Blyler

This appeal presents the question of whether ERISA plan fiduciaries are also fiduciaries within the meaning of 11 U.S.C. § 523 (a)(4). We conclude that they are, but that the specific allegations of breach of ERISA fiduciary duties do not constitute defalcations within the meaning of 11 U.S.C. § 523 (a)(4).

I

Morrison Knudsen Corporation (“MK”) was a large, publicly-held, engineering and construction company headquartered in Boise, Idaho. After an economic downturn, it filed a voluntary Chapter 11 bankruptcy petition in 1996 and was ultimately acquired by Washington Construction Group, Inc., under a confirmed reorganization plan. After the termination of its defined benefits pension plan in 1987, MK established two pension plans for the benefit of its employees: the Morrison Knudsen Corporation Employee Stock Ownership Plan (“ESOP Plan”) and the Morrison Knudsen Corporation Savings Plan (“401K Plan”).

The MK Board of Directors, of which resort developer Christopher Hemmeter was a member, and an Administrative Committee comprised of no fewer than three MK employees were the named fiduciaries of the ESOP plan. Mellon Bank, N.A., was the trustee of the ESOP plan assets during the…