1997 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-9-1997

Connell v. Trustees Ironworker

Precedential or Non-Precedential:

Docket 96-5047

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Recommended Citation

"Connell v. Trustees Ironworker" (1997). 1997 Decisions. Paper 151.

http://digitalcommons.law.villanova.edu/thirdcircuit_1997/151
Filed July 9, 1997 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 96-5047 

PHILLIP J. CONNELL; CHARLES NELSON, 

Appellants

v. 

TRUSTEES OF THE PENSION FUND OF THE 

IRONWORKERS DISTRICT COUNCIL OF NORTHERN NEW 

JERSEY; THE NORTHERN DISTRICT COUNCIL OF 

IRONWORKERS, and its Constituent Local Unions 

On Appeal From the United States District Court 

for the District of New Jersey 

(D.C. Civ. No. 92-cv-01655) 

Argued: January 21, 1997 

Before: NYGAARD, LEWIS, Circuit Judges, and 

SCHWARZER, Senior District Judge* 

(Filed July 9, 1997) 

_________________________________________________________________ 

*The Honorable William W Schwarzer, Senior District Judge for the 

Northern District of California, sitting by designation. 
JOHN A. CRANER, ESQUIRE 

 (ARGUED) 

Craner, Nelson, Satin & Scheer, 

 P.A. 

320 Park Avenue, P.O. Box 367 

Scotch Plains, New Jersey 07076 

Attorney for Appellants Phillip J.

Connell and Charles Nelson

JOSEPH R. PAGANO, ESQUIRE 

 (ARGUED) 

Jardine & Pagano, P.A. 

11 Cleveland Place 

Springfield, New Jersey 07081 

Attorney for Appellees Trustees of the

Pension Fund of the Ironworkers

District Council of Northern New

Jersey and the Northern District

Council of Ironworkers and its

Constituent Local Unions

OPINION OF THE COURT 

SCHWARZER, Senior District Judge. 

In this appeal we are again called on to interpret the 

"actual knowledge" requirement in ERISA's statute of 

limitations in an action for breach of fiduciary duty. See 29 

U.S.C. § 1113(a)(2)(A); see also Kurz v. Philadelphia Elec.

Co., 96 F.3d 1544 (3d Cir. 1996); International Union of

Electronic Workers v. Murata Erie North America, Inc., 980 

F.2d 889 (3d Cir. 1992); Gluck v. Unisys Corp., 960 F.2d 

1168 (3d Cir. 1992). 

Phillip Connell, who worked as an ironworker in covered 

employment1 nearly continuously between 1962 and 1993, 

and Charles Nelson, who has worked as an ironworker in 

covered employment periodically since 1951, brought this 

_________________________________________________________________ 

1. According to the Fund's pension plan booklet," `Covered Employment' 

consists of the jobs for which contributions are made to the pension 

fund [by the employer]." 

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action against the Pension Fund of the Ironworkers District 

Council of Northern New Jersey (the "Fund"). The Fund 

manages the pension plan established under a collective 

bargaining agreement between employers and the Northern 

District Council of Ironworkers (whose locals are affiliated 

with the International Association of Bridge, Structural & 

Ornamental Ironworkers, AFL-CIO) (the "Union"). Connell 

and Nelson claim that the Fund acted arbitrarily and 

capriciously in violation of 29 U.S.C. §§ 186(c)(5) and 1104 

when it enforced its break-in-service rule, which provides 

for cancellation of accrued pension credits after a specified 

absence from covered employment, thereby canceling their 

previously earned credits.2 The Fund contends, among 

other things, that because Connell and Nelson failed to file 

their action within three years of receiving actual notice 

that certain of their pension credits were canceled, the 

action is barred by the ERISA statute of limitations. 

Connell worked as an ironworker from 1962 to 1968 and 

again from 1971 to 1993. He testified at trial that he first 

knew that he had lost certain pension credits as a result of 

his break in service when he received a credit statement 

from the District Council in 1981. Connell then consulted 

his pension plan book and found the break-in-service rule. 

