1996 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

10-1-1996

Kurz v. Phila Elec Co

Precedential or Non-Precedential:

Docket 95-1795,95-1796

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Recommended Citation

"Kurz v. Phila Elec Co" (1996). 1996 Decisions. Paper 37.

http://digitalcommons.law.villanova.edu/thirdcircuit_1996/37
 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 

 No. 95-1795 and 95-1796 

 

 DONALD R. KURZ; WILLIAM ANDERSON; JAMES E.W. 

 BECK; WILLIAM T. BERGEN; CHARLES W. BOWDEN; 

 WILLIAM H. BROWN; RICHARD CAHILL; ARMANDO L. CAPOFERRI; 

 ROBERT C. DEMARCO; JAMES J. DILOLLE, SR.; VINCENT J. 

 DIMAGGIO; JOHN J. DIVALENTINO, JR.; WILLIAM E. DRUMEL; 

 VICTOR J. GIBIALANTE; FRANCIS T. GOLDEN; JAMES J. 

 GRANGER; ELMER D. GREIM, JR.; JAMES H. HAIR; JOHN M. 

 HOOPES; BENJAMIN J. KILIAN; GEORGE C. LINTHICUM; 

 HUBERT A. MCKOWN, JR.; HENRY P. MCNAMEE; 

 OLIVER K. MESSNER; ROBERT E. MILLER; JOHN A. MORSE; 

 SAMUEL J. MULLEN; JOHN A. MUNLEY; STANLEY B. MYERS; 

 JOHN J. NUSSPICKEL; JAMES W. PATTERSON; ALFRED B. 

 SCHUMANN; JOSEPH C. SHARKEY; WILLIAM H. SMOYER; 

 WOODROW E. SNYDER; JAMES D. SUTLIFF; EDWARD J. VETNER; 

 DOMINIC C. VIGLIANESE; G. EARLE WATT; FREDERICK 

 W. WINTERLING; JOHN R. YOUNG 

 v. 

 PHILADELPHIA ELECTRIC COMPANY; SERVICE ANNUITY 

 PLAN OF PHILADELPHIA ELECTRIC COMPANY; CHARLES L. 

 FRITZ; J.L. EVERETT, III; JOHN H. AUSTIN, JR. 

 JOHN J. DIVALENTINO, JR., WILLIAM E. DRUMEL; 

 JOHN A. MORSE; SAMUEL J. MULLEN; STANELY B. MYERS; 

 DOMINIC C. VIGLIANESE; JAMES J. DILOLLE; BENJAMIN 

 J. KILIAN; CHARLES W. BOWDEN; ELMER D. GREIM, JR.; 

 FREDERICK W. WINTERLING; JAMES W. BECK; JAMES H. HAIR; 

 ROBERT C. DEMARCO; ALFRED G. SCHUMANN; RICHARD CAHILL; 

 JAMES W. PATTERSON; JOHN M. HOOPES; HUBERT A. MCKOWN, 

 JR.; ROBERT E. MILLER; JAMES D. SUTLIFF; HENRY P. 

 MCNAMEE; FRANCIS T. GOLDEN; WILLIAM T. BERGEN; 

 GEORGE C. LINTHICUM; WILLIAM W. ANDERSON: JOHN R. 

 YOUNG; VINCENT J. DIMAGGIO; SHIELDS L. DALTROFF; 

 RICHARD O. FOLKMAN; ALFRED E. STAVOLA; ROBERT H.C. 

 LESS; SAMUEL E. BELL; DONALD F. WASHINGTON; FRANK 

 J. GALLAGHER; MAURICE M. PEITZMAN; HARRY G. TURNER, 

 JR.; ROBERT I. FRIEND; DONALD C. ROBINSON; 

 WILLIAM J. LEAMAN, JR.; AUGUSTUS W. O'MALLEY; DALLAS 

 S. SCOTT, JR.; JOHN S. STILLWAGON; ROBERT C. HECKESSER; 

 WILLIAM R. TRAVETTI; WILLIAM B. HORLOCK; JAMES STATES; 

 THOMAS W. RAYER; JOHN H. VONRHINE; WALTER ALLWOERDEN; 

