Source: https://casetext.com/case/farrell-v-automobile-club-of-michigan
Timestamp: 2019-05-20 03:10:28
Document Index: 682691300

Matched Legal Cases: ['§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1109', '§ 1109', '§ 1109', '§ 1132', '§ 1132', '§ 1132']

Farrell v. Automobile Club of Michigan, 870 F.2d 1129 | Casetext
Farrell v. Automobile Club of Michigan
870 F.2d 1129 (6th Cir. 1989)
Farrellv.Automobile Club of Michigan
Before MERRITT and GUY, Circuit Judges; and JOHNSTONE, District Judge.
The Honorable Edward H. Johnstone, United States District Judge for the Western District of Kentucky, sitting by designation.
On January 21, 1987 the state court ruled, inter alia, that plaintiffs' state law breach of employment contract and fraud and deceit claims were, in essence, claims regarding administration of an employee benefit plan and were, therefore, preempted by ERISA. The state court, however, failed to reach the last step in the analysis — whether jurisdiction over plaintiffs' particular claims was exclusively federal or concurrent. Instead, the state court dismissed the breach of contract and fraud and deceit claim on the basis that it was preempted by ERISA.
We agree with the District Court — there was no genuine issue of fact as to plaintiffs' actual knowledge of the breach. Indeed, as the Second Circuit stated in Perma Research Development Co. v. The Singer Co., 410 F.2d 572, 578 (2d Cir. 1969), and this Court adopted in Biechele v. Cedar Point, Inc., 747 F.2d 209, 215 (6th Cir. 1984):
The District Court rejected this argument, however. Construing plaintiffs' claim as one "for breach of fiduciary duty" and reasoning that pursuant to 29 U.S.C. § 1132(e)(1), federal courts have exclusive jurisdiction over ERISA breach of fiduciary duty actions, the District Court held that the statute of limitations was not tolled because the state action was filed in a court which "clearly lacked jurisdiction." As principal authority for this proposition, the District Court cites the following two cases: Silverberg v. Thompson McKinnon Securities, Inc., 787 F.2d 1079, 1082 (6th Cir. 1986) (Securities Exchange Act statute of limitations not tolled by filing of action in state court because federal jurisdiction exclusive); Fox v. Eaton Corp., 615 F.2d 716, 718-720 (6th Cir. 1980), cert. denied, 450 U.S. 935, 101 S.Ct. 1401, 67 L.Ed.2d 371 (1981) (90 day Title VII limitations period tolled by filing action in state court which plaintiff reasonably believes has subject matter jurisdiction).
29 U.S.C. § 1132(e)(1) provides in pertinent part:
Except for actions under subsection (a)(1)(B) . . ., the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter. . . . State courts of competent jurisdiction and district courts of the United States shall have concurrent jurisdiction of actions under subsection (a)(1)(B) of this section.
The ERISA jurisdiction clause, 29 U.S.C. § 1132(e)(1), provides in pertinent part that jurisdiction of actions brought under § 1132(a)(1)(B) is concurrent between state and federal courts. All other actions must be brought exclusively in federal courts. Id. The Michigan court had jurisdiction over plaintiffs' ERISA complaint, therefore, only if it was brought under § 1132(a)(1)(B).
29 U.S.C. § 1132(a)(1)(B) provides in pertinent part:
A civil action may be brought — by a participant or beneficiary . . . to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan. . . .
(18) The retirement and pension benefit information given by Defendant to each plaintiff was false, and the benefits made available to and/or paid to each Plaintiff was insufficient . . . and the true retirement benefits . . . were substantially greater than those claimed by defendant. . . .
(21) As a direct and proximate result of the . . . misconduct of the Defendant, . . . each Plaintiff has suffered . . . loss of employment benefits. . . .
WHEREFORE, Plaintiffs pray that full compensation . . . be made, including the value of all benefits, [and] future pay and benefits. . . .
Plaintiffs' claim can be construed as arising under at least two different ERISA provisions, although, as we shall see, § 1132(a)(1)(B) seems the most appropriate. The language in paragraph 17 of plaintiffs' complaint, claiming "serious breaches of defendant's fiduciary duty" could be construed as an exclusively federal claim arising under 29 U.S.C. § 1109, outlining liability for breach of fiduciary duty. But there is a serious flaw in this reasoning. Section 1109 authorizes relief only to the plan itself, not to individual beneficiaries. See Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134, 140, 105 S.Ct. 3085, 3089, 87 L.Ed.2d 96 (1985) ( § 1109 does not provide a cause of action for extra-contractual damages to a beneficiary caused by improper or untimely processing of benefit claims because § 1109 relief inures to the benefit only of the plan itself not an individual beneficiary). Plaintiffs' request for relief, however, is for themselves as individual beneficiaries, not for the plan as a whole.
Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary. . . .
Alternatively, plaintiffs' complaint could be construed as a § 1132(a)(1)(B) action to recover accrued benefits, a claim for which federal jurisdiction is concurrent with state court jurisdiction. This construction is supported by plaintiffs' prayer for individual relief in its state complaint and by plaintiffs' federal complaint which expressly requests § 1132(a)(1)(B) relief. The District Court's refusal to toll the statute of limitations on the ground that the state court "clearly lacked jurisdiction" is, therefore, erroneous.
Tolling is justified in this case for several reasons. First, as we have shown, the state court appears to have had jurisdiction over the claims of the individual plaintiffs under § 1132(a)(1)(B) of ERISA.
Second, as Burnett, supra, teaches, the primary purpose of statutes of limitations is to promote fairness to defendants by preventing prosecution of stale claims and the loss of relevant evidence and by encouraging diligence by plaintiffs. 380 U.S. at 428, 85 S.Ct. at 1054. See also Morgan v. Washington Manufacturing Co., 660 F.2d 710, 712 (6th Cir. 1981) (in the absence of prejudice to the defendant or a showing of bad faith or lack of diligence by a claimant, equitable considerations should toll the 180 day period for filing a complaint under Title VII when the claimant makes a timely filing with a federal agency). Where circumstances arise in which the plaintiff has been diligent and the defendant has been given adequate notice of the claim, "courts must be flexible to assure that the true purpose of the limitation is served." Joseph v. Syrian Arab Airlines, 88 F.R.D. 530, 532 (S.D.N.Y. 1980).
Finally, Burnett instructs us to deny tolling when it would frustrate the purpose of the statutory scheme. In this case, tolling would serve rather than frustrate the broad remedial purpose of ERISA — protection of participants in private pension plans.