

or an absurd consequence.’"(quoting United States _v.

Kirby, 74 U.S. (7 Wall.) 482, 486 (1868))).

Thus, construing section 206(d)(1) as limiting the

remedies provided to beneficiaries by section 409(a)

anomalously would deny beneficiaries of pension funds

protection under ERISA that was available under prior

law, an interpretation of ERISA which the Supreme

Court has disfavored. See Firestone, 489 U.S. at 114, 109

S.Ct. at 956 (rejecting "reading of ERISA" which "would

require us to impose a standard of review that would

afford less protection to employees and their beneficia-

ries than they enjoyed before ERISA was enacted").

*Coar emphasizes that in our opinion in his criminal

appeal we found "no evidence that the government

could or did show that the pension fund lost money,

either from its corpus or Omni’s guaranteed rate of

return." United States v. Zauber, 857 F.2d at 144.

However, the Pension Fund is not bound by the

government's proofs at a criminal trial at which it was

not a party. In its action against Coar, the Pension

Fund established that it had actual losses under ERISA

of $25,585,887.

-Pa30-

eT

Therefore permitting the set-off in this case best imple-

ments Congress’s purpose to guarantee pension benefi-

ciaries the broadest protection possible against fiducia-

ries who breach their fiduciary duties to a pension fund

and thereby cause it losses.”

In seeking to avoid this result, Coar suggests that

we should construe section 409(a) narrowly as creating

only a cause of action without authorizing a method of

recovery. In the first place, the language of the provi-

sion belies such an interpretation because it speaks of

remedies as well as a pensioner’s right to bring suit. In

fact, the text implies that courts should apply whatever

remedies seem equitable under the circumstances of a

given case. More importantly, Coar’s proffered con-

struction leads only to fruitless question begging. Given

this context, because Congress created a right, it proba-

bly intended to create a remedy. Thus, accepting Coar’s

suggested reading of section 409(a) would not solve our

problem, but instead would place us in the same

"We recognize that it is possible that a pension fund

might in circumstances which arguably are premature

set off benefits such as when it claims nothing more

than that a trustee made an unwise investment and the

trustee disputes that claim. We are, however, not

concerned with that type of situation in this case, for the

fund did not set off until after it obtained a summary

judgment on liability so that it was obvious that Coar

would be indebted to it under ERISA. Accordingly, we

are not required to determine the earliest point at which

a set-off is justifiable because whatever that point may

be, it was passed in this case.

-Pa31-

situation as at the beginning of our inquiry; namely,

forcing us to ask again what remedy does section 409(a)

authorize?

Likewise, unlike the district court and Coar, we

do not attach significance to the fact that Congress has

created some exceptions to section 206(d)(1), such as in

the domestic relations context, see section 104(a) of

ERISA, 29 U.S.C. § 1056(d) (creating exception to section

206’s anti-alienation provision for qualified domestic

relations orders), without creating an exception for the

situation in this case. To start with, of course, inasmuch

as a set-off is not an alienation, then the absence of an

exception allowing a set-off to the restraint on alienation

is meaningless. Furthermore, we do not find that

Congress’s failure to pass legislation to create an

exception to section 206(d) that would cover this

situation to be a persuasive indicator of its intent. The

Supreme Court previously has admonished the lower

courts not to read Congress’s refusal to amend ERISA

as necessarily indicative of a particular intent. "Congres-

sional inaction lacks ‘persuasive significance’ because

‘several equally tenable inferences may be drawn from

such inaction.” Pension Benefit Guar. Corp. v. LTV

Corp., 496 U.S. 633, 110 S.Ct. 2668, 2678 (1990) (quoting

United States v. Wise, 370 U.S. 405, 411, 82 S.Ct. 1354,

1359 (1962)). This is particularly true in our case where,

as discussed above, our examination of other available

statutory evidence compels the conclusion that Congress

would not have intended to forbid a set-off.

V. CONCLUSION

We will reverse the order of June 23, 1992,

-Pa32-

appealed at Docket No. 92-5356, and will remand the

case to the district court for entry of judgment in favor

of the Fund Defendants. We will dismiss the Fund

Defendants’ second appeal at Docket No. 92-5438 as

both unnecessary and untimely. In view of our disposi-

tion, Coar’s cross-appeals from the district court's denial

of attorney’s fees are moot, as he makes no contention

that he is entitled to fees if the Fund Defendants are

successful on the merits. See Midnight Sessions, Ltd. v.

City of Philadelphia, 945 F.2d 667, 675 (3d Cir. 1991),

cert. denied, 112 S.Ct. 1668 (1992); Ingersoll-Rand

Financial Corp. v. Anderson, 921 F.2d 497, 504 n.11 (3d

Cir. 1990). Furthermore, his first cross-appeal at Docket

No. 92-5359 was premature. Thus, we also will dismiss

the cross-appeals at Docket Nos. 92-5359 and 92-5439.

BECKER, Circuit Judge, concurring.

I do not agree with the majority that the language

of § 409(a) of ERISA, 29 U.S.C. 1109(a), is more specific

(and hence serves as a better indication of Congressional

intent) than the language of § 206(d)(1) of ERISA, 29

U.S.C. § 1056(d)(1). The issue here is (involuntary)

alienation, and in my view the Statutory language

dealing with alienation in § 206(d)(1) is more specific in

that context than the language dealing with equitable

remedies under § 409(a). In addition, with respect to

-Pa33-

the language concerning a trustee’s personal liability to

rectify his or her breach of fiduciary liability in § 409(a),

I find that language to be as equally general as the anti-

alienation provision of § 206(d)(1). In my view, neither

§ 409(a) nor § 206(d)(1) can be accurately characterized

as more specific than the other and therefore warranting

greater interpretive authority.

I also do not agree with the majority that the

language of § 206(d)(1), and by extension Guidry v.

Sheet Metal Workers Nat'l Pension Fund, 493 U.S. 365,

110 S. Ct. 680 (1990), can fairly be read as shielding only

the beneficiaries’ interest under the pension plan from

third-party creditors and not second-party creditors,

namely the Fund itself. In my view, the plain meaning

of "may not be assigned or alienated" in § 206(a)(1),

appears to apply equally to involuntary alienation by

the Fund itself and to involuntary alienation initiated by

; a garnishing third-party. In other words, the plain

meaning of § 206(d)(1) seems to encompass both the

involuntary alienation arising by reason of Coar’s

criminal fiduciary breach in the context of a claim by

the Fund and a claim by a garnishing third party.