 GEORGE C. WIEDERSUM, JR.; JAMES R. MCCARRON; SALVATOR 

 J. DESTEFANO; JOHN C. GARVIN; A. WILLIAM LANCASTER; 

 JOSEPH A. FOCHT; ROBERT MITCHELL; JOSEPH P. SUBRANNI; 
 JOHN F. CRAWFORD; WILLIAM G. TAYLOR; KENNETH R. SEDGLEY, 

 JR., IRWIN G. BLACKBURN; CHARLES R. CAREY; JOHN R. YOUNG; 

 JESSEE E. GRAY, JR.; JAMES D. DERSTINE; ALLEN H. BRAID; 

 PAUL L. THOMAS; STEPHEN MICKLOSH, JR.; WILLIAM L. GIBBONS; 

 RUSSELL B. MURRAY; ROLAND J. MARKUN; ERNEST W. BEAM; 

 RAYMOND W. SCHOLL, JR.; JOHN F. PARKER; JOSEPH F. MCBRIDE; 

 VINCENT S. BOYER; MARTIN M. MORGAN and DAVID MONZO, 

 Appellants in 95-1795 

 

 --------------------- 

 DONALD R. KURZ; WILLIAM ANDERSON; JAMES E.W. 

 BECK; WILLIAM T. BERGEN; CHARLES W. BOWDEN; 

 WILLIAM H. BROWN; RICHARD CAHILL; ARMANDO L. CAPOFERRI; 

 ROBERT C. DEMARCO; JAMES J. DILOLLE, SR.; VINCENT J. 

 DIMAGGIO; JOHN J. DIVALENTINO, JR.; WILLIAM E. DRUMEL; 

 VICTOR J. GIBIALANTE; FRANCIS T. GOLDEN; JAMES J. 

 GRANGER; ELMER D. GREIM, JR.; JAMES H. HAIR; JOHN M. 

 HOOPES; BENJAMIN J. KILIAN; GEORGE C. LINTHICUM; 

 HUBERT A. MCKOWN, JR.; HENRY P. MCNAMEE; 

 OLIVER K. MESSNER; ROBERT E. MILLER; JOHN A. MORSE; 

 SAMUEL J. MULLEN; JOHN A. MUNLEY; STANLEY B. MYERS; 

 JOHN J. NUSSPICKEL; JAMES W. PATTERSON; ALFRED B. 

 SCHUMANN; JOSEPH C. SHARKEY; WILLIAM H. SMOYER; 

 WOODROW E. SNYDER; JAMES D. SUTLIFF; EDWARD J. VETNER; 

 DOMINIC C. VIGLIANESE; G. EARLE WATT; FREDERICK 

 W. WINTERLING; JOHN R. YOUNG 

 v. 

 PHILADELPHIA ELECTRIC COMPANY; SERVICE ANNUITY 

 PLAN OF PHILADELPHIA ELECTRIC COMPANY; CHARLES L. 

 FRITZ; J.L. EVERETT, III; JOHN H. AUSTIN, JR. 

 

 Peco Energy Company, formerly 

 Known as Philadelphia Electric 

 Company, Service Annuity Plan of

 Philadelphia Electric Company, 

 Charles L. Fritz, J.L. Everett, 

 III and John H. Austin, Jr. 

 Appellants in 95-1796 

 

 On Appeal from the United States District Court 

 for the Eastern District of Pennsylvania 

 (D.C. Civil Action No. 91-cv-02771) 

 

 Argued April 29, 1996 
 Before: COWEN and ROTH, Circuit Judges 

and CINDRICH, District Judge 

 (Opinion filed October 1, l996) 

 

Ronald L. Wolf, Esq. 

Martina W. McLaughlin, Esq. (Argued) 

Litvin, Blumberg, Matusow & Young 

1339 Chestnut Street 

The Widener Building, 18th Floor 

Philadelphia, PA 19107 

 Attorneys for Appellants in 95-1795 

 and for Cross-Appellees in 95-1796 

David H. Marion, Esq. 

David Zalesne, Esq. (Argued) 

Howard J. Bashman, Esq. 

Montgomery, McCracken, Walker & Rhoads 

Three Parkway, 20th Floor 

Philadelphia, PA 19102 

 Attorneys for Appellees in 95-1795 

 For Cross-Appellants in 95-1796 

 

 OPINION OF THE COURT 

 

ROTH, Circuit Judge: 

 This appeal marks the second time this case has reached 

this court. In its first incarnation, Kurz v. Philadelphia Elec. 

