Opinion ID: 175947
Heading Depth: 3
Heading Rank: 4

Heading: The Plaintiffs' motion for leave to amend

Text: While the OC Defendants' motion for reconsideration was pending, the Plaintiffs moved to file a third amended complaint. The proposed complaint contained allegations that various OC officials took steps to hide the OC Defendants' breach of fiduciary duty, as well as to frustrate the efforts of any participant who might seek to bring suit for breach of the duty. As quoted above, the ERISA statute of limitations increases to six years after the date of discovery of the alleged breach or violation in the case of fraud or concealment. 29 U.S.C. § 1113. The Plaintiffs presumably sought this amendment in an attempt to save their lawsuit. ERISA's fraud exception to the statute of limitations requires the plaintiffs to show (1) that defendants engaged in a course of conduct designed to conceal evidence of their alleged wrong-doing and that (2) [the plaintiffs] were not on actual or constructive notice of that evidence, (3) despite their exercise of diligence. Larson v. Northrop Corp., 21 F.3d 1164, 1172 (D.C.Cir.1994) (alteration in original) (citation omitted); see also Schaefer v. Ark. Med. Soc'y, 853 F.2d 1487, 1491-92 (8th Cir.1988) (applying the same standard). The second element of this test is particularly critical in the present case because the majority of the actions that the Plaintiffs contend constituted fraud and concealment were taken at or after the time when the Plaintiffs gained actual knowledge in early October 2000 of the facts underlying the alleged breaches. They allege, for example, that the pattern of fraud and concealment includes the letter from CEO Hiner on October 5, 2000 claiming that the company's bankruptcy filing does not affect participants' investments, a statement by Hiner on December 4, 2000 that nothing could be done to recoup losses from the OC Stock Fund, and an April 25, 2001 letter from Hiner stating that [s]teps would be taken to change the 401(k) Plan in a positive direction. The Plaintiffs further contend that several participants asked questions in mid-October 2000 about their losses and whether the OC Stock Fund had been properly managed, but that no one at OC responded to these specific inquiries. Although OC did issue a general Question and Answer communication to all employees, the Plaintiffs contend that the answers did not inform the Plan participants that they had legal rights under ERISA or that Plan fiduciaries had breached their duties. The Plaintiffs also claim that when the company made a $2.2 million restorative payment to participants in November 2000, various OC officials explained in a letter to Plan participants that the payment was [b]ased on the unintended consequences [that] unit accounting had on the participants remaining in the Stock Fund. This explanation was misleading, the Plaintiffs argue, because the letter should have also informed the Plan participants that restorative payments are permitted by ERISA when a fiduciary's actions create a substantial risk of liability for breach of fiduciary duty. The Plaintiffs further claim that several of the OC Defendants were aware that they could face lawsuits for breaches of their fiduciary duties because they discussed potential liability with outside counsel in October and November 2000. None of these allegations, however, support a finding of fraud or concealment sufficient to invoke ERISA's six-year statute of limitations because the Plaintiffs were already on actual notice of the alleged wrongdoingthe failure to properly manage the Planswhen these acts occurred. See Schaefer, 853 F.2d at 1492 (stating that the fraud-or-concealment provision requires plaintiffs to show that, despite their exercise of due diligence or care, they were not on notice of [a defendant's] breach of duty). In other words, the OC Defendants could not have engaged in fraud to conceal from the Plaintiffs what the Plaintiffs already knew. The one allegation that predates the Plaintiffs' actual knowledge is the claim that OC never informed Plan participants of the identities of the members of the OC Investment Review Committee during all relevant times (1999 to 2006), an action required by Plan language. This failure allegedly concealed the identity of the Committee members. But this sole allegation is insufficient to invoke the six-year statute of limitations period because, at most, it shows inaction on the part of OC and its officials and thus does not rise to the level of active concealment, which is more than merely a failure to disclose. See Schaefer, 853 F.2d at 1491. Concealment by mere silence is not enough. Martin v. Consultants & Adm'rs, Inc., 966 F.2d 1078, 1094 (7th Cir.1992) (citation omitted). The OC defendants must have engaged in some trick or contrivance intended to exclude suspicion and prevent inquiry. See id. (citation omitted). The Plaintiffs' proposed amendment contains no such claims. Because these allegations are not sufficient to invoke the fraud-or-concealment exception for ERISA's statute of limitations, the Plaintiffs' amendment would have been futile. See Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 420 (6th Cir.2000) (holding that a proposed amendment is futile if the complaint, as amended, would not withstand a motion filed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss for failure to state a claim). The district court thus did not err in denying the Plaintiffs' motion to amend.