He went to see his business agent to complain and then 

called the Fund representative, who "quoted the brokenservice [sic] rule, that if you're out three years and you 

aren't vested . . . you lose the credit for those years you had 

in." Appellee's Br. at 13 (quoting Connell's testimony at 

trial). 

_________________________________________________________________ 

2. Connell and Nelson also claimed that the Union's discriminatory 

hiring practices, see Ironworkers, Local 373, 232 NLRB 504 (1977), enf'd

sub nom., NLRB v. International Ass'n of Bridge, Structural & Ornamental

Ironworkers, Local 373, 586 F.2d 835 (3d Cir. 1978); Moore v. Local 483,

International Ass'n of Bridge, Structural & Ornamental Ironworkers, 66 

N.J. 527 (1975), diminished their capacity to earn a decent living as 

ironworkers and that their breaks in service were therefore involuntary 

and subject to an equitable exception to the break-in-service rule. See,

e.g., Knauss v. Gorman, 583 F.2d 82 (3d Cir. 1978) (holding that 

enforcement of a break-in-service clause was arbitrary and capricious 

where employment hiatus was caused by involuntary unemployment and 

inability to find covered work). In view of our disposition of this appeal, 

we do not reach this claim. 

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Nelson worked off and on as an ironworker between 1951 

and 1973. He worked continuously outside the trade 

between 1973 and 1984. In 1984, Nelson resumed ironwork 

and remains in covered employment today. He testified that 

he first found out he had lost his pre-1974 pension credits 

about 1981 or 1982, when he received a document from the 

District Council stating that his credits for prior years of 

service had been canceled because he had two breaks in 

service. He contacted a union representative after receiving 

the notice of cancellation. As he said at trial,"That's when 

I thought I better find out about this whole thing." 

Appellee's Br. at 13 (quoting Nelson's testimony at trial). 

After a bench trial, the district court ruled in favor of the 

Fund, finding that the claims were not time-barred but that 

application of the break-in-service rule to Connell and 

Nelson was not arbitrary and capricious because they 

voluntarily left covered employment when jobs were 

available with notice that such departures would cause 

their pension credits to be canceled. Connell and Nelson 

appeal the district court's decision.3 We have jurisdiction of 

the appeal under 28 U.S.C. § 1291 and AFFIRM, albeit on 

different grounds. 

DISCUSSION 

The claims of Connell and Nelson against the Fund for 

breach of fiduciary duty arise under 29 U.S.C. §§ 186(c)(5) 

and 1104(a)(1)(A)(i).4 ERISA's statute of limitations, 29 

_________________________________________________________________ 

3. The dissent suggests that we have disregarded the factual findings 

underlying the district court's disposition of the Fund's statute of 

limitations defense. We do not question the district court's findings, but 

we nevertheless "exercise[ ] a plenary standard of review when applying 

legal precepts to undisputed facts." Easley v. Snider, 36 F.3d 297, 300 

(3d Cir. 1994). We therefore review de novo the district court's decision 

whether to apply 29 U.S.C. § 1113(a)(2) on the facts before it. 

4. Nelson also purports to state a claim under 29 U.S.C. § 1132(a)(1)(B) 

(permitting an action to be brought by a beneficiary "to clarify his rights 

to future benefits under the terms of the plan"). No such claim exists 

independent of his claim for breach of fiduciary duty--i.e., Nelson's only 

claim for "future benefits" arises out of his contention that the Fund, by 

canceling credits under its break-in-service rule, breached its fiduciary 

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U.S.C. § 1113(a)(2)(A), applies to claims arising under both 

of these statutory provisions.5 See Struble v. N.J. Brewery

Emp. Welfare Trust Fund, 732 F.2d 325, 331-32 (3d Cir. 

