In the

United States Court of Appeals

For the Seventh Circuit ____________________ 

Nos. 22-2204 & 22-2205 

JULIE A. SU, Acting Secretary of Labor,

United States Department of Labor,*

Plaintiff-Appellee, 

v.

LEROY JOHNSON and

SHIRLEY T. SHERROD, 

Defendants-Appellants. 

____________________ 

Appeals from the United States District Court for the

Northern District of Illinois, Eastern Division. 

No. 1:16-cv-04825 — Andrea R. Wood, Judge. 

____________________ 

ARGUED APRIL 19, 2023 — DECIDED MAY 10, 2023 

____________________ 

Before HAMILTON, BRENNAN, and KIRSCH, Circuit Judges. 

HAMILTON, Circuit Judge. These appeals present questions 

about enforcement of fiduciary duties of loyalty and prudence 

* We have substituted the current Acting Secretary of Labor, United 

States Department of Labor, for her predecessor, sued in an official capacity. Fed. R. App. P. 43(c)(2)
2 Nos. 22-2204 & 22-2205 

under the Employee Retirement Income Security Act of 1974, 

better known as ERISA, 29 U.S.C. § 1001 et seq., as well as fiduciaries’ duties to comply with plan documents. Defendants 

Shirley T. Sherrod and Leroy Johnson were fiduciaries of a retirement plan that Sherrod had set up for herself and other 

employees of her medical practice. The Secretary of Labor 

brought this civil enforcement action alleging that both defendants had breached their fiduciary duties under ERISA. 

The district court granted summary judgment in favor of the 

Secretary and entered a permanent injunction against defendants removing them as fiduciaries. Walsh v. Sherrod, No. 16-cv04825, 2022 WL 971857 (N.D. Ill. Mar. 31, 2022). Both defendants have appealed.

We affirm. The undisputed facts show that both defendants breached their fiduciary duties of loyalty and prudence 

under ERISA. Hundreds of thousands of dollars of plan assets 

were used for defendant Sherrod’s personal benefit but were 

accounted for as plan expenses or losses rather than as distributions of retirement benefits to her. The permanent injunction was well within the scope of reasonable responses to the 

breaches.

I. Facts for Summary Judgment & Procedural History

Defendant Sherrod owned and ran an ophthalmology 

practice (Shirley T. Sherrod, M.D., P.C.) in Detroit, Michigan. 

In 1987, she established a defined-benefit retirement plan for 

the practice’s employees, including herself. She named herself 

as trustee of the retirement plan, which is governed by ERISA. 

In 2008, the employment of all employees other than Dr. Sherrod herself was terminated, and sometime around then, she 

sold the practice to another physician. In April 2010, the plan 

was amended to make Sherrod responsible for: (1) investing, 
Nos. 22-2204 & 22-2205 3

managing, and controlling plan assets subject to the direction 

of the employer (herself) or an investment manager; (2) paying benefits to participants at the direction of the administrator; and (3) maintaining records of receipts and disbursements to furnish to the employer or administrator.

The buyer of Dr. Sherrod’s practice later sued her in Michigan state court for breach of contract and obtained a judgment against her for $181,000.1 Michael S. Sherman, D.O., P.C. 

v. Shirley T. Sherrod, M.D., P.C., Nos. 299045, 299775, 308263, 

2013 WL 2360189 (Mich. Ct. App. May 30, 2013). When that 

judgment went unpaid, the Michigan court prohibited 

“Shirley T. Sherrod, M.D., and Shirley T. Sherrod, M.D., P.C.,” 

or anyone acting on their behalf “from directly or indirectly 

selling, transferring, ... or otherwise disposing of” any assets 

“held or hereafter acquired by or becoming due to them.” 