All that said, I nonetheless concur in the judg-

ment. I do so because I recognize that the Supreme

Court in Guidry expressly left open the question before

us, see 493 U.S. at 373, 110 S. Ct. at 685, and, consistent

with the observation of the majority opinion, see

Majority Typescript at 18, I cannot conceive that Con-

gress intended that someone in the position of Mr. Coar

(in contrast to any of his survivors) should be able to

receive pension benefits from the Fund he had so

-Pa34-

———‘(Cis~‘*SY

extensively defrauded (at least until the amount taken

was repaid). As Judge Nickerson observed, reaching

the same conclusion, in a post-Guidry case, see Pension

Benefit Guar. Corp. v. Solmsen, 743 F. Supp. 125

(E.D.N.Y. 1990), such a result would make no sense.

See Sutherland, Statutory Construction § 363 (2d ed.

1904) (a statute should not be interpreted to create

absurd results); accord Robert Winzinger, Inc. _v.

Management Recruiters of Bucks County, Inc., 841 F.2d

497, 500 (3d Cir. 1988). This result would be particular-

ly counter-intuitive given that we are interpreting a

statute, ERISA, the broad purpose of which is to protect

and ensure the availability of pension funds for retirees.

As the majority opinion acknowledges, to allow Coar to

collect his pension from the very Fund he defrauded

would detract from this overriding purpose of ERISA.

-Pa35-

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos. 92-5356, 92-5359,

92-5438, 92-5439

ROBERT J. COAR

V.

JOSEPH KAZIMIR, ROCCO MORONGELLO, in their

Capacity as Trustees of the Pensin Fund-Mid Jersey

Trucking Industry Local 701; WILLIAM LEVINE, in

hisapacity as Trustee of the Pension Fund-Mid Jersey

Trucking Industry-Local 701; DONATO DeSANTI, in

his capacity as Trustee of the Pension Fund-Mid Jersey

Trucking Industry-Local 701; ROBERT DUDIK, in his

capacity as Trustee as of the Pension Fund-Mid Jersey

Trucking Industry-Local 701; PENSION FUND-MID

JERSEY TRUCKING INDUSTRY LOCAL 701

Joseph Kazimir, Rocco Morongello, William Levine,

Donato DeSanti and Robert Dudik, in their capacity as

Trustees of the Pension Fund - Mid-Jersey Trucking

Industry - Local 701 and the Pension Fund - Mid-Jersey

Trucking Industry - Local 701,

Appellants in Nos. 92-5356 and 92-5438

ROBERT J. COAR

-Pa36-

ROBERT J. COAR

V. :

JOSEPH KAZIMIR, ROCCO MORONGELLO, in their

Capacity as Trustees of the Pension Fund-Mid Jersey

Trucking Industry-Local 701; WILLIAM LEVINE, in his

capacity as Trustee of the Pension Fund-Mid Jersey

Trucking Industry-Local 701; DONATO DeSANTL, in his

capacity as Trustee of the Pension Fund-Mid Jersey

Trucking Industry-Local 701; ROBERT DUDIK, in his

capacity as Trustee of the Pension Fund-Mid Jersey.

Trucking Industry-Local 701; PENSION FUND-MID

JERSEY LOCAL 701

Robert Coar,

Appellant in Nos. 92-5359 and 92-5439

On Appeal from the United States District Court

for the District of New Jersey

(D.C. Civil No. 91-3116)

SUR PETITION FOR REHEARING

BEFORE: SLOVITER, Chief Judge, and BECKER,

STAPLETON, MANSMANN, GREENBERG,

HUTCHINGSON, SCIRICA, COWEN, NYGAARD,

ALITO, ROTH, LEWIS, and WEIS, Circuit Judges

The Petition for rehearing filed by the appellee-

cross appellant Robert J. Coar in the above captioned

-Pa37-

matters having been submitted to the judges who

participated in the decision of this court and to all the

other available circuit judges of the court in regular

active service, and no judge who concurred in the

decision having asked for rehearing, and a majority of

the circuit judges of the circuit in regular active service

not having voted for rehearing by the court in banc, the

petition for rehearing is denied.

BY THE COURT:

Ls/

Circuit Judge

Dated: May 11, 1992

-Pa38-

eo lll

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos. 92-5356, 92-5359,

92-5438, 92-5439

ROBERT J. COAR

V.

JOSEPH KAZIMIR, ROCCO MORONGELLO, in their

Capacity as Trustees of the Pensin Fund-Mid Jersey

Trucking Industry Local 701; WILLIAM LEVINE, in

his

capacity as Trustee of the Pension Fund-Mid Jersey

Trucking Industry-Local 701; DONATO DeSANTI, in

his capacity as Trustee of the Pension Fund-Mid Jersey

Trucking Industry-Local 701; ROBERT DUDIK, in his

capacity as Trustee as of the Pension Fund-Mid Jersey

Trucking Industry-Local 701; PENSION FUND-MID

JERSEY TRUCKING INDUSTRY LOCAL 701

Joseph Kazimir, Rocco Morongello, William Levine,

Donato DeSanti and Robert Dudik, in their capacity as

Trustees of the Pension Fund - Mid-Jersey Trucking

Industry - Local 701 and the Pension Fund - Mid-Jersey

Trucking Industry - Local 701,

Appellants in Nos. 92-5356 and 92-5438

-Pa39-

ROBERT J. COAR

V.

JOSEPH KAZIMIR, ROCCO MORONGELLO, in their

Capacity as Trustees of the Pension Fund-Mid Jersey

Trucking Industry-Local 701; WILLIAM LEVINE, in his

capacity as Trustee of the Pension Fund-Mid Jersey

Trucking Industry-Local 701; DONATO DeSANTL, in his

capacity as Trustee of the Pension Fund-Mid Jersey

Trucking Industry-Local 701; ROBERT DUDIK, in his

capacity as Trustee of the Pension Fund-Mid Jersey

Trucking Industry-Local 701; PENSION FUND-MID

JERSEY LOCAL 701

Robert Coar,

Appellant in Nos. 92-5359 and 92-5439

On Appeal from the United States District Court

for the District of New Jersey

(D.C. Civil No. 91-3116)

Present: Becker, Greenberg, and Weis, Circuit Judges

JUDGEMENT

This cause came to be heard on the record from

the United States District Court for the District of New

Jersey and was argued by counsel March 9, 1993.

