Opinion ID: 3023737
Heading Depth: 5
Heading Rank: 1

Heading: “Date of Last Action”

Text: On appeal, appellants contend that the six-year statute of limitations had not expired when they brought suit because under § 413(1)(A), “the date of the last action which constituted a part of the breach or violation” should have been the last date that they acted in detrimental reliance on Kodak’s and Sanofi’s alleged misrepresentations, as opposed to the dates when Kodak and Sanofi made their alleged misrepresentations.2 Citing our decision in In re Unisys Corp. Retiree Medical Benefit “ERISA” Litigation, 242 F.3d 497, 505-506 (3d Cir. 2001) (“Unisys III”), appellants argue that “the date of the last action” can be the last date that a beneficiary makes “important financial and general life choices in reliance upon the representations” of the fiduciary. In doing so, appellants assign error to the District Court’s determination that “the date of the last action” was the date that Kodak and Sanofi breached their fiduciary duties by allegedly making misrepresentations regarding the pension benefits in 1988 and 1994, respectively. Appellants also assert that dismissal of the complaint under Rule 12(b)(6) was premature since discovery was necessary in order to determine the particular circumstances of each appellant’s detrimental reliance. According to appellants, if they did not have actual 2 Since neither party argues that § 413(1)(B) is applicable to this appeal, we have limited our discussion to § 413(1)(A). 11 knowledge of the fiduciary’s misrepresentation, but they acted in detrimental reliance on a misrepresentation within six years of the complaint’s filing date, the complaint was not barred by the statute of limitations. In appellants’ view, it does not matter when the fiduciary made the misrepresentation leading to the breach of fiduciary duty. Kodak and Sanofi disagree with appellants’ assertion that the last date of detrimental reliance was “the date of the last action” in this case. Instead, they argue that the last date when Kodak and Sanofi made their purported misrepresentations leading to the breach of duty was “the date of the last action.” Pointing to the complaint, Kodak and Sanofi contend that all of appellants’ alleged misrepresentations occurred in 1988 and 1994, thereby making the claims barred by the statute of limitations. Moreover, appellees argue that allowing the last date of detrimental reliance to be “the date of the last action” would contravene the statutory scheme of § 413. According to appellees, § 413 is a statute of repose, and allowing the last date of detrimental reliance to be the starting date for the running of the statute of limitations would potentially allow a beneficiary to extend the statute indefinitely, as reliance can be said to occur continuously into the future. Kodak and Sanofi also dispute appellants’ interpretation of Unisys III as permitting the last date of detrimental reliance to be “the date of the last action.” They argue that Unisys III supports their position that the dates on which they allegedly made the misrepresentations leading to the breach of duty were 12 “the date[s] of the last action,” and that, those dates cannot logically be later than the dates that appellants relied on the alleged misrepresentation to change employment in 1988 and 1994. Appellees further submit that even if the last date of detrimental reliance can be considered to be “the date of the last action,” the District Court properly rejected appellants’ conclusory allegation that they “made important financial and general life choices in reliance upon the representations of [Kodak and Sanofi]” as “vague and unspecified” and “insufficient to withstand a motion to dismiss.” Unisys III guides the outcome in this case. In Unisys III, plaintiffs were retirees and disabled former employees who filed complaints against Unisys Corporation for breach of fiduciary duty under ERISA. The dispute arose from Unisys’s decision to terminate all of its preexisting medical benefit plans and replace them with a new one. Id. at 499. Under most of the old plans, Unisys paid the entire medical premium during the lifetimes of the retirees and provided continuing benefits for their spouses. Id. The new plan, however, required the retirees to contribute increasing amounts to the cost of the premiums until, eventually, the retirees were responsible for the entire premium. Id. According to the retirees in Unisys III, “the date of the last action” occurred in November 1992, when Unisys announced the termination of the “lifetime” medical benefit plans and after the plaintiff retirees had retired. Id. at 505. They argued that until the termination of the “lifetime” plan occurred, 13 there was no actual harm, and thus a claim for breach of fiduciary duty would have been premature. Id. This Court disagreed and determined that “any breach that may have occurred was completed, and a claim based thereon accrued, no later than the date upon which the employee relied to his detriment on the misrepresentations.” Id. at 505-06. Consequently, the Court rejected Unisys’s 1992 announcement as “the date of the last action.” The Court