Around the same time, the buyer garnished Sherrod’s assets at Merrill Lynch, where her personal and retirement accounts, her company’s account, and the plan’s account were 

kept. See Johnson v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 

719 F.3d 601, 602 (7th Cir. 2013). Acting as a custodian of plan 

assets, Merrill Lynch read the Michigan court’s order to require it to freeze all assets due to Sherrod, including distributions from the plan account. Id. at 603. But Merrill Lynch said 

it was prepared to follow any instructions from the plan administrator to make distributions to other plan participants. 

Id. 

Sherrod appealed the money judgment against her. The 

Michigan Court of Appeals allowed the appeal and a stay of 

1 For simplicity’s sake, all dollar figures in this opinion are rounded 

to the nearest hundred.
4 Nos. 22-2204 & 22-2205 

the judgment on the condition that Sherrod either appear for 

a creditor’s examination or post a $250,000 cash or surety 

bond. Sherrod chose to post the bond. Walsh, 2022 WL 971857, 

at *2. In November 2011, she signed an affidavit directing 

Merrill Lynch to make two distributions from the Plan: one 

for $250,000 to secure the bond and another for $3,000 to cover

costs associated with filing the bond. Her affidavit also “confirmed that the requested distributions did not exceed her individual interest” in the Plan. Id. Merrill Lynch made those 

requested payments from plan assets to cover the bond, apparently with the blessing of the Michigan court.

In May 2012, Sherrod appointed Johnson as plan administrator. In that role, Johnson’s “primary responsibility” was “to 

administer the Plan for the exclusive benefit” of plan participants and “in accordance with [plan] terms.” Toward that 

end, Johnson was “to maintain all necessary records for the 

administration of the Plan,” as well as “a record of all actions 

taken ... and other data that may be necessary for proper administration of the Plan.” He was also “responsible for supplying all information and reports to the Internal Revenue 

Service, Department of Labor, Participants, Beneficiaries and 

others as required by law” and for authorizing and directing 

the trustee “with respect to all discretionary or otherwise directed disbursements from the Trust.” After Johnson became

plan administrator, Sherrod filed a required form with the Department of Labor reporting no benefit distributions and no 

expenses in 2011, but reporting a $246,300 “loss” to the plan.

The Michigan court eventually lifted the freeze on Sherrod’s assets. She then started directing payments to herself 

out of plan funds. Sherrod had reached retirement age under 

the plan in 2011, but many of the payments to her were treated 
Nos. 22-2204 & 22-2205 5

as plan expenses rather than as distributions of her retirement 

benefits. In addition to the $250,000 bond payment that she 

had directed in 2011, Sherrod pulled at least $50,000 from the 

plan in 2013, $286,900 in 2014, $120,000 in 2015, $196,400 in 

2016, and $173,800 in 2017. In 2014, Sherrod and Johnson reported $57,000 in benefit distributions and $142,000 in expenses. In 2015, $59,000 in distributions and $40,000 in expenses. In 2016, $62,500 in distributions and $133,900 in expenses. In 2017, about $69,700 in distributions and $104,100 in 

expenses. The plan account had been closed to deposits since 

2008, and no deposits were made into the plan from 2014 to 

2017.

Under ERISA section 502(a)(2), codified as 29 U.S.C. 

§ 1132(a)(2), the Secretary of Labor brought this civil enforcement action against Sherrod and Johnson in April 2016, while 

Sherrod was still making payments to herself and Johnson 

was plan administrator. The Secretary’s complaint alleged 

both past and ongoing violations of defendants’ fiduciary duties. The complaint asked the court to remove Sherrod and 

Johnson from their positions of trust, to enjoin them permanently from serving as fiduciaries for ERISA-covered plans, 

and to appoint an independent fiduciary to administer and 

terminate the plan.