On consideration whereof, it is now here ordered

and adjudged by this Court that the judgment of the

said District Court entered August 3, 1992, be, and the

same is hereby appealed at Appeal No. 92-5356 and the

-Pa40-

cause is remanded to the District Court for entry of

judgment in favor of the Fund Defendants. Appeal No.

92-5438 is dismissed as unnecessary and untimely. The

cross-appeals filed by Robert J. coar from the District

Court’s denial of attorney’s fees are moot, as Mr. Coar

makes no contention that he is entitled to fees if the

Fund Defendants are successful on the merits. In

addition, Mr. Coar’s first cross-appeal which was

docketed at Appeal No. 92-5359 was premature. Both

cross appeals which were docketed at appeal Nos. 93-

5359 and 92-5439 are dismissed. Costs taxed against

Robert J. Coar. All of the above in accordance with the

opinion of this Court.

Attest:

Clerk

Dated: April 15, 1993

Certified as a true copy and issued in lieu of

a formal mandate on May 19, 1993.

Certified as a true copy and issued in lieu

of a formal mandate on May 19, 1993.

Teste: /s/ P. Douglas Sisk

Clerk, U.S. Court of Appeals for the Third Circuit

-Pa4l1-

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

ROBERT J. COAR,

Plaintiff, Civil Action No.

91-3116 (MTB)

VS.

OPINION

JOSEPH KAZIMIR, et al.

Defendants.

APPEARANCES:

HAYDEN, PERLE AND SILBER

1500 Harbor Boulevard

Weehawken, NJ 07087

By: Michael R. Perle

Attorneys for Plaintiff

WILENTZ, GOLDMAN & SPITZER

90 Woodbridge Center Drive

P.O. Box 10

Woodbridge, NJ 07095

By: Roger B. Kaplan, Esq.

Attorneys for Defendant

BEFORE: HON. MARYANNE TRUMP BARRY,

USD I.

-Pa42-

I. Introduction

Plaintiff Robert J. Coar has brought this action

against defendants Joseph Kazimir, Rocco Morongello,

William Levine, Donato DeSanti, and Robert Dudik, in

their capacities as trustees of the Pension Fund of Mid-

Jersey Trucking Local 701 ("the Fund"), and against the

Fund itself. Among the relief Coar seeks is a declara-

tion that defendants’ actions is withholding his vested

pension benefits and applying them as a set-off to his

liability to the Fund violated the Employee Retirement

Income Security Act of 1974 ("ERISA"), 29 U.S.c. § 1001

et seq.; an injunction preventing further withholding of

his benefits; and damages equal to the amount of

pension benefits heretofore withheld.’ See Amended

Complaint 418. Defendants have counterclaimed

seeking a declaratory judgment that their withholding

of Coar’s pension benefits because of his breach of

fiduciary duty was permitted by ERISA. Answer to

Amended Complaint {21. Presently before the court

are the parties’ cross-motions for summary judgment on

the issue of whether defendants could withhold Coar’s

pension benefits and apply them as a set-off to his

liability. For the reasons which follow, it is clear that

they could not.

II. Factual Background

The facts underlying this action are complex and

In addition, Coar seeks interest on the benefits

withheld from him and all parties seek costs and

counsel fees.

-Pa43-

need only be summarized briefly here.? Coar was one

of two lifetime trustees of the Funds. In 1982, he and

his co-trustee, Frank Scotto, entered into a contract on

behalf of the Fund under which the Fund agreed to

transfer $20 million for a period of thirty years to Omni

Funding Group ("Omni"), a Florida-based mortage

company owned by Joseph Higgens. Id.at 140-141. In

exchange for directing this investment, Coar and Scotto,

along with Fund general counsel Kenneth Zauber,

solicited kickbacks form Higgins and his partner in the

scheme, David Friedland, former general counsel to the

Fund. Id. at 153. In 1987, Coar, Scotto, and Zauber

were convicted of mail and wire fraud and conspiracy

to receive kickbacks in violation of the Racketeering

Influenced Corrupt Organizations Act {RICO), 19 U.S.C.

§ 1962(d). Friedland, also named in the indictment,

became a fugitive and, upon his arrest, pleaded guilty.

Coar’s conviction for conspiracy to receive kickbacks

was affirmed on appeal, although his convictions for

mail and wire fraud were vacated because the govern-

ment had not proved that the Fund had suffered a

money or property loss. He served 18 months in prison

and has since been released.

The actions of Coar and his co-conspirators also

gave rise to a civil action when the Fund brought claims

including, inter alia, a claim for breach of fiduciary duty

owed to the Fund in violation of ERISA and civil RICO.

Pension Fund-Mid Jersey Trucking Industry Local 701, et al.

For a more detailed factual recitation, see United

States v. Zauber, 857 F.2d 137 (3rd Cir.1988)(in banc).

-Pa44-

v. Omni Funding Group, Inc., No. 84-4332(GEB). On

September 13, 1990, the Hon. Garrett E. Brown granted

partial summary judgment as to liability only against

Coar, Zauber, Friedland, Scotto, Higgins and Omni on,

among other things, that court of the complaint alleging

breach of fiduciary duty under ERISA. Subsequently,

following a damage hearing, Judge Brown entered

judgment against those defendants finding them to be

jointly and severally liable to the Fund in the aggregate

amount of $122,143,548.00. See Second Supplemental

Affidavit of Roger B. Kaplan (hereinafter "Kaplan

Second Suppl. Aff.), Exh. Q and R.’

This action arises out of defendants’ decision, in

April, 1991, to withhold pension benefits which Coar

had been receiving since 1982 and apply them as a set-

off for the damages for which he was liable to the Fund

as the result of his breach of fiduciary duty. See Letter

dated April 16, 1991 from Frederic Becker to Robert

Coar, Affidavit of Roger Kaplan, dated February 27,

1992 (hereinafter "Kaplan Aff.") Exh. I. Defendants’

decision came after Coar’s liability to the Fund had been

established in the civil case, but before there had been

a judgment reflecting the monetary loss suffered by the

Findings of fact and conclusions of law were issued

on March 19, 1992. See Kaplan Second Suppl. Aff.,

Exh.Q. Judgement was entered on April 2, 1992. Coar

and codefendants Zauber, Friedland, Scotto, Higgins

and Omni were found jointly and severally liable to the

Fund in the amount of $25,535,887 for ERISA violations

and $96,607,661 for RICO violations. See Kaplan Second

Suppl. Aff., Exh.R.