Co., 994 F.2d 136 (3d Cir.) ("Kurz I"), cert. denied, 510 U.S. 

1020 (1993), we reversed the district court's grant of summary 

judgment to defendant Philadelphia Electric Co. ("PECo"). 

Applying the rule established in Fischer v. Philadelphia Elec. 

Co., 994 F.2d 130 (3d Cir.) ("Fischer I"), cert. denied, 510 U.S. 

1020 (1993), we held that genuine issues of material fact 

remained as to whether PECo, acting in its role as fiduciary 

under the Employee Retirement Income Security Act ("ERISA"), had 

made affirmative material misrepresentations to its employeebeneficiaries by denying, or failing to disclose when asked, that 

it was seriously considering changes in its pension benefits 

program. On remand, after a bench trial, the district court 

entered judgment for those members of the plaintiff class who had 

asked about a change in benefits after March 1, 1987, the date on 

which the district court found that serious consideration began. 

Kurz v. Philadelphia Elec. Co., No. 91-2771, slip op. at 24 (E.D. 
Pa. May 13, 1994) ("District Ct. Op."). We will apply the 

formulation of "serious consideration" established in Fischer v. 

Philadelphia Elec. Co., ___ F.3d ___ (3d Cir. 1996) ("Fischer 

II"), and on the basis of that analysis we will reverse the 

district court's decision and enter judgment for defendant PECo. 

 I. 

 This action stems from PECo's efforts to change its 

pension plan to provide more lucrative benefits to its employees. 

PECo announced this change on July 2, 1987, and implemented it on 

August 1, 1987. The plaintiff class consists of various 

employees who retired between February 1, 1987, and July 1, 1987, 

and who were therefore ineligible for the plan. 

 On April 30, 1991, the plaintiffs filed suit in the 

U.S. District Court for the Eastern District of Pennsylvania, 

alleging that PECo had long known of its intent to change its 

pension package and had breached its fiduciary duty under ERISA § 

404, 29 U.S.C. § 1104, by representing that no change was under 

consideration. The district court certified the class, then 

entered summary judgment for PECo. In Kurz I, we reversed. 

Relying on our decision in Fischer I, we held that PECo could be 

liable for breach of fiduciary duty if it had made affirmative 

misrepresentations, such as denying that any change was being 

considered when in fact a change was under serious consideration. 

Kurz I, 994 F.2d at 139. We remanded for a trial on the merits 

to determine, inter alia, when the plan came under serious 

consideration. The district court found the following facts, the 

vast majority of which were stipulated. 

 Since 1977, PECo had conducted periodic reviews of its 

pension fund program as part of its ordinary course of business. 

PECo also participated in an annual or biannual survey that 

compared benefits packages at selected utilities. 

 On October 2, 1985, the consulting firm of Towers, 

Perrin, Forster & Crosby ("TPF&C") completed a study of PECo's 

pension benefit plan. TPF&C concluded that the plan was wellfunded and that the current rate of contributions would be 

sufficient to cover improvements in the benefits package. At 

approximately the same time, Michael Crommie, PECo's Director of 

Employee Services, noted that PECo's comparative ranking in the 

benefits survey had fallen. On June 23, 1986, Crommie sent a 

memorandum to Ronald Downs, Manager of the Industrial Relations 

Department, asking whether TPF&C should be asked to prepare a 

pension benefit study based on the survey results. Downs 

responded, "Probably not, but suggest we consider after we see 

[this year's] survey results. Obviously, some input from TPF&C 

will be required with regard to our recommended modifications to 

plan!" 

 In 1986, PECo took over the task of compiling the 

benefits survey. Fred Beaver, an Administrative Assistant in the 

Personnel and Industrial Relations Department, was assigned the 

task of preparing the survey. In February, 1987, Beaver received 

data from other utilities on their 1986 benefits levels. Beaver 

concluded that PECo's position was below the mid-point for the 

industry. After discussing the matter with his colleagues, 

Beaver suggested that PECo increase its benefits. On February 
27, 1987, Beaver contacted Donald Fleischer, a consultant at 

TPF&C, to discuss a possible pension plan change. 