Defendants filed their answer raising three affirmative defenses, including ERISA’s statute of limitations, alleging that 

any failure to administer benefits for terminated employees 

according to the plan occurred no later than the sale of Sherrod’s practice in 2008. About four months later, in December 

2016, defendants sought leave to amend their answer to elaborate on the statute of limitations defense with respect to 

claims concerning the use of plan assets to post a bond in the 
6 Nos. 22-2204 & 22-2205 

Michigan lawsuit against Sherrod. The proposed amendment 

would have alleged that the Secretary had actual knowledge 

in 2012 that plan assets had been used for that purpose. The 

district court (the late Judge Milton I. Shadur) denied the motion. Although the district court said it rejected the Secretary’s 

argument that the amendment would be futile, the court 

noted that defendants had been dilatory and that the amendment lacked evidentiary support.

The case was later assigned to Judge Wood, and the Secretary moved for summary judgment. The district court found 

no genuine dispute of fact material to whether Johnson and 

Sherrod had repeatedly violated their duties of care and loyalty and their duty to administer according to plan documents. Walsh, 2022 WL 971857, at *4–9. Because these violations had harmed the plan, the court granted summary judgment for the Secretary, id. at *7, *9, as well as all requested 

injunctive relief.

The court removed defendants as plan fiduciaries and 

permanently enjoined them from serving or acting as 

fiduciaries or service providers with respect to any employee 

benefit plans subject to ERISA. The court also appointed an 

independent fiduciary to terminate the plan and to issue 

distributions to eligible participants and beneficiaries. The 

fiduciary was given the power to review and allocate 

appropriately all previous distributions and transactions for 

the plan, including the 2011 bond payment and all payments 

to Sherrod and her attorneys, and all other payments or 

withdrawals from the plan that were not paid directly to a 
Nos. 22-2204 & 22-2205 7

participant other than Sherrod from 2013 to present. Both 

defendants have appealed.2

II. Analysis

A. Legal Standard

We review de novo a district court’s grant of summary 

judgment, giving defendants, as the non-moving parties in 

this case, the benefit of conflicting evidence and drawing reasonable inferences in defendants’ favor. Kenseth v. Dean Health 

Plan, Inc., 610 F.3d 452, 462 (7th Cir. 2010). To prevail on a 

claim for breach of fiduciary duty under ERISA, the plaintiff 

must prove: (1) that the defendant is a plan fiduciary; (2) that 

the defendant breached his or her fiduciary duty; and (3) that 

the breach resulted in harm to the plaintiff. Id. at 464. Defendants agree that they were plan fiduciaries, and the undisputed 

facts show both breach and harm. 

B. Breaches of the Duty to Follow Plan Documents

To a degree unusual in the law, ERISA focuses on following written plan documents, regardless of other evidence. 

ERISA requires fiduciaries to “discharge [their] duties ... in 

accordance with the documents and instruments governing 

the plan.” 29 U.S.C. § 1104(a)(1)(D). As relevant here, the plan 

required Sherrod to pay benefits “at the direction of the Administrator,” and to “maintain records of receipts and disbursements.” Johnson was required “to authorize and direct” 

2 We asked at oral argument why the Secretary has not yet pursued 

any restitutionary relief against defendants under 29 U.S.C. § 1109. The 

answer may be that, in reviewing and allocating previous distributions 

and transactions, the independent fiduciary may be able to take further 

action affecting Sherrod’s personal benefits. Regardless, the district court’s 

permanent injunction is appealable under 28 U.S.C. § 1292(a).
8 Nos. 22-2204 & 22-2205 

Sherrod “with respect to all discretionary or otherwise directed disbursements” and to maintain records “of all actions 

taken.”