-Pa45-

Fund and, in particular, the loss to the Fund attributable

to Coar’s breach of fiduciary duty, a fact to which Coar

attributes much significance. See n.7, infra. It is not

disputed that Coar was a fiduciary who owed a duty to

the Fund and breached that duty. Neither is it seriously

disputed that the fund sustained a loss as a result of the

kickback scheme in which Coar was a principal player.‘

‘The parties differ as to whether there is an issue

properly before the court concerning the Fund’s con-

struction or interpretation and application of the Plan

and Trust Agreement. Defendants claim that Coar

cannot be heard to challenge the Fund’s construction or

interpretation of the Plan and Trust Agreement because

he has not exhausted is administrative remedies. Coar

takes issue with this claim, contending that not only is

it proper that arguments be heard with regard to the

Fund’s construction and interpretation of the Plan and

Trust Agreement, but that the inquiry into the basis for

defendants’ actions must be limited to the facts as set

forth in the April 16, 1991 letter from the Fund trustees

to Coar informing him that this pension benefits would

be applied to his liability to the Fund. See Kaplan Aff.,

Exh. I. Moreover, the parties disagree as to the effect of

their March 6, 1992 stipulation, which states somewhat

cryptically that

plaintiff does not and will not dispute

that, at the time the defendant trustees of

the Pension Fund...made their decision in

april 1991 to withhold all further pension

benefits from plaintiff, the defendant

trustee had before them substantial evi-

dence that, during 1983 and 1984, the

(continued...)

-Pa46-

III. Discussion

[1] Defendants claim that they were entitled

to withhold Coar’s pension benefits by virtue of section

409%(a) of ERISA, 29 U.S.C. § 1109(a).° Essentially,

‘(...continued)

plaintiff..received substantial kickbacks

from David Friedland in connection with

the $20 million investment by the Pension

Fund in 1982 with Omni Funding Group,

Inc., and plaintiff does not and will not

dispute such evidence in this case.

Stipulation, dated March 6, 1992 (hereinafter "Stipula-

tion") at 1.

These differences may well present issues which

could be substantial, both legally and factually. Howev-

er, because the propriety of alienation or forfeiture of

pension fund benefits can be resolved as a matter of

law, these issues need not be addressed.

‘Section 409(a) of ERISA provides:

Any person who is a fiduciary with re-

spect to a plan who breaches any of the

responsibilities, obligations, or duties

imposed upon fiduciary by this subchap-

ter shall be personally liable to make good

to such plan any losses to the plan result-

ing from each such breach, and to restore

to such plan any profits of such fiduciary

which have been made through use of

assets of the plan by the fiduciary, and

shall be subject to such other equitable or

remedial relief as the court may deem

(continued...)

-Pa47-

section 409(a) renders a person who breaches a fiduciary

duty to a pension fund personally liable for losses

caused by or profits earned from such breach and

subjects him or her "to such other equitable or remedial

relief as the court may deem appropriate..." 29 U.S.C. §

1109(a). Coar, on the other hand, contends that

defendants’ action violated both the anti-alienation

provision of section 206(d)(1) of ERISA, 29 U.S.C. §

1056(d)(1), and ERISA’s anti-forfeiture provision, section

203(a), 29 U.S.C. § 1053(a).© His primary argument is

°(...continued)

appropriate, including removal of such

fiduciary. A fiduciary may also be re-

moved for a violation of section 111 of this

title.

29 U.S.C. § 1109(a). In addition, defendants cite as a

basis for their counterclaim section 502(a)(3) of ERISA,

which provides for civil enforcement of the Act’s terms:

A civil action may be brought-

(3)by a participant, beneficiary, or fiducia-

ry

(A)to enjoin any act or practice which

violates any provision of this subchapter

or the terms of the plan, or (B) to obtain

other appropriate equitable relief (i) to

redress such violations or (ii) to enforce

any provisions of the subchapter or the

terms of the plan..."

29 U.S.C. §1132(a)(3).

‘Section 206(d)(1) provides that "[e]ach pension plan

shall provide that benefits provided under the plan shall

(continued...)

-Pa48-

re

that the withholding of pension benefits without a

money judgment conclusively establishing a “loss: to the

Fund, although couched in terms of a set-off, was

effectively a forfeiture. Thus, he contends, the court's

analysis of whether his pension benefits were properly

or improperly withheld should focus on the anti-forfei-

ture provision of section 203 of ERISA rather than the

statute’s anti-alienation provision, although that provi-

sion, he claims, was violated as well.’ Resolution of

these competing contentions requires a determination of

the nature of the interplay between ERISA’s remedial

provisions relating to breaches of fiduciary duty and its

*(...continued)

provide that benefits provided under the plan may not

be assigned or alienated." 29 U.S.C. § 1056(d)(1).

Section 203(a) provides that "[e]ach pension plan shall

provide that an employee’s right to his normal retire-

ment benefit is nonforfeitable upon the attainment of

normal retirement age..." 29 U.S.C. § 1053(a).

7Coar makes much of the fact that there had been no

adjudication of the amount of loss to the Fund at the

time his benefits were withheld. Defendants ague, in

response, that a money judgment was unnecessary

because substantial evidence of kickbacks was before

them at he time they acted and that was all that was

required. As will become clear, it is unnecessary to

decide whether a money judgment was required prior

to defendants doing as they did. In any event, there

now is such a judgment and Coar’s reliance on the fact

that there was none in April 1991 would not take him

very far.

-Pa49-

anti-alienation and anti-forfeiture provisions.

A. Alienation versus Forfeiture

Coar’s attempt to convince this court that the

Fund terminated his benefits "as further punishment for

the breach of fiduciary duty for which he was convicted

criminally," therefore implicating ERISA’s anti-forfeiture

provision rather than its anti-alienation provision, must

fail. Pl. Br. at 17. The March 16, 1991 letter to Coar

stated quite clearly that his pension benefits would be

withheld "to satisfy [his] liabilities to the Pension Fund

for [his] breaches of fiduciary duty..." It is plain at

least from the language used by defendants that hey

determined to withhold the pension benefits as a set-off

against Coar’s liability to the Fund and not to perma-

nently deny benefits as punishment for his criminal

actions.