 During March, 1987, the pace of deliberations 

increased. Charles L. Fritz, PECo's Vice President of Personnel 

and Industrial Relations, met with members of the Independent 

Group Association, PECo's unofficial employee representative, to 

discuss an increase in pension benefits. Fritz told them that 

the time was ripe to make significant changes in the pension 

plan. It was also during March that TPF&C began calculating the 

results of various changes in the pension benefit rate. TPF&C 

continued its work through April and May. 

 On May 6, 1987, Crommie and William Murdoch, a 

consultant with TPF&C, met to discuss competing alternatives for 

the amended plan. On May 11, Fritz reviewed the costs of the 

various alternatives with Murdoch. On May 20, TPF&C presented 

the results of its pension benefit study and recommended a 

pension increase. The TPF&C report discussed seven different 

proposals for changing the plan. By memorandum dated May 28, 

Fritz contacted J.L. Everett, III, PECo's Chief Executive 

Officer, and John H. Austin, Jr., PECo's President & Chief 

Operating Officer, to request permission to recommend a pension 

change to the Board of Directors. Everett and Austin were the 

only two individuals with authority to make recommendations to 

the Board. After receiving permission, Fritz prepared a 

recommendation, which was approved at the Board's June 22, 1987, 

meeting. 

 Based on this record, the district court concluded that 

PECo began seriously considering an increase in its pension 

benefit plan in March, 1987. It therefore set March 1, 1987, as 

the date on which PECo's duty to inform its employees arose. The 

district court entered judgment for those retirees who asked 

about pension benefits and retired after that date. The court 

entered judgment for PECo on the claims of those retirees who 

asked about pension benefits and retired before that date. This 

appeal followed. 

 II. 

 Our analysis proceeds within the confines of Fischer Iand Fischer 

II. Liability turns on the materiality of PECo's 

representation that no change was being considered. Fischer I, 

994 F.2d at 135. Under Fischer II, whether PECo's statement was 

a material "misrepresentation" turns on whether a change in 

benefits was in fact under serious consideration at the time the 

statement was made. Fischer II, ___ F.3d at ___ [typescript at 

11-12]. "[S]erious consideration requires (1) a specific proposal 

(2) discussed for purposes of implementation (3) by senior 

management with the authority to implement the change." Id. at 

___ [typescript at 15]. Based on this formulation, the district 

court's conclusion that serious consideration began on March 1, 

1987, was incorrect. 

 Under the first Fischer II factor, we must examine the 

record for evidence of a specific proposal. No such proposal 

existed until May 20, 1987, when TPF&C presented the results of 

its pension benefits study. The TPF&C report 

 noted that PECO's normal retirement benefits 
 were below average of the survey group . . .. 

 It commented that PECO needed to improve its 

 pension, [and it] recommend[ed] that 

 alternative pension improvements should take 

 into consideration 1. objectives for income 

 replacement at various pay levels, 2. the 

 company's desired competitive posture, 3. 

 cost implications for alternatives, 4. 

 posture with respect to introduction of 

 company-matching contribution in savings 

 plan, and 5. other benefits such as life 

 insurance and medical benefits. 

District Ct. Op. at 12. Most importantly, the study "proposed 

seven alternate benefit improvements." Id. at 13. 

 This document marked the culmination of PECo's 

considerable efforts, with the help of TPF&C, to "gather[] 

information, develop[] strategies, and analyz[e] options." 

Fischer II, ___ F.3d at ___ [typescript at 16]. It provided 

specific proposals for the company to evaluate, and it outlined 

factors and principles for senior management to consider. This 

document was "sufficiently concrete to support consideration by 

senior management for the purpose of implementation." Id.[typescript at 

16]. Indeed, it appears to have been intended for 

this very purpose. The TPF&C report therefore satisfies the 

first Fischer II factor. 

 By contrast, the laundry list of pre-May 20, 1987, 

events cited by the plaintiff class falls short of serious 

consideration. These activities fit comfortably within the 

categories of gathering information, developing strategies, and 

analyzing options that precede the drafting of a specific 

proposal. As we explained in Fischer II, 

 large corporate entities conduct regular or 

 on-going reviews of their benefit packages in 

 their ordinary course of business. These 

 entities employ individuals, including middle 

 and upper-level management employees, to 

 gather information and conduct reviews. The 

 periodic review process may also entail 

 contacting outside consultants or 

 commissioning studies. During the course of 

 their employment, the employees assigned 

 these tasks necessarily discuss their duties 

 and the results of their studies. These 

 discussions may include issues of 

 implementation. The employees may also make 

 recommendations to upper level management or 

 senior executives. As a general rule, such 

 operations will not constitute serious 

 consideration. 