Defendants do not dispute that Sherrod often acted at her 

own direction and not “at the direction of the Administrator,” 

unilaterally withdrawing funds from the plan without consulting Johnson. Accordingly, there is also no dispute that 

Johnson did not “authorize and direct” those payments as required by the plan. In effect, Sherrod gave herself the keys to 

the bank vault, and Johnson let her use them. On these undisputed facts, defendants violated their duty to act “in accordance with the documents and instruments governing” the 

plan. 29 U.S.C. § 1104(a)(1)(D).3

Johnson’s attempts to avoid this conclusion are not persuasive. He says that he prudently hired an actuary to prepare 

annual reports, that he and Sherrod “met frequently to discuss the Plan’s bills and to try to minimize expenses,” that he 

never “attempted to conceal” Sherrod’s conduct, and that he 

“found her to be an honest person” who could be taken “at 

her word.” None of these points creates a genuine dispute on 

3 The Secretary also alleged that defendants failed to maintain records

properly as required by the plan. Sherrod argues that she could not have 

violated ERISA on this basis because “ERISA does not ... mandate any 

specific recordkeeping arrangement at all.” See Divane v. Northwestern 

Univ., 953 F.3d 980, 990 (7th Cir. 2020), vacated on other grounds by 

Hughes v. Northwestern Univ., 142 S. Ct. 737, 740 (2022). That is true, but the 

plan still required some kind of recordkeeping. We need not reach the 

recordkeeping question, however. Sherrod’s failure to seek Johnson’s authorization and direction and Johnson’s concomitant failure to fulfil his 

responsibilities are sufficient to demonstrate breaches of § 1104(a)(1)(D).
Nos. 22-2204 & 22-2205 9

the core issue—whether Johnson failed to “authorize and direct” Sherrod’s withdrawals.

For her part, Sherrod argues that she was required to follow Johnson’s direction only when he gave it, so she could not 

have violated plan documents by acting on her own. But such 

an understanding is contrary to the plan’s language (the 

“Trustee will” make distributions “as directed by the Administrator”) and would render all but meaningless the administrator’s fiduciary role.

C. Breaches of the Duties of Care & Loyalty

“ERISA’s duty of loyalty is the ‘highest known to the 

law.’” Halperin v. Richards, 7 F.4th 534, 546 (7th Cir. 2021), 

quoting Donovan v. Bierwirth, 680 F.2d 263, 272 n.8 (2d Cir. 

1982). The duty “protects beneficiaries by barring any conflict 

of interest that might put the fiduciary in a position to engage 

in self-serving behavior at the expense of beneficiaries.” Id. 

ERISA’s primary command to fiduciaries, in section 404, is 

therefore to “discharge [their] duties ... solely in the interest 

of the participants and beneficiaries and ... for the exclusive 

purpose of ... providing benefits to participants and their beneficiaries.” 29 U.S.C. § 1104(a)(1)(A)(i). Fiduciary self-dealing 

is therefore prohibited “[e]xcept as provided in section 1108 

of this title.” 29 U.S.C. § 1106(a)(1)(D) (fiduciary “shall not 

cause the plan to engage in a transaction, if he knows or 

should know that such transaction constitutes a direct or indirect ... transfer to, or use by or for the benefit of a party in 

interest,” including the fiduciary, 29 U.S.C. § 1002(14)(A), “of 

any assets of the plan”); Leigh v. Engle, 727 F.2d 113, 123 (7th 

Cir. 1984) (§ 1106 “prohibits transactions where those dealing 

with the plan may have conflicting interests which could lead 

to self-dealing”).
10 Nos. 22-2204 & 22-2205 

1. The Bond Payment

In the district court, Sherrod did not dispute that she used 

plan funds to make the bond payment in her state-court 

appeal. She argued there that the payment was a reasonable 

expense authorized by the plan. Walsh, 2022 WL 971857, at *5. 

On appeal, Sherrod did not make this “reasonable litigation 

expense” argument until her reply brief, so that argument is 

waived. See Foster v. PNC Bank, N.A., 52 F.4th 315, 319 n.2 (7th 

Cir. 2022) (arguments not addressed in opening brief on 

appeal are waived).

Instead, Sherrod argues on appeal that she paid the plan 

back for the bond payment. But the only evidence of payment 

she offers is a 2014 letter from Johnson’s attorneys to a bond 

agency asking that the bond payment be returned to the plan. 