Winer v. Edison Brothers Stores Pension Plan, 593

F.2d 307,312 (8th Cir.1979), which Coar cites in support

of his position, is inapposite. Winer involved a forfei-

ture of pension fund benefits by operation of a “bad

boy" clause which provided for the automatic disqualifi-

cation from benefits of any plan member who had been

dishonest with respect to the assets of or in a transac-

tion on behalf of the corporation. The Fund in Winer

made no claim of set-off vis-a-vis any liability to the

Fund; rather, it claimed a forfeiture of the very nature

sought to be eradicated by section 203(a) of ERISA, 29

U.S.C. § 1053(a). See Winer, 593 F.2d at 311 (citing the

legislative history of the anti-forfeiture provision of

ERISA). Coar cites no further authority for his invoca-

-Pa50-

tion of ERISA’s anti-forfeiture provision and, indeed,

there appears to be none. Because the intention of

defendants in withholding Coar’s benefits was clearly to

offset his liability to the Fund, and wholly aside from

whether such set-off was or was not legally supportable

at that time, the relevant section of ERISA in determin-

ing the propriety of the Fund’s actions must be section

206(d)(1), 29 U.S.C. § 1056(d)(1), the anti-alienation

provision.

B. Withholding Pension Benefits to Satisfy a Liability to

the Fund for Breach of Fiduciary Duty.

[2] | Having determined that defendants’ action

is appropriately reviewed in light of ERISA’s anti-

alienation provision, the court must determine whether

the remedy of set-off, comprehended within the "such

other equitable relief as the court may deem appropri-

ate" language of section 409(a), acts as an exception to

the general prohibition against the alienation of such

benefits.’ In their regard, the Supreme Court's opinion

in Guidry v. Sheet Metal Workers National Pension Fund,

493 U.S. 365, 110 S.Ct. 680, 107 L.Ed.2d 782 (1990) is

"Defendants cite Carson v. Local 1588, International

Longshoremen’s Ass'n, 769 F. Supp. 141 (S.D.N.Y.1991), as

support for the proposition that a plan could offset

losses by withholding pension benefits upon the

beneficiary's breach of fiduciary duty. While that was,

in fact, the case in Carson, it was only because the non-

forfeiture and non-alienation rules do not apply to a

top-hat pension, the pension at issue in Carson by virtue

of the specific exemption found in 29 U.S.C. § 1051(2).

-Pa51-

highly instructive.

As an initial matter, it bears mention that Guidry

expressly left open the matter now before the court. Id.

at 365,110 S.Ct. at 681. Because the pensioner in that

case had breached a fiduciary duty to the union itself

rather than to the Fund, the Court found section 409(a)

inapplicable and specifically refused to decide whether

the remedial provisions of 409(a) supersede the bar on

alienation in section 206(d)(1). Resisting the "natural

tenency to blur the distinction between a fund and its

related union.” the Court looked instead to section

501(b) of the Labor-Management Reporting and Disclo-

sure Act of 1959 (LMRDA), 29 U.S.C. § 501(b).?

There are similarities, however, between section

501(b) of the LMRDA and section 409(a) of ERISA, thus

rendering much of Guidry’s reasoning and analysis apt

to the instant matter. Compare LMRDA section 501(b),

*Section 501(b) of the LMRDA provides for a private

right of action in federal court to recover damages or

“other appropriate relief for the benefit of the labor

organization" for breaches of fiduciary duty by union

officers. 29 U.S.C. §501(b). Having found no significant

difference between a writ of garnishment and a con-

structive trust, see Guidry, 493 U.S. at 372, 110 S.Ct. at

685, the Court assumed that "other appropriate relief"

may authorize, under certain circumstances, the imposi-

tion of a constructive trust. Id. at 374, 110 S.Ct. at 686.

Nevertheless, the Court was persuaded that the counter-

vailing interest expressed by ERISA’s anti-alienation ~

provision prevented the imposition of a constructive

trust on pension benefits. See Guidry, 493 U.S. at 375,

110 S.Ct. at 687.

-Pa52-

—— °°»

29 U.S.C. § 501(b)("or other appropriate relief") with

ERISA section 409(a). 29 U.S.C. § 1109(a)("and shall be

the subject to such other equitable or remedial relief as

the court may deem appropriate"). And, importantly

here, the Court's interpretation of section 206(d)(1) is

right on point, Thus, Guidry’s discussion of the prohibi-

tion on the assignment or alienation of pension benefits

set forth in section 206(d)(1) of ERISA is extremely

important for this court’s purposes.

The Court noted that section 206(d)(1)is clear and

reflects a "considered...decision to safeguard a stream of

income for pensioners (and their dependents, who may

be, and perhaps usually are, blameless) even if that

decision prevents others from securing relief for the

wrongs done to them." Id. Thus, the Court continued,

courts should generally be loathe to create equitable

exceptions to unqualified statutory pronouncements.

| Guidry, 493 U.S. at 376, 110 C. Ct. at 687.

The creation of such exceptions, in our

view, would be especially problematic in

the context of an antigarnishment provi-

sion. Such a provision acts, by definition,

to hinder the collection of a lawful debt.

A restriction on garnishment therefore can

be defended only on the view that the

effectuation of certain broad social policies

sometimes takes precedence over the

desire to do equity between particular

parties. It makes little sense to adopt such

a policy and then refuse enforcement

whenever enforcement appears inequita-

-Pa53-

ble. A court attempting to carve out an

exception that would not swallow the rule

would be forced to determine whether

application of the full in particular circum-

stances would be "especially" inequitable.

The impracticality of defining such a

standard reinforces our conclusion that the

identification of any exception should be

left to Congress.

id. at 376-77, 110 S.Ct. at 687-688 (emphasis in original).

The Court recognized that the operation of an

antigarnishment provision, like the anti-alienation

provision of section 206(d)(1), will almost always seem

inequitable. Despite the "natural distaste" for such a

result, the Court nevertheless paid deference to the

legislative policy decisions behind the anti-alienation

provision and left any change in that policy to Congress.

Id. at 377, 110 S.Ct. at 688.

Guidry, of course, involved reconciling two

distinct statutes: the "other appropriate relief" power of

the LMRDA and the anti-alienation language of ERISA.

Here, the reconciliation must take place within ERISA

itself with the court determining whether Congress

intended that the remedial aspects of section 409(a)

supersede the anti-alienation provision of section

1056(d)(1).

The District of Columbia Circuit, in its opinion in

Crawford v. La Boucherie Bernard Ltd., 815 F.2d 117

(D.C.Cir.), cert. denied, 484 U.S. 943, 108 S.Ct.328, 98

L.Ed.2d 355 (1987), answered this question in the

-Pa54-

affirmative. In reaching its conclusion, the Crawford

court noted that ERISA’s anti-alienation provision is

"not immutable," citing decisions in which the garnish-

ment of pension plan benefits was permitted to satisfy

family support and community property obligations of

divorce decrees and to satisfy liabilities arising from an

employee’s criminal misconduct toward his employer.