refrained from choosing between the date of the misrepresentation and the date of the detrimental reliance as “the date of the last action,” because both were agreed by the parties to be the same. Id. at 505-06. Similarly, in this case, accepting all of the complaint’s allegations as true, Kodak and Sanofi initiated the breach of fiduciary duty by purportedly misrepresenting the pension plan benefits in an attempt to persuade appellants to change employment in 1988 and 1994, respectively, and appellants relied on those activities at those times. Therefore, “the date of the last action” was in 1988 for Kodak and in 1994 for Sanofi. Appellants’ complaint contains no other allegation of misrepresentations occurring after April 1998 that are independent of and not mere continuations of the initial misrepresentations that led to the changes of employment. Appellants rely on an exceptional circumstance noted in Unisys III to argue that the last date of detrimental reliance can be “the date of the last action.” In Unisys III, the Court recognized that plaintiffs who retired more than six years before 14 their complaints were filed may still have viable claims if they relied to their detriment in making non-retirement-related decisions within the six-year statute of limitations. Id. at 50607. The favorable presumption for those plaintiffs opposing a summary judgment motion was that, before the running of the statute of limitations, Unisys may have engaged in additional acts of breach that were separate from the original breaches prompting the retirement of other plaintiffs. The plaintiffs who received this favorable presumption had not detrimentally relied when they retired. Their post-retirement reliances were apparently their first reliances, and (as the parties stipulated) the reliances occurred simultaneously with the misrepresentations. However, appellants in this case detrimentally relied on the alleged misrepresentations in 1988 and 1994, at which time their claims accrued. Unisys III did not hold that plaintiffs may “reset the clock” by later detrimental reliances occurring after their claims first accrued. 2. “Fraud or Concealment” In the alternative, appellants assert that the “fraud or concealment” exception of ERISA § 413 is applicable to this case, and that the six-year statute of limitations did not begin to run until after appellants received a statement of their estimated retirement benefits in 2002. Appellants argue that the common law “discovery rule,” implicit in the “fraud or concealment” exception, is applicable when an ERISA beneficiary does not know that his or her retirement benefits were misrepresented, but the fiduciary does. In such a situation, according to appellants, the “fraud or concealment” exception tolls the general six-year statute of limitations until the fiduciary corrects 15 its misrepresentations. At a minimum, appellants maintain that their complaint should not have been dismissed before they were given an opportunity to investigate “the conduct [of the fiduciary] both surrounding the breach and its concealment.” Thus, if appellants can discover acts of concealment by either Kodak or Sanofi within the relevant time frame, i.e., after April 1998, they can invoke the “fraud or concealment” exception and defeat the statute of limitations defense. Appellees counter that the “fraud or concealment” exception is inapplicable since the complaint does not allege that appellees took any affirmative steps to conceal the alleged misrepresentations. Citing our decisions in Kurz, 96 F.3d at 1552, and Unisys III, 242 F.3d at 502, appellees assert that an ERISA beneficiary must plead that “the fiduciary took steps to hide its breach of fiduciary duty.” Moreover, they argue, the fact that a breach is self-concealing or not readily apparent does not extend the statute of limitations under the “fraud or concealment” exception. Unisys III, 242 F.3d at 503-04. Appellees also dispute the contention that they had a continuing duty to correct any prior misrepresentation. Instead, appellees agree with the District Court’s determination that such an obligation has never been recognized to extend an ERISA statute of limitations. We agree with the District Court that the “fraud or concealment” exception is not applicable to this case. As we instructed in Kurz, 16 We now join our sister courts and hold that § 413’s “fraud or 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, the limitations period will run six years after the date of the claim’s discovery. The relevant question is 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. 96 F.3d at 1552 (citation omitted). We further discussed the standard for “fraud or concealment” in Unisys III: “The issue raised by this provision is not simply whether the alleged breach involved some kind of fraud but rather whether the fiduciary took steps to hide its breach.” 