Opinion ID: 596119
Heading Depth: 1
Heading Rank: 2

Heading: the erisa statute of limitations for breach of fiduciary duty

Text: 37 ERISA's statute of limitations prohibits filing suit more than six years after the date of the last action which constituted a part of the breach or violation, or more than three years after the plaintiff had actual knowledge of the breach or violation, whichever is earlier. See ERISA § 413, 29 U.S.C. § 1113 (1988). 5 Murata amended the Plans on October 25, 1985, and the plaintiffs filed suit on November 25, 1989, well within the six-year period. Therefore, to prevail on its statute of limitations argument, Murata must demonstrate that the plaintiffs had actual knowledge of the breach of fiduciary duty more than three years before they filed suit. 38 Murata argues that the type of ERISA violation that the plaintiffs allege--a breach of fiduciary duty under ERISA § 404, 29 U.S.C. § 1104--does not require that participants be denied benefits to bring suit. Compare Ziegler v Connecticut General Life Ins. Co., 916 F.2d 548, 551 (9th Cir 1990) (ERISA statute of limitations begins to run when actions constituting breach take place and not when actual harm is suffered by the plaintiffs). Therefore, Murata contends, plaintiffs could have brought suit as soon as the Plans were amended. Murata argues that plaintiffs had actual knowledge of the alleged breach because the Company posted notice on October 25, 1985 that the Plan documents had been amended and also informed the union's officers of the amendment. 6 Although the notice merely stated that the Plan documents had been amended and did not mention the content of the amendments, Murata argues that such notice provided the plaintiffs with actual knowledge of the breach of fiduciary duty as plaintiffs define it--an unauthorized, unilateral change in the Plans. Therefore, Murata urges that the statute began to run on the date of amendment, or at least on the date that notice was provided, both of which occurred more than three years before the initiation of this suit. 7 39 The plaintiffs respond that the statute did not begin to run until Murata actually recouped the funds in September 1989. They urge that the breach of fiduciary duty was a series of three acts: the amendment to the plans on October 25, 1985, allowing reversion of the funds to the Company; the termination of the Plans on September 30, 1987; and the actual reversion of the funds to Murata on September 5, 1989. The plaintiffs argue that the statute of limitations did not begin to accrue until the actual reversion three months before suit was actually brought, which was well within the three-year limitations period. 40 The plaintiffs further contend that, even if the breach of fiduciary duty was complete with the amendment of the Plans on October 25, 1985, the statute of limitations still did not begin to run because the plaintiffs lacked actual knowledge of the breach. The plaintiffs point out that there is no evidence suggesting that any of the Plan participants actually knew in 1985 that the Plans had been amended. Moreover, the plaintiffs contend, the notice that Murata did provide could not give rise to a finding of actual knowledge, even if all the plaintiffs had read it, because it did not contain specific notice of the content of the amendment. 41 We must first consider when the breach of fiduciary duty took place, for if the plaintiffs and the district court are correct that the breach was not complete until the recoupment of the funds in 1989, then the suit was timely filed under ERISA § 413, 29 U.S.C. § 1113. 42
43 The district court accepted the plaintiffs' theory of a multi-step or continuing breach and concluded that the ERISA statute of limitations did not begin to run until Murata actually recouped the excess funds, three months before the filing of suit. We find the district court's analysis unpersuasive, and we agree with Murata that the breach of fiduciary actually took place when the Plans were amended, on October 28, 1985. This conclusion is compelled by our recent decision in Gluck v. Unisys Corp., 960 F.2d 1168 (3d Cir.1992). 44 In Gluck, the plaintiffs were participants in a plan that was partially contributory and partially non-contributory. Members who donated to the contributory portion of the plan were scheduled to receive additional benefits upon retirement. The sponsoring company amended the plan to terminate the contributory portion of the plan, such that both the contributory and non-contributory portions of the plan would receive the same benefits. Participants in the contributory portion of the plan brought suit, arguing that the termination of the contributory portion denied them benefits that had vested under the terms of the plan, in contravention of 26 U.S.C. § 411(d)(3). The plaintiffs claimed, inter alia, a breach of fiduciary duty under ERISA § 404(a)(1)(A), 29 U.S.C. § 1104(a)(1)(A). The defendants argued that the suit was time-barred under ERISA § 413, 29 U.S.C. § 1113. By way of identifying the actual date of the breach of fiduciary duty, we held: 45 The 1984 failure to vest fully the accrued benefits upon partial termination of a plan could constitute a violation of 26 U.S.C. § 411(d)(3), and fiduciaries responsible for that amendment might be responsible for the violation under a breach of fiduciary duty theory. Section 1113(1)'s six-year limitations period would run from the date of the amendment's adoption. 46 Id. at 1178 (emphasis added). 47 We find no significant distinction between the situation in Gluck and the one at bar. Here, Murata amended the Plans in a manner arguably violative of their fiduciary duties under ERISA § 404, 29 U.S.C. § 1104, just as the defendant in Gluck arguably breached its fiduciary duty by amending the plans in a manner inconsistent with another ERISA provision. Further, in both cases, the defendants took subsequent steps that caused a transfer of assets later claimed by the plaintiffs. Nevertheless, in Gluck, we considered the date of the amendment to be the date on which the breach of fiduciary duty occurred, and, controlled by that decision, we consider the date of the breach of fiduciary duty in this case to have been October 25, 1985. 8 48