Crawford, 815 F.2d at 121 (citing American Telephone and

Telegraph Co. v. Merry, 592 F.2d 118(2d Cir.1979); Stone

v. Stone, 450 ESupp. 919 (N.D. Cal. 1978), aff'd, 632 F2d

740 (9th Cir.1980), cert. denied sub nom. Seafarers Interna-

tional Union, Pacific District-Pacific Maritime Association

Pension Plan v. Stone, 453 U.S. 922, 101 S.Ct.3158, 69

L.Ed.2d 1004 (1981); and St. Paul Fire and Marine Insur-

ance Co. v. Cox, 752 F.2d 550 (11th Cir.1985)).

This conclusion, however, has been vitiated not

only by Guidry itself, which held that it is not for a

court to declare that an employee’s criminal misconduct

can be the basis for an offset, but by the passage of

section 104(a) of the Retirement Equity Act of 1984, 29

U.S.C. § 1056(d)(3), subsequent to the domestic relations

decisions relied on by the Crawford court. Section 104(a)

excepts certain domestic relations orders from the anti-

alienation provision, and that Congress chose to do so

indicates a willingness to create such policy-oriented

exceptions where appropriate. Indeed, the Supreme

Court noted this fact in reaching its conclusion in Guidry

that the equitable enforcement provision of the LMRDA

should not override ERISA section 1056(d)(1). See

Guidry, 493 U.S. at 376 n. 18, 110 S.Ct. at 687 n. 18.

The precedential value of Crawford is, at least in

-Pa55-

this court’s view, questionable in light of the Supreme

Court’s subsequent decision in Guidry. The Fifth

Circuit, in Herberger v. Shanbaum, 897 F. 2d 801 (Sth Cir.

1990), held, as does this court, that section 409(a) cannot

override the anti-alienation provision of section

206(d)(1). The court considered Crawford in light of

Guidry and determined that Guidry had seriously

undermined much of the reasoning of the Crawford

court. Herberger, 897 F.2d at 804. The court noted that

the Supreme Court in Guidry rejected the notion,

suggested in Crawford, that a generalized equitable

exception to the anti-alienation provision is warranted

by virtue of ERISA’s legislative history endorsing

traditional trust principals. Id. Instead, Herberger

extrapolated that the Supreme Court's strict application

of the anti-alienation section would lead the court to

reject an exception based on section 203(a).Id.

This view, however, is not unanimous. A

contrary view was taken by the court in Pension Benefit

Guaranty Corp. v. Solmsen, 743 F.Supp.125

(E.D.N.Y.1990), which, undaunted by the Supreme

Court’s analysis in Guidry, adopted the reasoning of

Crawford and permitted a pensioner’s benefits to be used

as a set-off for his liability for breach of fiduciary duty.

The court, recognizing that Guidry had left open the

question of whether section 409(a) could supersede the

anti-alienation provision of ERISA, considered and

rejected the reasoning of Herberger. Solmsen, 743 F.Supp.

at 129. In addition to explicitly relying on Crawford's

analysis, the court opined that "common sense sug-

gest[s] that set-off is permissible.”

-Pa56-

This reasoning, however, flies in the face of the

Supreme Court's teaching in Guidry: despite the natural

distaste for permitting a beneficiary who has wronged

the pension fund to collect benefits while his or her debt

remains outstanding, a legislative policy determination

has been made and the statute, ERISA section 206(d)(1),

29 U.S.C. § 1056(d)(1), is clear. Guidry, 493 U.S. at 365,

110 S.Ct. at 681. Thus, Solmsen’s comment that"[nJo

good reason appears as to why Guaranty Corp. should

have to pay benefits to a person who has wronged the

Plan, and the beneficiaries of it, before he has made

good the wrong" is more appropriately addressed to the

legislature rather than the courts seeking to interpret the

law as it now stands.”°

“In their attempt to distinguish Herberger, defen-

dants rely on the Solmsen court's view of Herberger as a

case dealing with a set-off remedy as applied to a third

party who participated in the fiduciary breach of

another rather than someone who himself breached a

fiduciary duty. Such reliance is misplaced, for in this

regard the Solmsen court is simply wrong. While there

was a case related to and discussed in Herberger which

dealt with the same person’s (Shaubaum’s) participation

in the breach of fiduciary duty of another, see

McLaughlin v. Lindermann, 853 F.2d 1307 (5th Cir.1988),

the facts at issue in Herberger were not those. in

Herberger, a pension beneficiary brought suit against the

successors to his former employer, Shanbaum, an

individual named Carp, and the Lee Optical Pension

Plan, who had been the sole shareholders of the em-

ployer-corporation, to recover benefits owed to him.

(continued...)

-Pa57-

IV. Conclusion

Recognizing that Guidry left open the question of

whether the remedial provision of ERISA section 409(a),

29 U.S.C. § 1109(a), can serve as an exception to the

unqualified statutory language of the anti-alienation

provision of ERISA section 206(d)(1), 29 U.S.C. §

1056(d)(1), this court holds that the Supreme Court's

reasoning in Guidry counsels a strict application of the

anti-alienation provision, and that defendants cannot

withhold Coar’s benefits and apply them as a set-off to

his liability to the Fund. To echo the sentiments of the

Supreme Court, while this result may be unpalatable,

and it is unpalatable in this case, for Coar has hardly

bathed himself in glory, it is nevertheless in accordance

with the law, and any change must come from Congress

rather than from the court.

Coar’s motion for summary judgment will,

'*(...continued)

The pension plan settled with the beneficiary; at a later

trial the court awarded plaintiff damages against

Shanbaum and Carp, as well as an indemnification

judgment against Shanbaum in favor of the pension

plan for Shanbaum’s direct breach of his fiduciary duty to

the plan. Herberger, 897 F.2d at 802. When this judg-

ment proved uncollectible, the pension plan sought to

withhold Shanbaum’s pension benefits as a set-off for

his liability to the Plan for his direct breach of fiduciary

duty. Id. Therefore, any distinction defendants suggest

based on Herberger’s consideration of mere participation

by a third party in the breach of fiduciary duty of

another is wholly illusory.

-Pa58-

therefore, be granted and defendants’ motion will be

denied. Concomitantly, Coar’s motion to dismiss the

counterclaim will be granted and defendants’ motion for

judgment on the counterclaim will be denied." Counsel

for Coar shall submit an order reflecting this opinion

within ten days of its date.

/s/MARYANNE TRUMP BARRY, U.S.D.]J.