1984). That section provides in relevant part: 

No action may be commenced . . . with respect to a 

fiduciary's breach of any . . . obligation . . . after the 

earlier of-- 

(1) six years after (A) the date of the last action which 

constituted a part of the breach or violation . . . or . . . 

(2) three years after the earliest date on which the 

plaintiff had actual knowledge of the breach or violation 

. . . . 

29 U.S.C. § 1113(a). We have held that "Section 1113 sets 

a high standard for barring claims against fiduciaries prior 

to the expiration of the section's six-year limitations 

_________________________________________________________________ 

duty in violation of §§ 186(c)(5) and 1104. Under the facts of this case, 

§ 1132(a)(1)(B) does not create a right to relief distinct from that arising 

under §§ 186(c)(5) and 1104. And even if Nelson were able to state a 

claim under § 1132(a)(1)(B), the claim would be time-barred. New 

Jersey's statute of limitations for contract actions, which would apply, 

see Kennedy v. Electricians Pension Plan, 954 F.2d 1116, 1120 (5th Cir. 

1992) (quoting Johnson v. State Mut. Life Ass. Co., 942 F.2d 1260, 1262 

(8th Cir. 1991); see also National Iranian Oil Co. v. Mapco Int'l, Inc., 983 

F.2d 485, 492 (citing Johnson with approval as an example where state 

statute of limitations was applied to federal statute that lacked a time 

bar), is six years. N.J. Stat. Ann. § 2A:14-1. As Nelson had notice of his 

forfeited credits in 1981 or 1982, the statute began to run on that date, 

and whatever cause of action he might have had under § 1132(a)(1)(B) 

was barred after 1987 or 1988. 

5. Connell and Nelson claim that we may not consider the Fund's statute 

of limitations argument because the Fund failed to cross-appeal from the 

district court's adverse ruling on that issue. Their contention is without 

merit. Because the Fund "seek[s] to sustain th[e] judgment [below] . . . 

there was no need for a cross appeal." Reserve Ins. Co. v. Brokerage

Surplus Corp., 570 F.2d 487, 491 (3d Cir. 1978) (citing 9 Moore's 

Practice ¶ 204.11(3) (2d ed.)); see United States v. American Ry. Exp. Co., 

265 U.S. 425, 435 (1924) (stating that "it is likewise settled that the 

appellee may, without taking a cross-appeal, urge in support of a decree 

any matter appearing in the record, although his argument may involve 

an attack upon the reasoning of the lower court"). 

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period." Gluck v. Unisys Corp., 960 F.2d 1168, 1176 (3d 

Cir. 1992).6 " `[A]ctual knowledge of a breach or violation' 

requires that a plaintiff have actual knowledge of all 

material facts necessary to understand that some claim 

exists, which facts could include . . . knowledge of a 

transaction's harmful consequences . . . ." Id. at 1177 

(citations omitted). 

A breach may occur without a plaintiff's having suffered 

actual harm. Ziegler v. Connecticut General Life Ins. Co., 

916 F.2d 548, 551 (9th Cir. 1990). Plaintiffs' complaint that 

the Fund's cancellation of their pension credits under the 

break-in-service rule is arbitrary and capricious sufficiently 

alleges a claim for breach of fiduciary duties. See Knauss v.

Gorman, 583 F.2d 82 (3d Cir. 1978). If a breach was 

committed, it therefore must have occurred upon 

cancellation of the credits; by the terms of the plan, 

accrued credits were canceled immediately after a break-inservice exceeded the period specified by the plan (i.e., in 

1971 for Connell and in 1964 and 1978 for Nelson). 

In Gluck we held that mere knowledge of amendments of 

the employer's benefit plan, the effect of which was to cause 

accrued benefits not to fully vest upon partial termination, 

could not be deemed actual knowledge of a violation of the 

technical provisions of ERISA. We noted that: 

the company literature distributed to employees . . . 

described [the amendments] as improving participants' 

benefit packages. . . . For a participant to have 

discerned a cause of action for partial termination at 

that time . . . may have required a review of the plan 

document and of the plan's balance sheet . . . a level 

of research and scrutiny inconsistent with section 

1113's actual knowledge standard. 

