Opinion ID: 3013862
Heading Depth: 2
Heading Rank: 1

Heading: What law supplies the statutes of

Text: Inc., 296 F.3d at 207 (“if borrowing an limitations applicable to the analogous statute of limitations from state common law claims? law would ‘frustrate or interfere with the As a preliminary matter, the Trustee implementation of national policies,’ submits that because the estate’s claims courts must look to federal law for an arise out of the wrongful transfer and analogous limitations period”) (citations subsequent embezzlement of a bankruptcy omitted). The Trustee directs us to no estate’s escrowed funds, they are governed authority suggesting that application of by a federal common law of bankruptcy. state statutes of limitations to the common The bankruptcy court noted that whether law claims here – common law claims or not the Trustee’s claims were state or asserted post-bankruptcy petition and federal in nature was unimportant because based on post-petition wrongdoing – 9 frustrates any national policy in effecting statutes of limitations, we must assess the the administration and reorganization of a accuracy of those which they applied. In bankruptcy estate. To the contrary, the short, the bankruptcy and district courts Bankruptcy Code itself imposes a two-year correctly held that various two-year limitations period on post-petition claims statutes of limitations governed Counts II seeking to avoid post-petition transfers of and III (breach of fiduciary duty), V property of the bankruptcy estate. See 11 (wrongful conve rsion) and V II U.S.C. § 549(d). Thus, the suggestion that (negligence) in each adversary proceeding, imposing state-law limitations periods of and that a four-year statute of limitations two or more years on common law claims period governed Count VI (breach of asserted post-petition, and based on post- contract). 7 Maillie v. Greater Delaware petition misconduct, interferes with federal bankruptcy principles – where the Bankruptcy Code itself imposes a two-year 7 The bankruptcy and district courts limitations period on certain post-petition also correctly concluded that the ERISA claims based on post-petition misconduct breach of fiduciary duty claim in Count – is simply without merit. We therefore VIII was subject to the six-year statute of agree with the bankruptcy and district limitations set forth in 29 U.S.C. § courts that state law, specifically 1113(1). Neither court found that the Pennsylvania law,6 supplies the statutes of statute had run on this claim. There is no limitations applicable to the Trustee’s question that the statute of limitations had common law claims. not yet expired as to the ERISA claim B. The applicable statutes of against PVHR, as it was set forth in the limitations and laches principles original complaint filed in 1992. It is not so clear, however, whether the statute of Having determined that the limitations had run on the ERISA claim bankruptcy and district courts correctly against Continental, which was first chose to apply (or borrow) Pennsylvania’s advanced in the amended complaint filed on May 27, 1994. Since the bankruptcy court refused to relate the claims against 6 Given that Pennsylvania is the Continental back to the date of the original forum state, and has the most extensive complaint, there is an argument that the contacts with the litigants and the facts at six-year limitations period applicable to issue in this litigation, it is the proper the ERISA claim had expired by the date source of the applicable statutes of of the filing of the amended complaint. limitations and laches principles. Gluck v. Because we agree with the bankruptcy and Unisys Corp., 960 F.2d 1168, 1179-80 (3d district courts that neither PVHR nor Cir. 1992) (applying general rule that Continental are fiduciaries subject to suit statute of limitations should be borrowed under 29 U.S.C. § 1109, we need not from forum state). resolve whether the statute of limitations 10 Valley Health Care, Inc., 628 A.2d 528, The Bankruptcy Code does not impose a 532 (Pa. Commw. 1993) (breach of statute of limitations on turnover claims fiduciary duty); Bednar v. Marino, 646 arising under these provisions. In re A.2d 573, 578 (Pa. Super. 1994) Midway Airlines, Inc., 221 B.R. 411, 458 (conversion); 42 Pa.C.S.A. § 5524(2) (Bankr. N.D. Ill. 1998) (“Bankruptcy Code (citation omitted) (negligence); 42 does not contain a statute of limitations for Pa.C.S.A. § 5525(a) (breach of contract). turnover actions pursuant to § 542”); In re Bookout Holsteins, Inc., 100 B.R. 427, The bankruptcy and district courts 432 (Bankr. N.D. Ind. 1989) (same); In re also correctly determined the laches De Berry, 59 B.R. 891, 898 (Bankr. principles governing the turnover claim. E.D.N.Y. 1986) (same). Because turnover The turnover claim set forth in Count I claims are equitable in nature, see Walker arises under 11 U.S.C. §§ 542 and 543.8 v. Weese, 286 B.R. 294, 299 (D. Md. 2002) (turnover claim “fairly characterized bars Appellants’ ERISA claim against as an equitable claim”); In re Warmus, 252 Continental. B.R. 584, 587 (Bankr. S.D. Fla. 2000) (turnover claims, “firmly rooted in 8 11 U.S.C. § 542(a) provides that: protecting and preserving property of the [estate], ... are clearly and uniquely Except as provided in subsection equitable claims under the Bankruptcy (c) or (d) of this section, an entity, Code”) (citations omitted); In re Kabler, other than a cus tod ian, in 230 B.R. 525, 526 (Bankr. E.D.N.C. 1999) possession, custody, or control, (“Turnover is an equitable remedy”), they during the case, of property that the are subject to laches. Algrant v. Evergreen trustee may use, sell, or lease under Valley Nurseries Ltd. Partnership, 126 section 363 of this title, or that the F.3d 178, 186 n. 3 (3d Cir. 1997) (“An debtor may exempt under section action brought in equity is governed by the 522 of this title, shall deliver to the doctrine of laches.”) (citing Russell v. trustee, and account for, such Todd, 309 U.S. 280, 287 (1940)). See also property or the value of such Erkins v. Bryan, 785 F.2d 1538, 1543 property, unless such property is of (11th Cir. 1986) (“Policies underlying the inconsequential value or benefit to creation of federal equitable claims are not the estate. 