The suggestion that a request for payment should be sufficient 

proof that the requested payment was actually made seems to 

invite the court to enter unknown legal territory. If a quarter 

of a million dollars had actually been paid back into the plan, 

we would expect that the plan fiduciaries would have at least 

some record of the payment.

More fundamental, though, even if Sherrod had actually 

later reimbursed the plan for that quarter of a million dollars 

she had taken for her personal purposes and charged as a plan 

expense, that would not be a defense on the merits of the 

breach of fiduciary duty. Drawing on plan funds to obtain a 

bond in litigation that had little or nothing to do with the plan 

was itself a violation of Sherrod’s fiduciary duties. An embezzler does not avoid criminal liability by returning the stolen 

money, whether the theft has been discovered yet or not. Similarly here, Sherrod could not absolve herself of her fiduciary 
Nos. 22-2204 & 22-2205 11

breach by returning the funds three years after they were 

wrongfully taken from the plan. 

Johnson raises a separate point regarding the bond payment. The district court wrote that Johnson, who was supposed to be overseeing the plan’s funds, breached his fiduciary duties “by allowing Dr. Sherrod to make such a withdrawal on her own initiative.” Walsh, 2022 WL 971857, at *6. 

That statement was not accurate. The record shows that Sherrod directed Merrill Lynch to make the bond payment in November 2011, but Johnson did not become plan administrator 

until May 2012. Johnson makes much of this factual error, but 

it was harmless.

Although Johnson was not plan administrator at the time 

of the bond payment, once he did become administrator, he 

became “responsible for supplying all information and reports” to the Department of Labor. While Johnson was plan 

administrator, defendants reported no benefit distributions 

and no expenses for 2011—the year of the bond payment. 

They did report a $246,300 “loss” to the Plan. It is therefore 

not decisive that Johnson was not plan administrator at the 

time of the improper bond payment. 

Nor does it matter that Johnson hired an actuary to prepare the forms filed with the Department of Labor and did 

not, himself, sign the 2011 form reporting the bond payment 

as a “loss.” As plan administrator, Johnson was responsible

for the reporting, both under plan documents and under 

ERISA. See 29 U.S.C. § 1021(b) (“Duty of disclosure and reporting”). 

Sherrod and Johnson therefore both violated their fiduciary duties with respect to the bond payment—Sherrod in 
12 Nos. 22-2204 & 22-2205 

directing the payment and Johnson in falsely reporting it as a 

loss. And even if we thought that Johnson had a potentially 

viable defense based on his limited role in the payment for the 

bond, the rest of his breaches of fiduciary duty would still, as 

discussed below, call for the remedies the district court ordered.

2. Distributions After the Freeze Was Lifted

Once the Michigan court in May 2013 lifted the freeze on 

Sherrod’s assets, including plan distributions to her, Sherrod 

began directing payments to herself out of plan assets. From 

2013 to 2017, Sherrod withdrew close to $825,000 from the 

Plan in 123 transactions. 

In the district court, Sherrod argued that many of those 

payments were reimbursements for necessary and reasonable 

plan expenses, that she was entitled to any benefits she did 

receive as a plan participant, and that the Secretary bore the 

burden of establishing any violations. Walsh, 2022 WL 971857, 

at *7. The district court agreed that the burden was on the 

Secretary but found that the undisputed evidence showed 

that Sherrod had directed hundreds of thousands of dollars 

to be paid to herself out of plan funds. That was sufficient, 

said the district court, to prove that Sherrod had “put her own 

interests above those of Plan participants and beneficiaries in 

violation of § 404(a)(1)(A)” and had violated § 406(a)(1)(D)’s 

prohibition on self-dealing. Id., citing ERISA sections codified 

as 29 U.S.C. §§ 1104 & 1106. In the district court’s view, by 

establishing such self-dealing, the Secretary had shifted the 

burden back to the defendants to show that the transactions 

were “actually permissible under ERISA.” Id., citing Allen v. 

