Tenth Circuit Affirms Default Judgment and Permanent Injunction Against ERISA Fiduciaries

In Chavez-Deremer v. Ascent Construction, Inc., No. 24-4072, 2025 WL 1638134 (10th Cir. June 10, 2025), the Tenth Circuit highlights the rigorous standards and protective measures applied to employee benefit plans under ERISA. This case involves Ascent Construction, Inc., its president Bradley L. Knowlton, and the Ascent Construction, Inc. Employee Stock Ownership Plan. The Department of Labor (DOL) investigated Ascent and Knowlton for potentially breaching their fiduciary duties under ERISA. The investigation revealed that Knowlton had improperly transferred over $311,000 from the plan’s funds into Ascent’s accounts to cover business expenses. Further, a former employee’s retirement distribution request remained unfulfilled despite checks being issued. Ascent faced financial hardship, evidenced by a $26 million judgment against them in a separate insurance case.

The court upheld the district court’s decision to enter a default judgment against Ascent and Knowlton. This decision was grounded in their willful noncompliance with court orders, including failing to respond to discovery requests and not answering the amended complaint on time. The court applied the Ehrenhaus factors to affirm the default judgment, noting significant prejudice to the DOL, interference with the judicial process, and the inadequacy of lesser sanctions. The defendants’ repeated disobedience of court orders justified this severe sanction.

The court also upheld the entry of a permanent injunction, which barred Knowlton and Ascent from serving as fiduciaries for the plan. This was essential to prevent further violations of ERISA. The court found that the defendants’ actions posed a risk of irreparable harm, as the plan’s funds might not be recoverable if further misappropriated. The injunction aimed to protect the plan’s assets, ensuring they remain available for beneficiaries when needed.