11 U.S.C. § 543(b)(1) provides that: or profits of such property, that is (b) A custodian shall– in such custodian’s possession, (1) deliver to the trustee any custody, or control on the date that property of the debtor held by or such custodian acquires knowledge transferred to such custodian, or of the commencement of the case[.] proceeds, product, offspring, rents, 11 well served by applying rigid limitations; estate property. Section 549(a) claims are therefore, federal courts considering subject to § 549(d), which provides that § federal equitable claims should rely on 549(a) claims “may not be commenced equitable principles.”) (citing Holmberg v. after the earlier of – (1) two years after the Armbrecht, 327 U.S. 392, 395 (1946)). date of the transfer sought to be avoided; or (2) the time the case is closed or “The party asserting laches as a dismissed.” 11 U.S.C. § 549(d). The defensive bar must establish (1) an Trustee’s turnover claim targets a post- inexcusable delay in bringing the action petition transfer of funds by Continental to and (2) prejudice.” United States Fire Ins. Ganz. Section 549(a) expressly creates a Co. v. Asbestospray, Inc., 182 F.3d 201, cause of action by which to seek avoidance 208 (3d Cir. 1999) (citations omitted). of post-petition transfers, a cause of action “To establish prejudice, the party raising clearly analogous to the turnover claim laches must demonstrate that the delay here. Consequently, Great Atlantic & caused a disadvantage in asserting and Pacific Tea Co. dictates that we consult the establishing a claimed right or defense; the statute of limitations applicable to a § mere loss of what one would have 549(a) claim – the two-year period set otherwise kept does not establish forth in § 549(d) – in determining whether prejudice.” Id. (citation omitted). While to shift to the Trustee the burden of statutes of limitations do not directly apply proving excusable delay and the absence to equitable claims such as the turnover of prejudice. claim, a limitations period on an analogous claim for legal relief is highly relevant to a C. Did Mushroom fail as a matter of laches analysis. As we said in E.E.O.C. v. law to exercise reasonable Great Atlantic & Pacific Tea Co., 735 F.2d diligence in uncovering Ganz’s 69 (3d Cir. 1984), “[i]f a statutory embezzlement? limitations period that would bar legal The bankruptcy and district courts relief has expired, then the defendant in an correctly found that, absent application of action for equitable relief enjoys the tolling principles, the common law tort and benefit of a presumption of inexcusable contract claims accrued no later than delay and prejudice. In that case, the August of 1987, when Continental burden shifts to the plaintiff to justify its completed the transfer of funds to Ganz delay and negate prejudice.” 735 F.2d at per the Stipulation. The bankruptcy and 80 (citations omitted). district courts further concluded correctly The bankruptcy and district courts that the limitations period on the claim at concluded that the claim at law analogous law analogous to the turnover claim – to the Trustee’s turnover claim arises relevant to a laches analysis under Great under 11 U.S.C. § 549(a), which creates a Atlantic & Pacific Tea Co. – began to run cause of action in a trustee to avoid an no later than April 26, 1988, the date on unauthorized post-petition transfer of 12 which Ganz completed his embezzlement January-February 1992, when Arnold and of the transferred funds. Mushroom first discovered Ganz’s defalcation of the funds. The bankruptcy The Trustee’s primary argument 9 and district courts held that, as a matter of against the application of the statutes of law, Mushroom (through Arnold and limitations and laches is that the discovery Cutaiar) failed to exercise due diligence in rule and/or equitable tolling suspended the superintending Ganz’s oversight of the running of the statutes of limitations (and funds, and therefore could not invoke thereby precluded the onset of laches) until either the discovery rule or equitable tolling to preserve its claims against all 9 Defendants. For the reasons that follow, The Trustee also contends that we find that there are genuine issues of Continental and PVHR were trustees of an material fact concerning Mushroom’s express trust (the escrow bank account), reasonable diligence for the fact-finder to and that since causes of action against such determine. trustees do not accrue until the trust is “repudiated,” the limitations periods Under Pennsylvania’s discovery should not have begun to run until rule, the statute of limitations will not November-December 1992, when Arnold begin to run until “the plaintiff reasonably first made a demand on Ganz for tender of knows, or reasonably should know: (1) estate property in the escrow account. The that he has been injured, and (2) that his district court correctly rejected this injury has been caused by another party’s contention. Pennsylvania law makes clear conduct.” In re TMI Litig., 89 F.3d 1106, that the key element in a trust is that the 1116 (3d Cir. 1996) (quoting Cathcart v. trustee possesses legal title to property. Keene Indus. Insulation, 471 A.2d 493, Schellentrager v. Tradesmens Nat’l Bank 500 (Pa. Super. 