Gluck, 960 F.2d at 1179. We remanded for a determination

of "when each employee had actual knowledge of all 

_________________________________________________________________ 

6. The Fund does not contend that the action is barred by the six-year 

statute. It is clear that if the forfeiture of pension credits under the 

break-in-service rule resulted in a breach of fiduciary duties, the last 

action constituting a part of that breach did not occur until payment of 

reduced pension benefits to the beneficiaries. 

 6 
material facts relevant to a partial termination claim," 

having emphasized, however, "that our holding does not 

mean that the statute of limitations can never begin to run 

until a plaintiff first consults with a lawyer." Id. at 1177. 

Following Gluck, we held in International Union of

Electronic Workers v. Murata Erie North America, Inc., 980 

F.2d 889, 900 (3d Cir. 1992), that beneficiaries who had 

notice of a plan amendment but were not informed that the 

amendment provided for reversion of excess funds to the 

employer lacked actual knowledge of a breach. As we then 

said, Murata "failed to make the showing of actual 

knowledge necessary to meet the `stringent requirement' 

imposed by . . . 29 U.S.C. 1113[(a)](2)." Id. at 901 (citing 

Gluck, 960 F.2d at 1176). 

Recently, we held that where a company decides to make 

a material change to its pension plan but misrepresents its 

intent to make such a modification, the statute of 

limitations will begin to run once an employee knows of the 

change in benefits and of his own ineligibility. See Kurz v.

Philadelphia Elec. Co., 96 F.3d 1544, 1551 (3d Cir. 1996). 

In Kurz, we found that plaintiffs' knowledge of the change

in plan was sufficient to begin the running of § 1113(a)(2) 

because: 

This was not a technical violation of ERISA, nor a 

cleverly concealed plan amendment. PECo openly 

announced that certain employees would receive better 

benefits, and others would not. 

Id. Similarly, the plaintiffs in this case were aware of the 

Fund's break-in-service rule and were aware that it had 

already been applied to them. 

It is undisputed that Connell and Nelson knew as early 

as 1981 or 1982 that the Fund had canceled their pension 

credits by applying the break-in-service rule and that the 

Fund's actions would diminish their future benefits. Like 

the plaintiffs in Kurz, their actual knowledge of both the 

alleged breach and the consequential injury they would 

thereby suffer gave them "knowledge that a fiduciary duty 

[may have] been breached or ERISA provision violated." 

Gluck, 960 F.2d at 1178. Indeed, both Connell and Nelson

felt sufficiently aggrieved by the Fund's actions to question 

 7 
their union representatives. Thus by 1981 or 1982, Connell 

and Nelson had "actual knowledge of all of the [material] 

elements of the violation," Gluck, 960 F.2d at 1176, 

including knowledge of the harmful consequencesflowing 

from the cancellation of the credits. See International Union, 

980 F.2d at 901; Gluck, 960 F.2d at 1177, 1179. There was 

nothing left for them to discover and nothing more for them 

to do but to file suit or to seek legal counsel. As we stated 

in Kurz, "the `harmful consequences' .. . were obvious." 

Kurz, 96 F.3d at 1551 (citation omitted).7 Their action, 

having been filed more than three years after 1982, is 

therefore time-barred. 

The judgment is AFFIRMED. 

_________________________________________________________________ 

7. The dissent's hypothetical concerning a pair of ironworkers 

discriminated against on the basis of their nonunion status has no 

bearing here. Unlike the dissent's hypothetical plaintiffs, who were 

unaware that they had lost pension credits because they were not union 

members, Connell and Nelson clearly knew in 1981 or 1982 of the 

break-in-service rule, of the union's discriminatory practices, of their 

own employment histories, and of the effect of the rule's application to 

them. The hypothetical, sound as it may be on its own terms, is 

therefore not relevant to the facts of this case. 