Fischer II, ___ F.3d at ___ [typescript at 17]. The efforts of 

Beaver, Crommie, Downs, and other individuals in PECo's seemingly 

far-flung personnel department illustrate this general rule. 

These individuals were simply performing their ordinary duties. 
Their activities do not constitute serious consideration. 

 Because a specific proposal did not emerge until May 

20, 1987, serious consideration could not have commenced before 

this date. The existence of a specific proposal, however, does 

not resolve matters. 

 [The Fischer II] formulation does not turn on 

 any single factor; the determination is 

 inherently fact-specific. Kurz I, 994 F.2d 

 at 139. Likewise, the factors themselves are 

 not isolated criteria; the three interact and 

 coalesce to form a composite picture of 

 serious consideration. 

Id. at ___ [typescript at 15-16]. Moreover, as we emphasized in 

Fischer II, "these factors do not establish a bright-line rule." 

Id. at ___ [typescript at 18]. We therefore turn to the second 

and third factors. 

 Under the second and third factors, we look to whether 

the specific proposal was being considered for implementation by 

senior management. As noted, supra, the contents of the proposal 

itself suggest that TPF&C intended its report for consideration 

by senior management for purposes of implementation. What is 

important for this phase of our inquiry, however, is whether 

PECo's senior management considered the document for purposes of 

implementation. In addition, consideration must have been by 

senior management with the authority to implement the change. 

This final requirement will not limit serious consideration to 

discussion by the Board of Directors: "It is sufficient for this 

factor that the plan be considered by those members of senior 

management with responsibility for the benefits area of the 

business, and who ultimately will make recommendations to the 

Board regarding benefits operations." Id. at ___ [typescript at 

18]. 

 Although the record is sparse on these points, the 

district court found that "[t]he persons having authority in 1987 

to recommend that the PECO Board of Directors implement the 

pension plan changes were Everett and Austin." District Ct. Op.at 14. 

Based on this finding, we conclude that Everett and

Austin were the appropriate cadre of senior management whose 

consideration is pertinent. 

 We must therefore determine when Everett and Austin 

began considering the specific proposal for purposes of 

implementation. The record indicates that on May 22, 1987, 

Everett and Austin submitted the TPF&C report to the Board of 

Directors. On May 28, Fritz sent a memorandum to Austin and 

Everett setting out the cost for one of the seven proposals and 

requesting their approval to proceed further. After receiving 

approval, Fritz prepared a recommendation for the Board. The 

Board made the decision to amend the plan on June 22, 1987. 

 We conclude that Fritz's May 28 memorandum and Everett 

and Austin's subsequent approval of his recommendation mark the 

beginning of serious consideration by senior management for 

purposes of implementation. We therefore hold that serious 

consideration began on May 28, 1987. 

 In reaching this conclusion, we stress yet again the 
fact-specific nature of our analysis. Our holding in this case 

does not establish a bright-line rule based on management's 

approval of an employee's request to make a recommendation to the 

Board of Directors, just as in Kurz I we rejected a bright-line 

rule based on the formal proposal of a plan change to the Board 

of Directors. 994 F.2d at 139. Rather, serious consideration 

depends on "(1) a specific proposal (2) discussed for purposes of 

implementation (3) by senior management with the authority to 

implement the change." Fischer II, ___ F.3d at ___ [typescript 

at 15]. Here, these factors indicate that serious consideration 

began on May 28, 1987. 

 Based on this analysis, any employee who asked about 

changes in pension benefits after serious consideration began on 

May 28, 1987, but before the formal announcement of the change on 

July 2, 1987, received material misinformation. We will enter 

judgment for PECo on the claims of all employees who asked about 

a benefits change and retired before May 28. The record reveals, 

however, that some members of the plaintiff class retired after 

May 28, 1987. We must therefore consider the viability of their 

claims in light of PECo's statute of limitations defense. 