1984)) (internal quotation & Trust Co., 88 A.2d 773, 774 (Pa. 1952). marks omitted). The discovery rule will None of the relevant documents (including only toll the statute of limitations where the Stipulation) reflects any intent to the plaintiff shows that he or she has convey title in Mushroom’s funds to exercised “‘reasonable diligence’ in Continental or PVHR. Rather, the ascertaining the existence of the injury and Stipulation rendered Continental and its cause.” Bohus v. Bellof, 950 F.2d 919, PVHR escrow agents w ho, under 925 (3d Cir. 1991). Pennsylvania law, did not acquire legal Similarly, equitable tolling will title to Mushroom’s funds. Paul v. suspend the running of the statute of Kennedy, 102 A.2d 158, 159 (Pa. 1954) limitations “(1) where the defendant has (under escrow arrangement, legal title actively misled the plaintiff respecting the remains in a depositor until a condition plaintiff’s cause of action; (2) where the precedent is satisfied) (citations omitted). plaintiff in some extraordinary way has Accordingly, this argument is without been prevented from asserting his or her merit. 13 rights; or (3) where the plaintiff has timely includes the “‘duty to protect and conserve asserted his or her rights mistakenly in the property in its possession for the benefit of wrong forum.” Oshiver v. Levin, creditors.’” In re Marvel Entertainment Fishbein, Sedran & Berman, 38 F.3d 1380, Grp., Inc., 140 F.3d 463, 474 (3d Cir. 1387 (3d Cir. 1994) (citations omitted). 1998) (citation omitted). Thus, there is no Like the discovery rule, equitable tolling question that Mushroom, acting through its requires the plaintiff to demonstrate “that representatives Arnold and Cutaiar, had a he or she could not, by the exercise of fiduciary duty to protect and maximize the reasonable diligence, have discovered estate’s assets. essential information bearing on his or her This duty formed the foundation for claim.” Id. at 1390 (citation omitted). the bankruptcy and district courts’ In assessing the finding that reasonable diligence analysis. Indeed, the Mushroom failed as a matter of law to bankruptcy and district courts essentially exercise reasonable diligence for purposes equated the fiduciary duty to safeguard of the discovery rule and equitable tolling, assets with the duty of reasonable we are guided by the general rule that such diligence and, finding a breach of the determinations are typically within the former, therefore found a breach of the jury’s province unless “the facts are so latter. Moreover, the courts held, clear that reasonable minds cannot Mushroom could not escape the statutory differ ... .” Melley v. Pioneer Bank, N.A., fiduciary duty to protect and maximize by 834 A.2d 1191, 1201 (Pa. Super. 2003) delegating such duty to legal counsel, (citation omitted). During the time of where the delegation amounted to an Ganz’s defalcations, Mushroom was in abdication of that duty. The district court Chapter 11 bankruptcy, and was therefore explained its distinction between a debtor-in-possession. See 11 U.S.C. § permissible delegation and impermissible 1101(1). As we recently pointed out, “[i]n abdication: Chapter 11 cases where no trustee is Although delegation of duties is appointed, [11 U.S.C.] § 1107(a) provides o n e t h i n g , a b d i c a ti o n o f that the debtor-in-possession, i.e., the responsibility is quite another. In debtor’s management, enjoys the powers this case, the debtors not only that would otherwise vest in the “delegated” to Ganz the duty to bankruptcy trustee. Along with those collect the funds generated from the powers, of course, comes the trustee’s sale of assets, deposit them into the fiduciary duty to maximize the value of the escrow account pursuant to an bankruptcy estate.” Official Committee of order of the court, and transfer the Unsecured Creditors of Cybergenics Corp. funds to the law firm account to be v. Chinery, 330 F.3d 548, 573 (3d Cir. maintained pending further order of 2003) (en banc). The debtor-in- the Bankruptcy Court, but rather possession’s fiduciary duty to maximize they surrendered totally their 14 obligation to oversee the funds embezzled by Ganz. The district liquidation of the estate or to court found that summary judgment in the supervise, even in the most bank’s favor on the issue of reasonable relaxed fash ion, the diligence and the statute of limitations was activities of a retained inappropriate for several reasons. First, professional. The the court noted, delegation of debtor duties Bankruptcy Code – including those performed, or intended commands the debtor in to be performed, by Ganz here – is possession (or the trustee) to perfectly appropriate under, and indeed be the captain of the debtor encouraged by, the Bankruptcy Code. ship. See 11 U.S.C. § 1108. Accordingly, “a reasonable debtor in Wh ile the debto r in p o s s e s s io n w o u l d , i n ce r t a in possession may assign to circumstances, entrust the care of liquid others specific duties, it may assets to a court-appointed lawyer.” Id. at not surrender the helm and 403 (citation omitted). Therefore, “there is let the debtor ship sail under no legal basis to conclude that the someone else’s captaincy. delegation of core trustee duties to courtappointed counsel for the estate by a Burtch