 8 
LEWIS, Circuit Judge, concurring and dissenting. 

I agree with the majority's conclusion that the district 

court's judgment should be affirmed. I write separately, 

however, because I disagree that ERISA's statute of

limitations bars the Appellants' claim. 

My disagreement lies with the majority's interpretation 

and application of Gluck v. Unisys Corporation , 960 F.2d 

1168 (3d Cir. 1992). In Gluck, we held that "actual 

knowledge of a breach or violation requires knowledge of all 

relevant facts at least sufficient to give the plaintiff 

knowledge that a fiduciary duty has been breached or 

ERISA provision violated." Gluck, 960 F.2d at 1178. This 

requires "the district court [to] determine, as a factual 

matter, the date on which each employee had actual 

knowledge of the breach or violation." Id. at 1176. 

Knowledge of the breach is distinguished from knowledge of 

the actions constituting the breach or violation. See id.; 

International Union of Electronic Workers v. Murata Erie

North America, Inc., 980 F.2d 889, 900 (3d Cir. 1992) 

(requiring a showing "that plaintiffs actually knew not only 

of the events that occurred which constitute the breach or 

violation but also that those events supported a claim of 

breach of fiduciary duty or violation under ERISA"). 

Noting Gluck's "stringent" actual knowledge requirement, 

the district court found that although the pension fund 

"demonstrated that plaintiffs became aware of their loss of 

pension credits during 1981," the fund had "failed to 

demonstrate that [Connell and Nelson] actually knew of 

their potential ERISA cause of action." Connell v. Pension

Fund, Civ. No. 92-1655, slip op. at 16 (D.N.J. Jan. 2, 1996). 

To support this conclusion, the district court drew certain 

factual inferences from the testimony presented at the nonjury trial. Specifically, the court found that Connell's failure 

to take any action after learning of his loss of pension 

credits other than contacting the plan administrator and 

Nelson's failure to express any concerns to the plan 

administrator about the break-in-service rule "clearly 

indicate[d] that [they] were not aware of their potential 

cause of action." Id. at 6, 11 & 16. 

The majority seems to overlook the district court's factual 

inferences, concluding: 

 9 
[I]t is undisputed in this case that Connell and Nelson 

knew as early as 1981 or 1982 that the Fund had 

canceled their pension credits by applying the breakin-service rule and that the Fund's actions would 

diminish their future benefits. Their actual knowledge 

of both the alleged breach and the consequential injury 

they would thereby suffer gave them "knowledge that a 

fiduciary duty [may have] been breached or ERISA 

provision violated." 

Maj. Op. at 7 (quoting Gluck, 960 F.2d at 1178) (alteration 

of Gluck in original). The majority's conclusion does not 

follow from its premise. Although it was established that 

Connell and Nelson knew in 1981 or 1982 of the pension 

fund's action which constituted the alleged breach -- that 

is, its enforcement of the break-in-service rule -- it does not 

follow that they had actual knowledge of the breach itself. 

The majority further notes, again without reference to the 

district court's findings, that Connell and Nelson must have 

had " `actual knowledge of all of the [material] elements of 

the violation' " because they "felt sufficiently aggrieved by 

the Fund's actions to question their union representatives." 

Maj. Op. at 8 (quoting Gluck, 960 F.2d at 1178). 

As noted earlier, however, the district court reached the 

exact opposite conclusion from the same facts and 

testimony cited by the majority. Indeed, the district court 

found that Connell's and Nelson's actions after receiving 

notice of their lost pension credits "clearly indicate[d] that 

plaintiffs were not aware of their potential ERISA cause of 

action." Connell, Civ. No. 92-1655, slip op. at 16. I would 

not disregard, as the majority does, the district court's 

factual determination that Connell's and Nelson's actions, 

or lack thereof, indicated that they had no knowledge of a 

breach. 