Dated: May 12, 1992

"Tt follows inexorably that those benefits wrongfully

withheld from Coar are to be paid to him, together with

interest at the appropriate rate, and defendants are to

do so within thirty days of this date. It follows, as well,

that no further benefits are to be withheld as a set-off

for liability for the breach of Coar’s fiduciary duty to

the Fund. Finally, Coar will be awarded reasonable

counsel fees and costs. 29 U.S.C. § 1132. In this connec-

tion, counsel shall submit the necessary affidavit within

twenty days of this date.

-Pa59-

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

Civil Action No.

ROBERT J. COAR, 91-3116 (MTB)

Plaintiff,

vs. ORDER

JOSEPH KAZIMIR, et al. |

Defendants.

This matter having come before the court upon

the motion of plaintiff Robert Coar by his attorney,

Hayden, Perle and Silber, pursuant to Fed. R. Civ. P. 56,

for an order granting summary judgment in favor of

plaintiff upon plaintiff’s amended complaint, in the

presence of Wilentz, Goldman and Spitzer, Esqs. (Roger

Kaplan, Esq., appearing), attorneys for defendants

Joseph Kazimir, Rocco Morongello, William Levine,

Donato D’Santi, and Robert Dukik in their capacities as

Trustees of the Pension Fund-Mid Jersey Trucking

Industry-Local 701 (collectively “the Trustees"), and

said defendant Trustees, having cross-moved for

summary judgment upon their counterclaim, and the

Court having reviewed the briefs and supporting

documents filed in support of the motion and the cross-

motion, and for good cause appearing, as set forth in

-Pa60-

the decision of the Court, filed May 12, 1992;

IT IS on this 23rd day of June, 1992 hereby

ORDERED:

A. That plaintiff's motion for summary

judgment is granted and defendants’ motion for sum-

mary judgment is denied;

B. That defendants are permanently enjoined

and restrained from withholding, delaying or otherwise

limiting the payment of plaintiffs pension benefits on

account of his liability to the Fund to plaintiff or any

person who may be entitled to receive those benefits;

C. That judgment is entered in favor of

plaintiff and against defendants in the amount of

$18,061.62 in past benefits together with interest of

$475.26 as of June 22, 1992, same to be paid to plaintiff

within thirty days of the date of this order;

Costs to plaintiff.

/s/ MARYANNE TRUMP BARRY, U.S.D,J.

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UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

ROBERT J. COAR,

| Civil Action

Plaintiff, | No. 91-3116(MTB)

VS.

JOSEPH KAZIMIR, et al.

: ORDER

Defendants.

This matter having come before the court upon

the motion of defendants for reconsideration or to alter

or amend the court’s May 12, 1992 Opinion ("Opinion")

in its entirety or for reconsideration or to alter or amend

that portion of the Opinion awarding costs and

attorney’s fees to plaintiff, pursuant to Fed. R. Civ. P. 59

and 60, or, in the alternative, for a stay of the decision

and judgment pending exhaustion of all appeals,

pursuant to Fed.R.Civ.P.62(c); and the court having

considered the submissions of the parties both in

support of and in opposition to the motion without oral

argument pursuant to Fed. R. Civ. P. 78; and

it being the opinion of the court that Fed. R. Civ.

P. 59(e) provided that a party may move to alter or

amend a judgment within ten days of the entrv of

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judgment; ' and

‘Defendants; motion will be treated as one for

reconsideration under Rule 59(e) and General Rule 12(1)

of the United States District Court of the District of New

Jersey. There has, however, been no judgment entered,

and the language of Rule 59(e) states that a motion

thereunder must be filed "not later than 10 days after

entry of the judgment." Courts and commentators have

held, and I agree, that this ten day time period is only

a maximum time period and that the rule does not

require that there be a pre-existing judgment. Jurgens

v.McKasy, 905 F. 2d 382,385-86 (Fed. Cir. 1990), cert.

denied, 112 S. Ct. 281 (1991); Smith v. Hudson, 600 F.2d

60, 62 (6th Cir.), cert.denied, 444 U.S. 986 (1979); Jetero

Constr. Co. v. South Memphis Lumber Co., 531 F.2d

1348,1351 (6th Cir.1976); 9 J. Moore, B. Ward & J Lucas,

Moore’s Federal Practice J 204.12[4](2d ed.1989); 11 C.

Wright & A. Miller, Federal Practice and Procedure §

2812 at 81-82(1973).

As for defendants’ invocation of Rule 60, the only

possible section under which defendants could seek

relief if Rule 60(b)(6), which authorized the court to take

action based on “any other reason justifying relief from

the operation of the judgement." Defendants’ argu-

ments in favor of relief, however, are simply legal

arguments. it is well established that Rule 60(b) is not

to be a substitute for appeal, Martinez-McBean_v.

Government of Virgin Islands, 562 F. 2d 908,911 (3rd

Cir.1977), but is to be used to grant relief in extraordi-

nary situations. Moolenaar v. Government of Virgin

Island, 822 F. 2d 1342, 1346 (3d Cir. 1987). The Third

Circuit has held that legal error is not an extraordinary

circumstance which would justify the application of

Rule 60(b). Martinez-McBean, 562 F. 2d at 912.

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it being the opinion of the court that General

Rule 12(I) provides that a party may make a motion for

reargument when there are "matters or controlling

decisions which counsel believes the Court has over-

looked;" General Rule 12(I) of the United States District

Court for the District of New Jersey; and

the court considering first defendants’ motion for

reconsideration or reversal of that portion of the Opin-

ion granting summary judgment in favor of plaintiff;

and

it being the opinion of the court that its Opinion

was by no means based upon an "implicit and explicit

assumption that the anti-alienation provision of

ERISA...was inflexible and permitted no exceptions

absent Congressional action," Def. Br. in Support of

Reconsideration at 2, but rather was based upon the

court’s interpretation of ERISA in light of the applicable

case law, including, inter alia, Guidry v. Sheet Metal

Workers National Pension Fund, 493 U.S. 365 (1990)’;

and

it being the opinions of the court that defendants’

citations to judicial and administrative interpretations of

ERISA are not binding on the court, and, in light of the

? Defendants argue that the court ignored the fact

that Guidry left open the question before the court.

Defendants are mistaken. See Opinion at 9 & 15.

Moreover, simply because Guidry expressly left open

this issue does not mean that Guidry’s reasoning is

inapplicable here.