v. Ganz (In re Mushroom Transp. debtor in possession is per se sufficient to Co., Inc.), 282 B.R. 805, 825 (E.D. Pa. show that the debtors in possession failed 2002) (footnote omitted). Because to exercise due diligence.” Id. Mushroom abdicated its statutory duty to preserve the estate’s assets, the bankruptcy The district court then reviewed the and district courts held, it could not record and found that “in light of the fact possibly demonstrate reasonable diligence that reliance on counsel is inherent in the for purposes of the discovery rule. Id. bankruptcy code, ... the bankruptcy court invaded the province of the fact finder by In Burtch v. Security Pacific Bank depreciating the evidence that could Oregon (In re Mushroom Transp. Co., persuade a trier of fact that a reasonable Inc.), 247 B.R. 395 (E.D. Pa. 2000), a person in the circumstances of the related case involving the same facts Mushroom debtors in possession would respecting Ganz’s embezzlement and have relied on counsel and consequently Mushroom’s oversight, Judge Reed of the failed to discover the thefts by Ganz until District Court for the Eastern District of a later date.” Id. at 404. Several aspects Pennsylvania reached a conclusion on of the record led the court to this reasonable diligence and the statute of conclusion. First, the distribution of estate limitations directly contrary to the one assets was not an issue from early 1986 reached by the bankruptcy and district through August 1988 (when Ganz had courts here. There, the Trustee filed completed his embezzlement) because the various claims against one of the banks bankruptcy proceedings were focused on that had allegedly received some of the 15 motions to consolidate. Rather, Arnold of administration.” Boldt v. United States and Cutaiar devoted their energies to Trustee (In re Jenkins), 130 F.3d 1335, priority claims, which, according to 1340 (9th Cir. 1997) (citations and internal Arnold, were the source of major quotation marks omitted). A fact-finder uncertainty concerning Mushroom’s could thus conclude that Mushroom’s financial condition. Second, Arnold’s decision to entrust its lawyer, Ganz, with inquiries to Ganz in February 1988 could the task of safeguarding its assets was have led a reasonable trier of fact to within the bounds of reasonableness. conclude that Arnold’s efforts went Still further, the bankruptcy court beyond abdication of the debtor’s duty to had issued two orders in June and preserve the estate’s assets and in fact September of 1987 entrusting Mushroom’s constituted reasonable diligence for assets to Ganz. The June 1987 order purposes of the discovery rule. Finally, the approved the Stipulation pursuant to which bankruptcy court’s two orders in June and Mushroom’s assets were to be turned over September 1987 provided Ganz with to Ganz to hold in escrow. In Arnold’s nearly exclusive control over Mushroom’s view, the June 1987 order prompted him to assets and removed any mechanism by believe that Mushroom’s assets were being which the court could monitor use of those “invested in accordance with the special funds. In the district court’s, a reasonable rules applicable to bankruptcy.” The fact-finder could find that a reasonably September 1987 order granted Ganz’s diligent person in these circumstances motion to excuse M ushroom from filing would have acted precisely as Mushroom operating reports otherwise required by the and its Trustee did here. Bankruptcy Code. In Arnold’s view, the We find much of Judge Reed’s September 1987 order gave him “no analysis persuasive. First, the Bankruptcy reason to expect that the absence of such Code contemplates and encourages the reporting indicated that a lawyer had retention of professionals by debtors to absconded with escrow funds... .” Just as facilitate a Chapter 11 reorganization. they in fact appeared to lead Arnold to Section 327 states that “the trustee [and, believe that the assets were safe and there therefore, the debtor in possession], with was no need to monitor them closely, these the court’s approval, may employ one or orders could have led a reasonable person more attorneys ... to represent or assist the to believe that there was no need to trustee in carrying out the trustee’s duties monitor them on his or her own. under this title.” 11 U.S.C. § 327(a). The In addition to these aspects of Judge Code also provides for the compensation Reed’s analysis, and perhaps most of such attorneys. 11 U.S.C. § 329. These importantly, we find highly relevant the provisions reflect Congress’s desire “to fact that the genesis of this action is encourage trustees to delegate their duties Ganz’s abuse of his fiduciary, lawyer- where such delegation would lower costs client relationship with Mushroom, an 16 abuse which very well could have caused is in prohibits the principal from Mushroom to relax its vigilance in uncovering the fraud. Furthermore, overseeing the execution of the duties it the fiduciary, because of his delegated to Ganz. Neither Judge Robreno position of trust, would have an nor Judge Reed expressly mentioned the affirmative duty to the principal to principle manifesting itself in decisions disclose the fraud. Absent a from courts in this circuit (and numerous disclosure, the fiduciary commits other state and federal courts) that where an act of continual covering up of the wrongdoing underlying causes of the fraud. action has been perpetrated by a fiduciary Id. at 403. The court noted that letters sent to the detriment of its principal, this fact by counsel for the creditors to the trustee militates strongly against