 ERISA § 413, 29 U.S.C. § 1113, establishes a 

combination of limitations provisions to govern breach of 

fiduciary duty claims. It provides: 

 No action may be commenced under this 

 subchapter with respect to a fiduciary's 

 breach of any responsibility, duty, or 

 obligation under this part, or with respect 

 to a violation of this part, 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 (B) in the case of an 

 omission, the latest date on which the 

 fiduciary could have cured the breach or 

 violation, or 

 (2) three years after the earliest date on 

 which the plaintiff had actual knowledge of 

 the breach or violation; 

 except that in the case of fraud or 

 concealment, such action may be commenced not 

 later than six years after the date of 

 discovery of such breach or violation. 

29 U.S.C. § 1113. This section thus creates a general six year 

statute of limitations, shortened to three years in cases where 

the plaintiff has actual knowledge, and potentially extended to 

six years from the date of discovery in cases involving fraud or 

concealment. 

 Invoking § 413, PECo argues that the three year period 

for actual knowledge applies. PECo points out that the benefits 

change was formally announced on July 2, 1987. No lawsuit was 

filed until April 3, 1991, more than three and a half years 

later. In addition, the record contains statements by sixteen of 

the twenty members of the plaintiff class stating that they knew 
of the plan change more than three years before the complaint was 

filed. PECo concludes that on these facts, the claim was 

untimely. 

 The plaintiff class responds by pointing to § 413's 

language on fraud and concealment, claiming it refers to the type 

of behavior in which PECo engaged. The district court adopted 

this position, explaining, 

 The class action complaint clearly sounds in 

 concealment. The heart of the complaint is 

 PECO's concealment of the plan to implement 

 the early retirement plan. PECO admits it

 had a policy of keeping such matters 

 confidential and telling potential retirees 

 that no such plans existed until formally 

 announced. 

 Section [413] provides a six year statute 

 of limitation for cases of concealment, 

 measured from the time the plaintiff 

 discovers the breach or violation. 

 Members of the plaintiffs' class discovered 

 the breach or violation as early as June 

 1987. Suit was filed in this matter April

 30, 1991, less than six years later. 

District Ct. Op. at 25-26. We disagree with the district court's 

interpretation of the statute in the circumstances of this case. 

 The proper interpretation of § 413 presents an issue of 

law subject to plenary review. Board of Trustees of District No. 

15 Machinists' Pension Fund v. Kahale Engineering Corp., 43 F.3d 

852, 857 (3d Cir. 1994); Sheet Metal Workers, Local 19 v. 2300 

Group, Inc., 949 F.2d 1274, 1278 (3d Cir. 1991). We first hold 

that § 413(2)'s three year period applies on the facts of this 

case. We next hold that the district court misconstrued § 413's 

fraud and concealment language. We find that the claims of the 

plaintiff class are untimely and barred. 

 We begin with the selection of the 6 year or the 3 year 

limitations period as provided in subsections (1) and (2). We 

find that the 3 year "actual knowledge" provision of subsection 

(2) applies here. We first examined the meaning of § 413(2)'s 

"actual knowledge" in Gluck v. Unisys Corp., 960 F.2d 1168 (3d 

Cir. 1992). We interpreted the phrase "actual knowledge" to 

require actual knowledge of "all material facts necessary to 

understand that some claim exists, which facts could include 

necessary opinions of experts, knowledge of a transaction's 

harmful consequences, or even actual harm." Id. at 1177 

(citations omitted). 

 In the current case, all the material elements of a 

breach of fiduciary duty claim were patently obvious on July 2, 

1987, the day PECo announced the pension increase. On that date, 

employees who had asked about benefits and retired before July 2 

knew (1) benefits had been increased, (2) they were not eligible 

for the new package, and (3) no one had told them about the 

change even though they had asked. 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. For those who did not qualify, 

the "harmful consequences" of the change were obvious. Gluck, 

960 F.2d at 1177. No "opinions of experts" were needed. Id. 

Legal consultation was not required. Id. The plaintiffs had 

"knowledge of all relevant facts at least sufficient to give 

[them] knowledge that a fiduciary duty ha[d] been breached or 

ERISA provision violated." Id. at 1178. The plaintiff class 

therefore had actual knowledge as of July 2, 1987, and § 413's 

three year statute of limitations began to run on that date. 

 We next turn to the "fraud and concealment" language of 

§ 413, which the district court applied to save the class claim. 

The district court apparently interpreted this language as 

referring to the type of ERISA claim in question. See District 

Ct. Op. at 25 ("[t]he class action complaint clearly sounds in 

concealment"). We disagree. 