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a |

precedent cited in its Opinion, the court does not find

them persuasive; and

the court considering second defendants’ motion

for reconsideration or reversal of that portion of the

Opinion awarding counsel fees and costs to plaintiff

under 29 U.S.C. § 1132; and

it being the opinion of the court that ERISA

section 502(g)(1) provides that "the court in its discretion

may allow a reasonable attorney’s fee and costs of

action to either party;" 29 U.S.C. § 1132(g)(1); and

it being the opinion of the court that in consider-

ing whether to ward attorney’s fees and costs, five

factors should be considered: (1) the offending party’s

culpability or bad faith; (2) the ability of the offending

party to satisfy an award of attorney's fees; (3) the

deterrent effect of an award of attorney's fees against

the offending party; (4) the benefit conferred on mem-

bers of the pension plan as a whole; and (5) the relative

merits of the parties’ position; Ursic_v. Bethlehem

Mines, 719 F. 2d 670,673 (3d Cir.1983); see also Ellison

v. Shengano Inc. Pension Board, 956 F. 2d 1268,1273 (3d

Cir.1992); Monkelis v. Mobay Chemical, 827 F. 2d 935,

936 (3d Cir. 1987);° and

*In support of his argument for counsel fees, plain-

tiff cites to Amith v. CMTA-IAM Pension Trust, 746 F.

2d 587,589 (9th Cir.1984) and the Ninth Circuit's state-

ment that "absent special circumstances, a prevailing

ERISA employee plaintiff should ordinarily recover

attorneys’ fees from the defendant." However, the

Third Circuit in its recent opinion in Ellison explicitly

(continued...)

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it being the opinion of the court that defendants

did not act in bad faith in withholding plaintiff's

pension benefits, inasmuch as defendants waited until

after partial summary judgment as to liability, albeit no

judgment, was rendered against plaintiff in the action

before the Hon. Garrett E. Brown and on equitable

grounds, as least, to withhold payment was eminently

appropriate; and

it being the opinion of the court that, although

the court disagrees with defendants’ position as to their

right as a matter of law to withhold plaintiff’s pension

benefits under ERISA, defendants’ position is supported

by some case law, is not totally without merit, and

remains an open question in the Third Circuit; and

it being the opinion of the court that, because

defendants were acting to preserve the assets of the

Fund for the benefit of all it members and did not

violate clearly established law at the time, there is no

*(...continued)

rejected the "special circumstances" test employed by the

Ninth Circuit in Smith. Ellison v. Shenango Inc. Pen-

sion Board, 956 F.2d 1268,1275 (3d Cir.1992). In the

course of rejecting the "special circumstances” test, the

court found that adoption of that test in ERISA cases is

not justified by analogy to fee provisions in similar

remedial legislation, id, although plaintiff argues that it

is. I cannot, however, write on a clean slate, as plaintiff

would have me do, when the Third Circuit has rejected

a presumption in favor of granting attorney’s fees to

prevailing parties and requires application of the Ursic

factors.

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need to deter defendants’ conduct; and

it being the opinion of the court that, while

plaintiff’s action conferred a monetary benefit only on

himself, his action may confer a benefit on other mem-

bers of the Fund in that the Fund now knows that it

cannot withhold pension benefits from a member based

on that member’s breach of fiduciary duty to the Fund;

see Grove v. Modified Retirement Plan for Hourly Paid

Emplovees of Johns Manville, Corp. and Subsidiaries,

803 FE. 2d 109, 119-20 (3d Cir. 1986), although this factor

does not weigh heavily in plaintiff’s favor; and

it being the opinion of the court that the fund

easily has the capacity to pay an award of attorney’s

fees and costs; and

it being the opinion of the court that in balancing

the five factors set forth in Ursic, the balance comes

down in defendants’ favor and defendants will not be

required to pay attorney’s fees and costs in connection

with this action;

the court considering third defendants’ request

for a stay of enforcement of the judgment pending

appeal pursuant to Fed.R.Civ.P.62(c); and

it being the opinion of the court that in consider-

ing a motion to stay a judgment pending appeal,

pursuant to Rule 62(c), the court should consider (1)

whether the stay applicant has made a strong showing

‘While costs will not be awarded under ERISA,

“costs shall be allowed as of course to the prevailing

party unless the court otherwise directs.”

Fed.R.Civ.P.54(s). Costs will be allowed here.

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that he or she is likely to succeed on the merits; (2)

whether the applicant will be irreparably injured absent

a stay; (3) whether the issuance of the stay will substan-

tially injure the other parties interested in the proceed-

ing; and (4) where the public interest lies; Hilton _v.

Braunskill, 481 U.S. 770, 776 (1987); Evans v. Buchanan,

435 F Supp. 832, 844 (D.Del.1977)("a stay may be

appropriate in a case where the threat of irreparable

injury to the applicant is immediate and substantial, the

appeal raises serious and difficult questions of law in an

areas where the law is somewhat unclear and the

interests of the other parties and the public are not

harmed substantially"); and

it being the opinion of the court that while

defendant may be able to demonstrate that there is a

"serious" question of law on appeal, see Evans, 435 F.

Supp. at 844, defendant will not be irreparably harmed

in the absence of a stay and, in any event, the harm

plaintiff would suffer if a stay were issued counsels

against the issuance of a stay pending appeal;

IT IS on this 23rd day of June, 1992 hereby

ORDERED that defendants’ motion for reconsid-

eration or to alter or amend that portion of the court’s

May 12, 1992 Opinion granting summary judgment in

favor of plaintiff is denied; and it is further

ORDERED that defendants’ motion for reconsid-

eration or to alter or amend that portion of the court’s

May 12, 1992 Opinion awarding attorney's fees and

costs to plaintiff is granted and that the portion of the

Opinion awarding attorney’s fees and costs is hereby

vacated; and it is further

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ORDERED that defendants’ motion for a stay of

the judgment pending appeal is denied; and it is further

ORDERED that defendants’ motion for a stay of

the judgment pending appeal is denied; and it is further

ORDERED that plaintiff’s fee application is

denied.”

/S/

MARYANNE TRUMP BARRY

U.S.DJ.

‘It is further ordered, pursuant to Fed. R. Civ. P.

60(a) that a clerical error in the court’s Opinion be

corrected so that the first sentence of footnote 10 of the

Opinion reads as follows:

In their attempt to distin-

guish Herberger, defendants

rely on the Solmsen court’s

view of Herberger as a case

dealing with a set-off reme-

dy as applied to a third

party who participated in

the fiduciary breach of an-

other rather than someone

who himself breached a

fiduciary duty.

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