summary urging the trustee to investigate matters judgment on the issue of whether the pertaining to the purloined funds might principal (here Mushroom) exercised have imposed a duty to inquire upon the reasonable diligence in failing to discover trustee, but “whether or not the letters the fiduciary’s malfeasance within the imposed a duty upon the trustee to applicable statutes of limitations. investigate is a question of fact, which Many judges in this Circuit have must be resolved by a trier of fact.” Id. recognized the impact of a fiduciary The District Court for the Eastern relationship, and abuse of that relationship District of Pennsylvania subsequently by the fiduciary, on a discovery rule addressed Schw artz in Gurfein v. analysis. In Schwartz v. Pierucci, 60 B.R. Sovereign Group, 826 F. Supp. 890 (E.D. 397 (E.D. Pa. 1986), the trustee asserted Pa. 1993). Plaintiffs, investors and claims against a bank in an effort to partners in real estate limited partnerships, recover funds improperly drawn by brought fraud, breach of fiduciary duty and principals and officers of the debtor from related claims against some of their the debtor’s account at the bank. The general partners and related entities. In district court denied the bank’s motion for response to defendants’ statute of su m m a ry judgment, rejecting its limitations defense, plaintiffs argued that contention that the statute of limitations because defendants were plaintiffs’ barred certain of the claims against it. fiduciaries, plaintiffs’ causes of action did Specifically, the court found that the not accrue until they acquired actual officers’ wrongful conduct tolled the knowledge of their injury. The district applicable limitations period, reasoning court found that we had not yet that: “recognized an exception to the discovery Where a fiduciary commits an act rule in the fiduciary-defendant context.” of fraud against his principal, the Id. at 918. Nonetheless, he acknowledged statute of limitations will be tolled, that “[t]he existence of a fiduciary since the very position the fiduciary relationship is relevant to the question of 17 when a cause of action accrued. Because To require a principal to engage in of a fiduciary’s unique position of trust, aggressive oversight of its the presence of a fiduciary relationship fiduciary’s conduct is to deny the would be pertinent to the question of when very essence of a fiduciary a plaintiff’s duty to investigate arose.” Id. relationship. at 919 n. 31 (citing, inter alia, Schwartz). Id. at 935 (citation omitted and first two The Eastern District recognized the alterations and emphasis supplied) .10 relevance of a fiduciary relationship to a discovery rule/reasonable diligence 10 analysis in Rubin Quinn Moss Heaney & The Eastern District is by no Patterson, P.C. v. Kennel, 832 F. Supp. means alone in subscribing to this view: 922 (E.D. Pa. 1993). The plaintiff law numerous courts have enunciated a similar firm sued one of its partners who had approach. See, e.g., Rieff v. Evans, 630 misappropriated client funds. The N.W.2d 278, 290 (Iowa 2001) (statute defendant asserted a limitations defense to tolled where plaintiff proves that “a plaintiff’s breach of fiduciary duty claim. confidential or fiduciary relationship exists The district court held that the discovery between the person concealing the cause rule preserved the breach of fiduciary duty of action and the aggrieved party, claim largely because of the fiduciary combined with proof that defendant relationship existing between the firm and breached the duty of disclosure”) (citation its partners. The court concluded that: and internal quotation marks omitted); Ray v. Queen, 747 A.2d 1137, 1142 (D.C. Given Defendant’s position as a 2000) (“In determining whether the fiduciary of the firm, and the plaintiff exercised reasonable diligence, complexity of the real estate the courts should consider, inter alia, transactions which gave rise to the whether there was a fiduciary relationship Real Estate Accounts, the Court between the parties.”) (citation omitted); concludes that Plaintiff did exercise Willis v. Maverick, 760 S.W.2d 642, 645 due diligence in its oversight of (Tex. 1988) (“The client must feel free to Defendant’s management of the rely on his attorney’s advice. Facts which accounts. ... First as an employee, might ordinarily require investigation and later as a partner, [Defendant] likely may not excite suspicion where a sought and was accorded in return fiduciary relationship is involved.”) the trust of [the firm’s] partners. (citation omitted); Hobbs v. Bateman Ironically, it is this type of very Eichler, 210 Cal. Rptr. 387, 404 (Cal. Ct. special relationship that enables a App. 1985) (“W here a fiduciary wayward fiduciary to engage in relationship exists, facts which ordinarily acts of concealment that “cause the require investigation may not incite [principal] to relax vigilance or suspicion ... and do not give rise to a duty deviate from the right of inquiry.” of inquiry....”) (citations omitted). Other 18 We should stress that we do not inquiry on the principal’s part into its hold here that the existence of a fiduciary, fiduciary’s behavior. lawyer-client relationship between Ganz Here, Mushroom, through Arnold, and Mushroom, and Ganz’s abuse of that questioned Ganz directly concerning the relationship, alone preclude judgment as a whereabouts of the transferred funds. matter of law in PVHR’s and its Arnold’s letter to Ganz set forth estimates shareholders’ favor. 