 With rare exceptions, the courts of appeals have 

interpreted the final clause of § 413's as incorporating the 

federal doctrine of fraudulent concealment: The statute of 

limitations is tolled until the plaintiff in the exercise of 

reasonable diligence discovered or should have discovered the 

alleged fraud or concealment. See J. Geils Band Employee Benefit 

Plan v. Smith Barney Shearson, Inc., 76 F.3d 1245, 1253 (1st 

Cir.), petition for cert. filed, 65 U.S.L.W. 3001 (June 19, 

1996); Barker v. American Mobil Power Corp., 64 F.3d 1397, 

1401-02 (9th Cir. 1995); Larson v. Northrop Corp., 21 F.3d 1164, 

1172-74 (D.C. Cir. 1994); Martin v. Consultants & Administrators, 

Inc., 966 F.2d 1078, 1093-96 (7th Cir. 1992); Schaefer v. 

Arkansas Medical Soc'y, 853 F.2d 1487, 1491-92 (8th Cir. 1988); 

but see Diduck v. Kaszycki & Sons Contractors, Inc., 874 F.2d 

912, 919 (2d Cir. 1989) ("[f]or a breach of fiduciary duty 

involving fraud or concealment, the three year exception for 

actual knowledge does not apply, and a party has six years from 

the time it discovers the breach to bring an action"). 

 Although we have yet to address this issue squarely, 

we have implicitly rejected the district court's interpretation 

in dictum. See Gluck, 960 F.2d at 1177 n.5 ("Although not 

implicated here, we note that the six-year limitation period of 

[§ 413(1)] does not protect defendants in instances involving 

concealment or fraud."). We now join our sister courts and hold 

that § 413's "fraud and concealment" language applies the federal 

common law discovery rule to ERISA breach of fiduciary duty 

claims. In other words, when a lawsuit has been delayed because 

the defendant itself has taken steps to hide its breach of 

fiduciary duty, see Barker, 64 F.3d at 1402, the limitations 

period will run six years after the date of the claim's 

discovery. The relevant question is therefore not whether the 

complaint "sounds in concealment," but rather whether there is 

evidence that the defendant took affirmative steps to hide its 

breach of fiduciary duty. 

 Turning to the case at bar, we find nothing suggesting 

that fraud or concealment delayed the discovery of the breach of 

fiduciary duty claim. Serious consideration began on May 28, 

1987. The plan was announced one month later on July 2, 1987. 
Although again eschewing a bright-line rule, we suggest that this 

relatively brief period exemplifies the type of timely 

notification that companies should give their employees. By 

publicly announcing its decision on July 2, 1987, PECo foreclosed 

any suggestion that it attempted to conceal its plans or engaged 

in a campaign of fraud to prevent the plaintiff class from suing 

for the alleged breach. The claim, such as it was, lay bare for 

the world to see. The federal discovery rule, and hence the six 

year fraud or concealment limitation period, does not apply. 

 We therefore hold that § 413's statute of limitations 

bars the fiduciary duty claims of those members of the plaintiff 

class who asked about a change in pension benefits and retired 

after May 28 but before July 2, 1987. Given our disposition of 

the claims of class members who asked about benefits and retired 

before May 28, we will enter judgment for PECo on the entire 

class's breach of fiduciary duty claim. 

 Our treatment of the breach of fiduciary duty claim 

leaves the plaintiff class with two theories of recovery, 

discriminatory treatment under ERISA § 510, 29 U.S.C. § 1140, and 

equitable estoppel. Neither theory has merit. We reject the 

class's § 510 claim for the reasons announced in Fischer II, ___ 

F.3d at ___ [typescript at 26-27]. As to the equitable estoppel 

claim, our reasoning in Fischer II is equally controlling for 

those members who retired before May 28, 1987. PECo correctly 

informed these class members that no pension increase was under 

serious consideration. As a result, these class members cannot 

establish the first element of an estoppel claim, material 

misrepresentation. See Curcio v. John Hancock Mut. Life Ins. 

Co., 33 F.3d 226, 235 (3d Cir. 1994) (listing elements of 

equitable estoppel claim under ERISA); Fischer II, ___ F.3d at 

___ [typescript at 25]. We also reject the equitable estoppel 

claim of the post-May 28 class members. These plaintiffs have 

failed to establish the third ERISA estoppel element, 

extraordinary circumstances. See Curcio, 33 F.3d at 235. 