242 F.3d at 502. At a minimum, our decisions in Kurz and Unisys III require an ERISA fiduciary to have taken affirmative steps to hide an alleged breach of duty from a beneficiary in order for the “fraud or concealment” exception to apply. For example, in Unisys III we concluded that a fiduciary’s act of responding to questions in a manner that diverted the beneficiary from discovering a prior misrepresentation could make the “fraud or concealment” exception applicable. Id. at 505. The complaint in this case, however, does not contain any allegation of 17 affirmative steps taken by either Kodak or Sanofi that prevented appellants from discovering the alleged breach of duty before the statute of limitations expired. The complaint alleges only that neither Kodak nor Sanofi informed appellants that “their pension entitlements, under either the KRIP or the SSGP Plan, would be adversely affected or diminished.” Kodak’s and Sanofi’s failures to notify their beneficiaries of any change in the method of calculating retirement benefits or warn them of any misconception regarding their benefits are not “affirmative steps,” and cannot on their own bring the “fraud or concealment” exception into play. Moreover, we do not agree with appellants’ assertion that because discovery may reveal appellees engaged in “fraud or concealment,” dismissal of the complaint was premature. Appellants were well-positioned to know, upon reviewing their own past experiences, whether they had any communications from Kodak or Sanofi that prevented or diverted them from discovering the alleged breach of duty at an earlier time. To the extent that any misleading communication did occur, or was believed to have occurred, it should have been pled in the complaint, but it was not. Indeed, were we to reverse the dismissal here to allow for discovery, we would be permitting appellants to conduct a fishing expedition in order to find a cause of action. We cannot do so. Furthermore, even if appellants might discover that Kodak and Sanofi knew they made misrepresentations but decided to withhold that information from appellants, such conduct, as we explained above, is not “fraud or concealment.” Unisys III, 242 F.3d at 18 503 (“We held in Kurz that, regardless of whether the acts to conceal the breach occur in the course of the conduct that constitutes the underlying breach or independent of and subsequent to the breach, there must be conduct beyond the breach itself that has the effect of concealing the breach from its victims.”). This analysis conforms to the statutory scheme of § 413. In Unisys III, we noted that § 413(2) contains a statute of limitations provision encompassing situations where the beneficiary has “actual knowledge” of the fiduciary’s breach.3 Id. at 504. Thus, we deemed § 413(1)’s general six-year limit, which does not require “actual knowledge,” to create a period of repose, which is applicable here. Id. Appellants’ “failure to notify” argument is similar to the equitable tolling argument that we rejected in Unisys III. Both arguments hinge on an ERISA beneficiary’s lack of knowledge of a fiduciary’s breach. Starting the running of the statute of limitations on the date of discovery of the breach, absent “fraud or concealment,” would prevent the fiduciary from being able to recognize a firm cutoff date for future breach of duty claims, which is inconsistent with a statute of repose. Thus, we reject appellants’ argument. Since we do not consider a fiduciary’s decision not to notify the beneficiary of a prior misrepresentation a separate breach of duty falling within the “fraud or concealment” exception, 3 No argument has been made under § 413(2) in this appeal, presumably because the six-year period of § 413(1) occurred earlier than the three-year period of § 413(2). 19 appellants cannot invoke the discovery provision of the exception. Lastly, we respond to appellants’ strained characterization of several decisions from this Court, including Unisys III, Harte v. Bethlehem Steel Corp., 214 F.3d 446 (3d Cir. 2000), and Bixler v. Central Pennsylvania Teamsters Health & Welfare Fund, 12 F.3d 1292 (3d Cir. 1993). Citing those cases as support, appellants assert that this Court “found that the discovery provisions of the statute of limitations extended a beneficiary’s claims which were based upon the fiduciary’s failure to meet its ‘duty to convey complete and accurate information’ which predictably and reasonably could result in the beneficiary taking action in detrimental reliance thereon.” In Unisys III, as we have discussed above, ERISA’s general sixyear statute of limitations is triggered by a fiduciary’s action, not a beneficiary’s discovery of the breach. Harte and Bixler addressed the standard for proving breach of fiduciary duty. They did not discuss any aspect of the ERISA statute of limitations, let alone implicate the common law “discovery rule” in situations not involving § 413’s “fraud or concealment” exception. 3. Equitable Relief As an additional basis for dismissing the complaint, the District Court held that appellants did not plead relief falling within the scope of “appropriate equitable relief” authorized by ERISA § 502(a)(3)(B), 19 U.S.C. § 1132(a)(3)(B). As they 20 must in order to sustain their complaint, appellants challenge that holding. There is no need for us to address the correctness of that holding, however, as we have affirmed the decision that the complaint was barred under the statute of limitations.