11 But as the district of Mushroom’s assets based on court noted in Gurfein, “the presence of a Mushroom’s records and other numbers. fiduciary relationship would be pertinent According to Arnold, Ganz responded to to the question of when a plaintiff's duty to Ganz’s letter “that the assets were invested investigate arose.” 826 F. Supp. at 919 n. in passbook certificates of deposit at 31 (citation omitted). Ganz was no various banks... .” Ganz himself testified stranger to Mushroom and Arnold – he that he told Arnold that there was a certain was Mushroom’s lawyer, bound by amount of assets under his supervision, professional rules of ethics to the highest though he could not recall the exact duties of honesty and probity in his number he conveyed to Arnold. dealings with his client. As the cases discussed above illustrate, the existence of We do not suggest that Arnold’s a fiduciary relationship is relevant to a inquiries should serve as a model of discovery rule analysis precisely because it vigilance for similarly situated debtors-inentails such a presumptive level of trust in possession. However, we believe that the the fiduciary by the principal that it may facts here – particularly the Bankruptcy take a “smoking gun” to excite searching Code’s encouragement that debtors-inpossession retain lawyers and other pr of e ssionals t o a s s ist in th e ir reorganization, and the existence of a courts have gone even further in holding lawyer-client relationship which Ganz that where there is a fiduciary relationship, employed to conceal his defalcations at his only the actual discovery of the client’s (and its creditors’) expense – wrongdoing starts the running of the create genuine factual issues for the factlimitations period. See, e.g., Community finder concerning whether Arnold and Title Co. v. U.S. Title Guaranty Co., Inc., Mushroom exercised reasonable diligence 965 S.W.2d 245, 252 (Mo. Ct. App. 1998) in uncovering Ganz’s embezzlement. 12 (citations omitted). 11 At the same time, however, we 12 would not foreclose the possibility that in The bankruptcy and district courts some instances, the nature of a fiduciary found that laches barred the Trustee’s relationship might be such that the turnover claim solely because the statute of relationship alone would be sufficient to limitations on the analogous claim at law trigger application of the discovery rule. under 11 U.S.C. § 549(a) had expired, 19 We therefore, with the exception of limitations and laches, Continental has Continental,13 will reverse the grant of asserted numerous alternative grounds summary judgment in Appellees’ favor on supporting affirmance. Of course, we may the non-ERISA claims and remand with affirm the district court on grounds instructions to the district court to remand different from those relied on by the the non-ERISA claims to the bankruptcy district court. Kabakjian v. United States, court for further proceedings consistent 267 F.3d 208, 213 (3d Cir. 2001) (citation with this opinion. omitted). And we will affirm summary judgment in Continental’s favor because D. Is Continental entitled to summary Pennsylvania’s Uniform Fiduciaries Act judgment on the alternative ground (“UFA”) immunizes Continental from any that Pennsylvania’s Uniform liability flowing from its transfer of funds Fiduciaries Act shields it from to Ganz. liability? Continental bases its argument on § While PVHR and its shareholders 6361 of the UFA, which provides that: have advanced no arguments in support of affirmance beyond the statutes of A person who, in good faith, pays or transfers to a fiduciary any money or other property, which the creating a presumption of inexcusable fiduciary as such is authorized to delay and prejudice that the Trustee receive, is not responsible for the presumably did not rebut. Because we proper application thereof by the find here that the applicable statutes of fiduciary, and any right or title limitations have not expired as a matter of acquired from the fiduciary in law, we necessarily reverse the bankruptcy consideration of such payment or and district courts’ conclusion that the tr a nsfer is not inva lid in presumption of inexcusable delay and consequence of a misapplication by prejudice had arisen as to Appellees’ the fiduciary. laches defense, and remand as to laches as well. 7 P.S. § 6361. A payment or transfer of money “is done ‘in good faith,’ within the 13 Because we conclude in the meaning of this act, when it is in fact done following section that summary judgment honestly, whether it be done negligently or in Continental’s favor should be affirmed not.” Id. § 6351(2). on the alternative basis of the Pennsylvania In the leading case on § 6361, the Uniform Fiduciaries Act’s immunity Supreme Court of Pennsylvania held that provision, we decline to decide whether a bank in virtually the same position as the bankruptcy and district courts properly Continental could not be liable on a breach granted sum mary jud gm ent in of contract theory. See Robinson Continental’s favor on the basis of the Protective Alarm Co. v. Bolger & Picker, statutes of limitations. 