GreatBanc Trust Co., 835 F.3d 670, 676 (7th Cir. 2016). 
Nos. 22-2204 & 22-2205 13

On appeal, Sherrod has abandoned several arguments she 

made in the district court. She no longer argues that some of 

the payments were made to reimburse her for plan legal expenses she had covered out of her own funds. Nor does she 

argue that some of the payments went to plan expenses and 

to other plan beneficiaries. 

Instead, Sherrod argues that any allegations of violations 

after plan year 2014 should be disregarded on the theory that 

“the particularized allegations” of the Secretary’s complaint 

were limited to plan years 2012 to 2014. But the Secretary’s 

2016 complaint alleged continuing violations from “January 

1, 2015 to the present.” That was sufficient to put defendants 

on notice that ongoing violations were part of the case. Even 

if we were to accept this argument, it would not help Sherrod. 

She has not argued, let alone raised a dispute of fact, in this 

appeal that the payments from 2012 to 2014 were proper. 

Those payments alone are enough to establish violations of 

ERISA sections 404(a)(1)(A) and 406(a)(1)(D), codified in 29 

U.S.C. §§ 1104 & 1106.

Still, both Sherrod and Johnson argue that the burden is 

on the Secretary to prove violations and not on them to show 

that payments were permissible. We disagree. Section 406(a) 

applies broad prohibitions on payments to fiduciaries subject 

to section 408. In the most relevant portion, section 406(a) provides: “Except as provided in section [408]: (1) A fiduciary 

with respect to a plan shall not cause the plan to engage in a 

transaction, if he knows or should know that such transaction 

constitutes a direct or indirect ... (D) transfer to, or use by or 

for the benefit of a party in interest, of any assets of the plan 

....” In turn, section 408(b) enumerates categories and conditions for transactions exempted from the prohibitions of 
14 Nos. 22-2204 & 22-2205 

section 406. Further, section 408(c) provides that section 406 

shall not be construed to prohibit a fiduciary from receiving 

benefits she may be entitled to as a plan participant or beneficiary or reasonable compensation for services rendered to the 

plan. 29 U.S.C. § 1108(c). As we said in Allen, though, “an 

ERISA plaintiff need not plead the absence of exemptions to 

prohibited transactions. It is the defendant who bears the burden of proving” that a section 408 exemption applies. 835 F.3d 

at 676. A fiduciary seeking the protection of section 408 has 

the burden of pleading and ultimately proving that an exception applies to a transaction otherwise prohibited by section 

406. The district court correctly shifted the burden to defendants. 

Defendants did not carry that burden. They produced 70 

pages of “postal money orders, invoices, and communications 

with counsel regarding attorneys’ fees,” but they failed to offer “an accounting of these documents” or to match them up 

with Sherrod’s withdrawals from the plan. Walsh, 2022 WL 

971857, at *8. It is neither the district court’s nor this Court’s 

job to piece together an argument for Sherrod and Johnson. 

Id., citing Estate of Moreland v. Dieter, 395 F.3d 747, 759 (7th Cir. 

2005) (“We will not scour a record to locate evidence supporting a party’s legal argument.”).

D. Harm to the Plan

Once it is established that fiduciaries have breached their 

duties, the plaintiff must show harm to the plan. See Kenseth, 

610 F.3d at 464. Defendants argue that the district court erred 

when—in spite of the 2014 letter from Johnson’s attorney asking that the payment be returned to the plan—the court inferred that there was “no indication in the record ... that the 

Plan ever received” those funds and concluded that the bond 
Nos. 22-2204 & 22-2205 15

payment was therefore a loss to the plan. Walsh, 2022 WL 

971857, at *7 & n.6. The district court’s treatment of that issue 

was exactly right. Also, undisputed evidence shows that the 

plan suffered harm from at least a significant portion of the 

more than 100 subsequent payments Sherrod made to herself 

from plan assets from 2012 to 2017. 

