Asset Dissipation as Irreparable Harm: Chavez-DeRemer v. Ascent Construction and the Tenth Circuit’s Endorsement of Injunctive Removal of ERISA Fiduciaries Following Willful Discovery Misconduct

1. Introduction

Chavez-DeRemer v. Ascent Construction, No. 24-4072 (10th Cir. June 10 2025), is the latest chapter in a long-running enforcement action by the U.S. Department of Labor (DOL) concerning serious fiduciary breaches under the Employee Retirement Income Security Act of 1974 (ERISA). The Tenth Circuit—via a non-precedential but citable Order and Judgment—affirmed two pivotal district-court rulings:

1. Entry of default judgment as a discovery sanction against Ascent Construction, its president Bradley L. Knowlton, and the company’s Employee Stock Ownership Plan (ESOP); and
2. Entry of a permanent injunction removing the corporate defendants as plan fiduciaries and appointing an independent fiduciary to terminate the plan and marshal remaining assets.

Although the opinion arises in the sanction and injunction context, it crystallises a broader legal principle: when an ERISA fiduciary is insolvent or financially distressed, the imminent risk that plan monies will be unrecoverable constitutes “irreparable harm,” thereby justifying permanent injunctive relief—even where the underlying injuries are monetary in nature. At the same time, the Court reinforced district courts’ discretion to impose the “harsh” remedy of default judgment for willful failure to obey discovery and scheduling orders.

2. Summary of the Judgment

• Jurisdiction: Appellate jurisdiction under 28 U.S.C. § 1291 over the final default judgment and permanent injunction; appeal of the earlier preliminary injunction dismissed as moot.
• Default Judgment: The district court properly invoked Fed. R. Civ. P. 16(f) & 37(b) after defendants ignored both discovery orders (compelling interrogatory responses) and the deadline to answer the amended complaint. All five Ehrenhaus factors favoured terminating sanctions.
• Permanent Injunction: Under ERISA §§ 409(a) & 502(a)(5) (29 U.S.C. §§ 1109, 1132), the district court removed Knowlton/Ascent as fiduciaries, barred them from future service, and authorised an independent fiduciary to terminate the ESOP and process claims.
• Tenth Circuit Holding: No abuse of discretion. (a) Willfulness was undisputed; defendants offered no valid justification for non-compliance. (b) Lesser sanctions were futile given the pattern of non-participation. (c) Risk of dissipation of plan assets constituted irreparable harm warranting final injunctive relief—ascent’s precarious finances and a $26 million Zurich judgment made future recovery speculative.

3. Detailed Analysis

3.1 Precedents Cited and Their Influence

3.2 The Court’s Legal Reasoning

1. Willfulness & Culpability – Defendants failed to (a) respond to interrogatories, (b) answer the amended complaint, and (c) explain non-compliance when ordered. Absence of a valid excuse equated to intentional, willful disregard.
2. Prejudice & Judicial Process Interference – Delay thwarted DOL’s ability to secure retirement assets, while the court’s docket was burdened by repeated motions and orders.
3. Advance Warning – The show-cause order explicitly threatened “terminating sanctions,” satisfying due-process notice requirements.
4. Inefficacy of Lesser Sanctions – Monetary or issue-related sanctions would not spur participation; defendants had “continually refused to engage.”
5. Irreparable Harm for Injunctive Relief – The Court accepted that:
   • Knowlton had already siphoned >$311k for corporate and personal use;
   • He attempted to close the ESOP’s account after DOL’s investigation commenced;
   • Ascent faced a $26 million Zurich judgment and was virtually non-operational.
   Under these facts, further asset dissipation was “likely” and any additional diversion “would not be recoverable,” satisfying the Husky Ventures standard for irreparable harm.
6. Scope of Injunction – Tailored narrowly to prevent future breaches: removal of current fiduciaries, appointment of an independent fiduciary, and plan termination/claims administration—all expressly authorised by ERISA §§ 409 & 502.

3.3 Impact on Future Litigation

• Asset-Dissipation Standard Clarified: The Court adds persuasive support for the proposition that risk of non-collectability transforms ostensibly “monetary” injury into irreparable harm, especially in ERISA fiduciary-breach settings.
• Sanctioning Authority Reaffirmed: Trial courts in the Tenth Circuit have wide latitude to deploy default judgment for discovery abuse after a single missed answer deadline—if coupled with prior notice and pattern of disobedience.
• Practical Guidance for ERISA Enforcement: DOL and private plaintiffs can cite the case to obtain emergency and permanent equitable relief where plan sponsors are insolvent or under collateral attack from large judgments.
• Persuasive Precedent Beyond the Tenth Circuit: Although an “unpublished” order, Fed. R. App. P. 32.1 permits citation; other circuits may find its reasoning compelling on irreparable harm and sanctions.

4. Complex Concepts Simplified

ERISA Fiduciary

Anyone exercising discretionary control over plan assets or administration owes strict loyalty and prudence duties to participants. Personal liability attaches for breaches.

Employee Stock Ownership Plan (ESOP)

A retirement plan that invests primarily in the sponsoring employer’s stock, thereby creating heightened conflict-of-interest risks.

Default Judgment (Rule 37/16)

A judgment entered against a party who disobeys court orders. It is the civil-procedure equivalent of “forfeiting the game” after repeated rule violations.

Ehrenhaus Factors

Five considerations (prejudice, interference, culpability, warning, lesser sanctions) guiding dismissal or default as litigation sanctions.

Irreparable Harm

A type of injury that cannot be adequately compensated by money damages after trial—such as when the defendant is insolvent or assets are rapidly disappearing.

Independent Fiduciary

A neutral professional (often an experienced ERISA attorney or accountant) appointed by the court to safeguard plan assets and administer claims when normal fiduciaries are conflicted or removed.

5. Conclusion

Chavez-DeRemer v. Ascent Construction delivers two key lessons. First, district courts in the Tenth Circuit enjoy expansive—but reviewable—discretion to impose default judgment where litigants flout discovery and scheduling orders after explicit warnings. Second, and more significantly for ERISA jurisprudence, the opinion confirms that the threatened loss of plan assets in the hands of insolvent or embattled fiduciaries is per se irreparable; injunctions removing such fiduciaries are therefore not only permissible but often necessary to protect participants’ retirement security. Although non-precedential, the ruling provides a robust analytical roadmap for future courts confronting similar fiduciary-breach scenarios.