Moreover, contrary to the majority's indication, it is not 

enough that the plaintiffs have knowledge that afiduciary 

duty "may have" been breached or ERISA provision 

violated. Rather, the plaintiff must have actual knowledge 

that a fiduciary duty "has" been breached or ERISA 

provision violated. See Gluck, 960 F.2d at 1178. 

While this distinction may seem merely semantic, it is 

important, as perhaps the following hypothetical will 

 10 
explain. Assume that Smith and Jones were non-union iron 

workers who occasionally worked in the iron trade and 

participated in a multi-employer pension fund that 

supported both union and non-union workers. In 1981, 

Smith and Jones received notice that some of their pension 

credits would be lost because they had incurred breaks in 

service. Assume further that they questioned a 

representative of the Fund but were told that the Fund was 

merely enforcing its break-in-service rule, of which they 

were on notice. Jones and Smith were upset about their 

lost credits and may have even assumed that the Fund was 

treating them unfairly. But, without any other information, 

Jones and Smith thought that they were just out of luck. 

Now assume that in 1990, Jones and Smith discovered that 

the Fund was in practice only applying the break-in-service 

rule to non-union workers. 

Under Gluck, the statute of limitations would start to run 

in 1990, when Smith and Jones learned that the Fund was 

discriminating in its enforcement of the break-in-service 

rule. In other words, the statute would start to run when 

they possessed knowledge that the enforcement of the 

break-in-service rule violated ERISA. Under the majority's 

analysis, which, in my view, relaxes Gluck's "stringent" 

requirement, Jones and Smith would be barred from 

bringing their claim because the three-year statute would 

have started running in 1981 when they first learned that 

they had lost credits due to their break in service. 

The hypothetical discussed above is not that different 

from the case at hand. Here, Connell and Nelson admit that 

they knew in 1981 or 1982 that they had lost credits. But 

they allege that they incurred the breaks in service because 

the union had discriminated against them in allocating iron 

work. Thus, if Connell and Nelson could show that they 

had left the ironworking trade involuntarily, enforcement of 

the break-in-service rule against them might have 

constituted a breach of ERISA.1 Had the union's 

_________________________________________________________________ 

1. We recognized in Knauss v. Gorman, 583 F.2d 82 (3d Cir. 1978), that 

if a plan beneficiary incurs a break in service involuntarily, the pension 

fund must come forward with a justification for why the rule is 

enforceable. See also Van Fossan v. International Brotherhood of

Teamsters, 649 F.2d 1243, 1248 (7th Cir. 1981) ("We believe the 

distinction between voluntary and involuntary breaks in service is 

crucial to determining the arbitrariness of the operation of a given break 

in service rule."). 

 11 
discrimination forced Connell and Nelson out of the trade 

involuntarily, and had they not had actual knowledge of the 

discrimination (say, for example, they thought that they 

just were unlucky in obtaining work), they would not have 

possessed the requisite "actual knowledge" of a breach of 

fiduciary duty or ERISA violation merely when they had 

been notified of their lost credits. Indeed, they would be 

lacking "actual knowledge of all material facts constituting 

[the] breach of fiduciary duty or violation of ERISA [which] 

is the sine qua non for application of [ERISA's] three-year 

limitation." Gluck, 960 F.2d at 1177. 

Put simply, then, the actual knowledge requirement is 

necessarily intertwined with the cause of action or the 

theory of the breach. See Martin v. Consultants &

Administrators, Inc., 966 F.2d 1078 (7th Cir. 1992) (courts 

must take into account "the complexity of the underlying 

factual transaction, the complexity of the legal claim and 

the egregiousness of the alleged violation"). 

At bottom, a determination of what the plaintiffs knew 

and when is a very fact-intensive inquiry. See Gluck, 960 

F.2d at 1176 (requiring the district court to determine "as 

a factual matter" when the statute began to run). I cannot 

agree with the majority's disregard of the inferences that 

the district court drew from the facts here. 

A True Copy: 

Teste: 

Clerk of the United States Court of Appeals

for the Third Circuit

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