E. Denial of Motions to Amend

Both defendants argue on appeal that the district court 

abused its discretion by denying defendants leave to amend 

their original answer to add a statute of limitations defense. 

Federal Rule of Civil Procedure 15(a)(2) provides that courts 

“should freely give leave” to amend “when justice so requires,” but “a district court may deny leave to amend for undue delay, bad faith, dilatory motive, prejudice, or futility.” 

General Electric Capital Corp. v. Lease Resolution Corp., 128 F.3d 

1074, 1085 (7th Cir. 1997). 

The presumptive limitation period for violations of ERISA 

is six years from the date of the last action constituting part of 

the breach or violation. Fish v. GreatBanc Trust Co., 749 F.3d 

671, 674 (7th Cir. 2014); 29 U.S.C. § 1113(1). The period is 

shortened to just three years from the time the plaintiff gained 

“actual knowledge of the breach or violation.” Fish, 749 F.3d at 

674, quoting 29 U.S.C. § 1113(2) (emphasis added).

Four months after they filed their answer, defendants 

sought leave to amend to add an affirmative defense 

regarding the bond transaction in 2011 based on ERISA’s 

three-year limitations period. They claimed that two 

documents they had discovered in their own files suggested 

that the Secretary’s claims with respect to the bond payment 

were time-barred. The documents showed nothing of the sort.
16 Nos. 22-2204 & 22-2205 

One was a fax from the plan’s lawyer to the Department of 

Labor, dated December 20, 2012, notifying the Department 

that Johnson had succeeded Sherrod as plan administrator 

and that a notice of appeal had been filed in a federal case 

brought by Sherrod and Johnson against Merrill Lynch. See 

Johnson v. Merrill Lynch, Pierce, Fenner & Smith Inc., No. 12-cv2545, 2012 WL 5989345 (N.D. Ill. Nov. 28, 2012). The second 

document was an email from Sherrod to the Department of 

Labor, dated August 10, 2012, asking about the alienation of 

plan assets by the Michigan state court.

In March 2017, District Judge Shadur denied the motion, 

finding that defendants had been dilatory in pursuing the 

amendment and had, regardless, put forth no evidence that 

could meet the statute’s “actual knowledge” requirement. 

Aside from questions of law, which we review de novo, our 

review of a district court’s denial of leave to amend is for an 

abuse of discretion. Gandhi v. Sitara Capital Mgmt., LLC, 721 

F.3d 865, 868 (7th Cir. 2013). We find no abuse of discretion in 

the district court’s decision. 

First, the district court did not err by finding that defendants had been dilatory in pursuing this affirmative defense. 

The supposedly new documents had been in defendants’ possession from the start, so an affirmative defense based on 

them “could have been pled at any time after the filing of the 

initial complaint.” See Continental Bank, N.A. v. Meyer, 10 F.3d 

1293, 1298 (7th Cir. 1993) (affirming denial of amendment 

where facts “must have been known to defendants”).

More important, though, the documents defendants relied 

upon fell far short of hinting, let alone proving, that the Secretary actually learned of the defendants’ violations. The 

three-year statute of limitations applies only when the 
Nos. 22-2204 & 22-2205 17

plaintiff has actual knowledge of a violation, not when the 

plaintiff arguably should have known of a violation.

Defendants’ theory seems to be that the Secretary should 

have realized that Sherrod had breached her fiduciary duties 

by posting the bond with plan assets because (a) the fax referred to the federal lawsuit between defendants and Merrill 

Lynch, and (b) if the Secretary had investigated and obtained 

documents filed in that suit, then the Secretary would or 

could or should have known of her breach. The August 2012 

email, defendants argued, likewise should have put the Secretary on notice because a letter attached to that email described how Sherrod had signed an affidavit stating that plan 

assets would be used to post the bond.