20 516 A.2d 299 (Pa. 1986). There, a law to him will aid a breach of trust, firm opened an escrow account in its name then the bank will be held to have on behalf of its client, Robinson Protective acted in “bad faith.” Alarm. Three partners of the law firm Id. at 304 (citations omitted). executed the signature card for the account. One of these partners eventually Applying this view, the court noted embezzled hundreds of thousands of that the embezzling lawyer was a fiduciary dollars from the account. After as to the escrow funds in question, and was compensating Robinson for the embezzled empowered to receive them from the bank. funds, the law firm brought an action for After setting forth the purpose of § 6361 – indemnity or contribution against the bank. “to facilitate banking transactions by relieving a depositary of the responsibility The Court of Common Pleas of of seeing that an authorized fiduciary will Philadelphia County and the Pennsylvania use entrusted funds for proper purposes” – Superior Court both held that the bank, by the court concluded that “[t]o apply a not obtaining endorsements prior to theory which would hold a payor liable for redeeming certificates relating to the a minuscule and irrelevant departure from account, had violated the redemption the prescribed procedure, where he has provisions set forth on the certificates, and acted honestly in releasing money to a had thereby committed a breach of known authorized fiduciary, without contract. The Pennsylvania Supreme knowledge of the latter’s intent to Court reversed, finding that § 6361 subsequently embezzle those funds, would shielded the bank from liability because it clearly not contribute to the smooth flow disbursed funds from the account to the of commerce sought to be achieved by the embezzling lawyer in good faith. The UFA.” Id. “Indeed,” the court continued, court began its analysis by distinguishing “in the absence of contrary knowledge on “good faith” in this context from “bad the depositary’s part, it [the bank] is faith”: entitled, if not bound, to presume that a Even a failure to inquire under fiduciary will properly apply funds suspicious circumstances will not released to him.” Id. at 304-05 (citations negate “good faith,” unless the omitted). failure to do so is due to a Here, the Trustee has not directed deli berate desire to eva de us to any evidence in the record knowledge because of a belief or demonstrating that Continental acted in fear that inquiry would disclose a bad faith in transferring the funds to Ganz, vice or defect in the transaction. nor could we locate any on our own. The Conversely, if a bank has Trustee does suggest, however, that knowledge that a fiduciary intends Continental is not entitled to the UFA’s to appropriate trust funds to his immunity because only PVHR itself, not own use, and that to release funds 21 Ganz, was authorized to receive the “Pennsylvania courts define apparent transferred funds. Section 6361 requires authority as that authority which, although that the transfer at issue be made to a not actually granted, the principal fiduciary who “as such is authorized to knowingly permits the agent to exercise, or receive” the transfer before one can be holds him out as possessing.” D & G immunized from liability for making the Equip. Co., Inc. v. First Nat’l Bank of transfer. Continental naturally contends Greencastle, 764 F.2d 950, 954 (3d Cir. that “Ganz was a fiduciary authorized to 1985) (citing, inter alia, Revere Press, Inc. receive the funds at issue[,]” pointing to v. Blumberg, 246 A.2d 407, 410 (Pa. admissions in the complaints that “at the 1968)). “Apparent authority can exist only time of the transfer of the funds, Ganz was to the extent that it is reasonable for the a member of PVHR and acted as legal third party dealing with the agent to representative of M ushroom.” Moreover, believe the agent is authorized.” Id. at 954 Continental continues, “it is undisputed (citation omitted). “The test for that Ganz was the only signatory on behalf determining whether an agent possesses of PVHR on the Stipulation and signed as apparent authority is whether ‘a man of counsel of record for Mushroom.” ordinary prude nce, d iligence and discretion would have a right to believe The Stipulation required that the and would actually believe that the agent escrow funds be turned over “to Debtor’s possessed the authority he purported to counsel, Pincus, Verlin, Hahn & Reich, exercise.’” Universal Computer Systems, P.C., to be held in escrow for the benefit of Inc. v. Medical Svcs. Ass’n of Pa., 628 the Debtor’s estate....” The issue for us is F.2d 820, 823 (3d Cir. 1980) (citation whether this fact – that the Stipulation omitted). required Continental to turn the escrow funds over to PVHR, and not Ganz We find that the actions of PVHR – specifically – precludes affirmance on this holding Ganz out as one of the firm’s alternative basis because it creates a genuine issue of material fact concerning the applicability of § 6361. receive the funds on PVHR’s behalf. See Volunteer Fire Co. of New Buffalo v. We conclude that the undisputed Hilltop Oil Co., 602 A.2d 1348, 1351-52 facts of record demonstrate as a matter of (Pa. Super. 1992) (noting that acts of agent law that Ganz was authorized to receive can bind principal upon showing of the funds within the meaning of § 6361 “express authority directly granted by the because, as an agent of PVHR, he had at principal to bind the principal as to certain least apparent authority to do so.14 matters [ ] or implied authority to bind the principal to those acts of the agent that are necessary, proper and usual in the exercise 14 Indeed, a strong case could be of the agent’s express authority”) (citation made that Ganz had actual authority to omitted). 