 We have never clearly defined "extraordinary 

circumstances," relying instead on case law to establish its 

parameters. Id. A review of our precedents indicates that 

extraordinary circumstances do not exist in this case. To 

support this element, we have previously required a showing of 

affirmative acts of fraud or similarly inequitable conduct by an 

employer. See Rosen v. Hotel & Restaurant Employees & Bartenders 

Union, 637 F.2d 592, 598 (3d Cir. 1981) (holding that pension 

fund could not deny benefits to participant on grounds that 

participant's employer failed to pay required contributions where 

fund administrator allowed employee to pay contributions 

himself), cert. denied, 454 U.S. 898 (1981); see also Hozier v. 

Midwest Fasteners, Inc., 908 F.2d 1155, 1165 n.10 (3d Cir. 1990) 

(citing Rosen). Elsewhere, we have focused on the network of 

misrepresentations that arises over an extended course of dealing 

between parties. See Curcio, 33 F.3d at 238 (finding 

extraordinary circumstances where insurer misrepresented type of 

coverage available, informed patient that certain coverage would 

be provided, then disclaimed coverage); Smith v. Hartford Ins. 

Group, 6 F.3d 131, 142 (3d Cir. 1993) (suggesting extraordinary 
circumstances might exist where plaintiff repeatedly and 

diligently inquired about benefits and defendant repeatedly 

misrepresented scope of coverage to plaintiff). We have also 

cited the vulnerability of particular plaintiffs. See Curcio, 33 

F.3d at 238 (hospital patient denied coverage for substantial 

claim after hospital represented that coverage would exist); 

Smith, 6 F.3d at 142 (same); but see Gridley v. Cleveland 

Pneumatic Co., 924 F.2d 1310, 1319 (3d Cir.) (rejecting estoppel 

where widow of terminal cancer victim sought increased life 

insurance benefits), cert. denied, 501 U.S. 1232 (1991). 

 These cases demonstrate that a plaintiff must do more 

than merely make out the "ordinary elements" of equitable 

estoppel to establish a claim for equitable estoppel under ERISA. 

Gillis v. Hoechst Celanese Corp., 4 F.3d 1137, 1142 (3d Cir. 

1993), cert. denied, ___ U.S. ___, 114 S.Ct. 1540 (1994); 

Gridley, 924 F.2d at 1319. Because of these heightened 

requirements, we have consistently rejected estoppel claims based 

on simple ERISA reporting errors or disclosure violations, such 

as a variation between a plan summary and the plan itself, or an 

omission in the disclosure documents. See Gillis, 4 F.3d at 1142 

(denying recovery where plaintiffs claimed plan documents failed 

to disclose that severance pay would not be provided to employees 

who continued working for purchaser of corporate division); 

Gridley, 924 F.2d at 1319 (denying recovery despite omission from 

disclosure documents of requirement that employee be "actively at 

work" to qualify for increased life insurance benefits; employee 

was later denied increased benefits based on requirement). 

 Applying these principles to the current case, we find 

nothing to suggest that extraordinary circumstances exist. At 

best, plaintiffs have established the basic elements of an 

estoppel claim. There is no conduct suggesting that PECo sought 

to profit at the expense of its employees, no showing of repeated 

misrepresentations over time, no suggestion that plaintiffs are 

particularly vulnerable. In addition, we note that the district 

court made no finding of extraordinary circumstances. SeeDistrict Ct. Op. 

at 20, 24. The plaintiffs seem to have ignored 

the issue, despite the fact that they bear the burden of proof on 

each estoppel element. See Gillis, 4 F.3d at 1142. We therefore 

hold that extraordinary circumstances do not exist on the facts 

of this case, and we will enter judgment for the defendant on the 

post-May 28 class members' equitable estoppel claim. 

 III. 

 The plaintiff class has failed to establish a valid 

claim for breach of fiduciary duty. Those class members who 

retired prior to May 28, 1987, did not receive material 

misinformation about a benefits change because no pension 

increase was then under serious consideration. The claims of the 

remaining class members are barred by the applicable statute of 

limitations. The class's equitable estoppel claim and ERISA § 

510 claim also fail. We will therefore reverse the district 

court's judgment and enter judgment for defendant PECo.