We agree with the district court that defendants’ effort to 

“cobble together” from these two documents a showing of actual knowledge that would trigger the three-year statute of 

limitations did not warrant a late amendment of the answer, 

or at least the district court did not abuse its discretion in 

denying the amendment. The passing references in these documents to the lawsuits did not give the Secretary actual notice 

of defendants’ self-dealing and neglect. At best, those documents might have prompted the Secretary “to engage in active 

outside research” that might have revealed Sherrod’s breach 

of her fiduciary duties. That theory would have been a stretch 

to establish constructive (“should have known”) knowledge. 

It certainly falls far short of actual knowledge.

The district court accurately explained that defendants 

were trying to apply the concept of inquiry notice to “the far 

more demanding ‘actual knowledge’ test under ERISA.” The 

court’s analysis was prescient. Three years after the district 

court denied defendants’ motion to amend, the Supreme 
18 Nos. 22-2204 & 22-2205 

Court heard a case where the plaintiff had received far more 

explicit disclosures of the ERISA breaches, not just indications 

that might warrant an investigation. The Court held that, to 

meet ERISA’s actual knowledge requirement, there must be 

“more than evidence of disclosure alone.” Intel Corp. Inv. Policy Comm. v. Sulyma, 140 S. Ct. 768, 774–75, 777 (2020). Rather, 

“the plaintiff must in fact have become aware” of the disclosed information showing the violation. Id. In reaching this 

holding, the Court addressed some of the same circuit decisions that the district court did here.4

In sum, even if defendants’ supposedly newly discovered 

documents had actually disclosed a violation, which they did 

not, there is no evidence or reason to think that the Secretary 

was “in fact ... aware” of that disclosure. In the wake of Intel, 

establishing actual knowledge on such paltry evidence would 

be impossible, and it is now clear that any amendment would 

have been futile. The denial of leave to amend was not a reversible error.

F. Injunctive Relief

Finally, both defendants argue that even if we agree with 

the district court on the merits, the court granted excessive 

equitable relief. We review a district court’s grant of injunctive 

relief for an abuse of discretion. Harrell ex rel. NLRB v. American Red Cross, 714 F.3d 553, 556 (7th Cir. 2013). 

While Johnson asks that we reverse the judgment of the 

district court and remand for a trial, he makes no specific argument that the district court abused its discretion in granting 

4 See Intel, 140 S. Ct. at 775 n.3, citing, e.g., Caputo v. Pfizer, Inc., 267 

F.3d 181 (2d Cir. 2001), and Gluck v. Unisys Corp., 960 F.2d 1168 (3d Cir. 

1992).
Nos. 22-2204 & 22-2205 19

the relief that it did. For her part, Sherrod argues that she 

should not have been removed as plan trustee. She says that 

she faced extraordinary circumstances, that the plan’s assets 

were enmeshed in a state lawsuit, that she “reached out to the 

Secretary for help,” that she used the services of experts and 

even “made efforts to secure the return of the bond funds.” In 

other words, Sherrod argues that, at the time she made the 

bond payment, she thought she was doing “everything reasonable to protect” the plan from the Michigan litigation. 

Even if we give Sherrod the benefit of her assertions of 

good faith, since the district court imposed the injunction 

based on a summary judgment decision, good faith is not a 

defense for one breach of a fiduciary duty, let alone the repeated breaches shown here. See Halperin, 7 F.4th at 546, citing Leigh, 727 F.2d at 124. In any event, the undisputed facts 

show that a significant portion of Sherrod’s many later payments to Sherrod herself from plan assets from 2012 to 2017 

were prohibited self-dealing. As with harm to the plan, those 

payments, taken alone, amply support the district court’s decision to remove defendants as fiduciaries and to prohibit 

them from again serving in such positions of trust. Given the 

gravity and frequency of defendants’ breaches of their fiduciary duties, they are fortunate that the relief against them has 

thus far been relatively modest. The district court’s grant of 

summary judgment and its permanent injunction are

AFFIRMED.