22 bankruptcy lawyers and permitting him to WL 96006, at  n. 7 (E.D. Pa. Feb. 24, handle Mushroom’s bankruptcy – would 1999) (breach of contract, breach of have led an ordinarily prudent bank in f id u c ia r y d u t y a n d n e g l ig e n c e ). Continental’s position to “have a right to Accordingly, we will affirm the grant of believe and [ ] actually believe that [Ganz] summary judgment in Continental’s favor possessed the authority” to receive the on all of the Trustee’s non-ERISA claims15 transferred funds on PVHR’s behalf. against it. Ganz himself signed the Stipulation on E. Are Continental and PVHR behalf of PVHR, giving Continental even fiduciaries within the meaning of more reason to believe that Ganz had 29 U.S.C. § 1002(21)(A)(i) so as to apparent authority to receive funds be susceptible to Appellants’ pursuant to the Stipulation. Thus, by breach of fiduciary duty claim transferring the funds to Ganz, Continental under 29 U.S.C. § 1109(a)? transferred the funds to one authorized to receive them within the meaning of § Appellants’ breach of fiduciary duty 6361. claim arises under 29 U.S.C. § 1109(a) of ERISA, which creates liability for “[a]ny The final issue is the scope of person who is a fiduciary with respect to a immunity the UFA confers on Continental. plan w ho br ea ch es an y of the There is no question that Continental’s responsibilities, obligations, or duties allegedly wrongful transfer of funds to imposed upon fiduciaries by this Ganz forms the basis of the Trustee’s non- subchapter[.]” 29 U.S.C. § 1109(a). A ERISA claims against it. In Robinson person is a fiduciary of an ERISA plan to Protective Alarm, the Pennsylvania the extent that such person “exercises any Supreme Court stated that “[t]here is discretionary authority or discretionary nothing on the face of [§ 6361], or in any control respecting management of such other provision of the UFA, that would plan or exercises any authority or control restrict the immunity from liability to suits respecting management or disposition of based on negligence – or preclude its its assets... .” 29 U.S.C. § 1002(21)(A)(i). applicability merely because a claim for recovery rests on a contract theory.” 516 The district court found that neither A.2d at 304. Following this dictate, Continental nor PVHR were fiduciaries Pennsylvania courts have applied § 6361 within the meaning of § 1002(21)(A)(i), to all manner of common law claims, and therefore that § 1109(a) did not apply including, pertinently, breach of contract, to them. We concur. In Board of Trustees breach of fiduciary duty, and conversion of Bricklayers & Allied Craftsmen Local 6 claims. See id. (breach of contract); Jones of New Jersey Welfare Fund v. Wettlin v. Van Norman, 522 A.2d 503 (Pa. 1987) (conversion); Harris v. Police & Fire Fed. 15 Credit Union, No. Civ. A. 98-5175, 1999 The Trustee did not assert its turnover claim against Continental. 23 Assocs., Inc., 237 F.3d 270 (3d Cir. 2001), lead us to conclude that Continental was we made clear that one need not have not a fiduciary within the meaning of § discretion in exercising authority or 1002(21)(A)(i). We therefore will affirm control over the man agem ent or the grant of summary judgment in disposition of plan assets in order to Continental’s favor on Appellants’ breach qualify as a fiduciary under § of fiduciary duty claim under ERISA. 1002(21)(A)(i). 237 F.3d at 274. We have not yet addressed whether Nonetheless, although we reversed the a law firm in PVHR’s position here district court’s grant of the defendant- constitutes a § 1002(21)(A)(i) fiduciary. bank’s motion to dismiss because the Appellants have not alleged, nor does the complaint had alleged the bank’s “day to evidence establish, that PVHR had any day responsibility to control, manage, legal right or discretion to dispose of hold, safeguard, and account for the Mushroom’s escrowed funds. Indeed, Fund’s assets and income[,]” id. at 275 Appellants’ amended complaint made (internal quotation marks omitted), we clear that the escrowed funds were to be stated that we were “inclined to agree that paid to the trustee on demand. The ERISA does not consider as a fiduciary an Stipulation provides that PVHR’s role with entity such as a bank when it does no more respect to the alleged “plan assets” (the than receive deposits from a benefit fund escrowed funds) was to hold them in on which the fund can draw checks.” Id. escrow for the benefit of the Mushroom (emphasis supplied). estate. Neither the allegations nor the We agree with the bankruptcy and evidence here suggest that Continental did district courts that in its role as holder of anything more than serve as the holder of Mushroom’s escrowed funds, PVHR assets placed there pursuant to the simply was not a fiduciary within the Stipulation. Our dictum in Wettlin meaning of § 1002(21)(A)(i). As noted Assocs., and the views of many of our above, many of our sister circuits have sister circuits, see Beddall v. State Street held that mere custody or possession over Bank & Trust Co., 137 F.3d 12, 20 (1st plan assets, without more, does not render Cir. 1998) (“mechanical administrative one a fiduciary. Beddall, 137 F.3d at 20; responsibilities (such as retaining the Southern Council of Indus. Workers, 83 assets and keeping a record of their value) F.3d at 968-69. Moreover, imposing are insufficient to ground a claim of ERISA fiduciary duties to the Pension Plan fiduciary status”) (citations omitted); Plaintiffs where PVHR already had clearly Southern Council of Indus. Workers v. d e f i n e d f i d u c ia r y d u t ie s u n d e r Ford, 83 F.3d 966, 968 (8th Cir. 1996) Pennsylvania law to both the debtor and all (lawyer “did not become a plan fiduciary merely by ... related control over the settlement proceeds”) (citation omitted), 24 of the debtor’s creditors 16 would place Appellants’ breach of fiduciary duty claim PVHR in a potentially conflicted position. under ERISA. Southern Council of Indus. Workers, 83