49 Because the alleged breach of fiduciary duty took place on October 28, 1985, less than six years but more than three years before the initiation of this lawsuit on November 23, 1989, we must decide whether, under ERISA § 413, 29 U.S.C. § 1113, plaintiffs had actual knowledge of the breach more than three years before filing. 50 Our decision with regard to actual knowledge is also controlled by Gluck. In Gluck, after determining the date of the breach of fiduciary duty, we construed the term actual knowledge in ERISA § 413(2), 29 U.S.C. § 1113(2). The district court in Gluck had held that the breach of fiduciary duty claim was time-barred on the ground that plaintiffs had knowledge of all of the actions that constituted the breach more than three years before they filed suit. We reversed because we concluded that, although the breach of fiduciary duty had occurred more than three years before the initiation of the suit and the plaintiffs had knowledge then of the events constituting the breach, the district court had not determined whether the plaintiffs actually knew at that time that a claim of breach or violation under ERISA existed. 51 In so holding, we defined actual knowledge as follows: 52 We hold that under 29 U.S.C. § 1113(2) actual 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 necessary opinions of experts, ... knowledge of a transaction's harmful consequences, ... or even actual harm.... 53 Gluck, 960 F.2d at 1177 (citations omitted). We specifically rejected a formulation of the test for actual knowledge proffered by the defendant, which would have required defendants to prove only that the plaintiffs had knowledge of the transaction that constituted the alleged violation, not ... knowledge of the law. See id. at 1178 (quoting Blanton v. Anzalone, 760 F.2d 989, 992 (9th Cir.1985)). Instead, we found that ERISA § 413, 29 U.S.C. § 1113, set a higher standard for barring claims against fiduciaries: We disagree that mere knowledge of a transaction is always enough. '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. Id. (emphasis added). Gluck therefore requires 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. 54 Applying this test in Gluck, we determined that it was not clear from the record whether plaintiffs had actual knowledge of the defendant's alleged breach of fiduciary duty, even though plaintiffs clearly knew that the defendant had adopted the amendment that allowed the breach to occur. We held that participants in the company's plan could not be deemed to have had actual knowledge because, although they knew of the contents of the amendment, the amendment itself disguised the potential for breach of a fiduciary duty. See id. at 1178. Further, the literature that the company distributed to employees announcing the amendment was misleading. See id. at 1179. We therefore remanded to the district court for a finding of the date on which the plaintiffs acquired actual knowledge. 55 Based on the test articulated in Gluck, we hold that Murata has failed to make the showing of actual knowledge necessary to meet the stringent requirement imposed by ERISA § 413(2), 29 USC § 1113(2). See Gluck, 960 F.2d at 1176. Murata has failed to present evidence to show that any of the plaintiffs had actual knowledge of a potential breach of fiduciary duty claim in 1985 when Murata amended the Plan documents. Murata concedes that the notice it provided to the plaintiffs in October 1985 did not discuss the content of the amendment. Rather, the notice simply stated, in general terms, that the Plans had been amended. Whereas the plaintiffs in Gluck were informed of the content of the amendment but may not have known its full legal import, there is no showing here that the plaintiffs even knew that the Plan documents had been amended to allow reversion of excess funds to Murata. 9 56 Murata argues that, since the plaintiffs claim that any amendment to the Plan documents would have been a breach of fiduciary duty, the plaintiffs must have known that there had been such a breach when they learned that the Plan documents had been amended, even if they did not know the content of the amendment. We find this argument unpersuasive. Murata has made no showing that plaintiffs actually knew what their lawyers now contend--that any amendment to the Plan documents was a breach of fiduciary duty. 57 Murata also contends that the union officers knew of the breach by at least November 20, 1986, when union official Bordonaro met with Murata's Entrekin and discussed the possibility of funds reverting to Murata upon termination. This conversation was confirmed in writing the next day through a letter from union counsel Mauro to Entrekin, which stated that there was a potential dispute over Murata's right to recoup excess funds remaining upon termination of the Plans. All of this took place slightly more than three years before the plaintiffs filed their suit, and Murata contends that it evidences actual knowledge on the part of the plaintiffs. 58 We disagree. Mauro's letter in no way suggests that participants in the Plans knew that there was a controversy over the reversion of excess funds. Moreover, the letter's acknowledgment that there was a dispute over reversion does not suggest that any of the plaintiffs knew that the Plans contained an amendment allowing for such reversion. Indeed, the letter specifically stated the union's understanding that, under the Plan documents, the employees and not Murata were entitled to the funds, which suggests that the plaintiffs were not then aware of the October 1985 amendment. 59 In sum, Murata has failed to demonstrate that the plaintiffs had actual knowledge of the alleged breach of fiduciary duty more than three years before they filed suit. Because plaintiffs initiated this action less than six years after the alleged breach of fiduciary duty, and because there is insufficient evidence to show they had actual knowledge of the breach more than three years before bringing suit, we hold that their suit is not time-barred under ERISA § 413, 29 U.S.C. § 1113. 10 60