Landwehr v. DuPree

• Decision Date: 12 December 1995
• Docket Number: Nos. 93-36166,94-35003,s. 93-36166
• Citation: 72 F.3d 726
• Parties: 19 Employee Benefits Cas. 2638, 95 Cal. Daily Op. Serv. 9432, 95 Daily Journal D.A.R. 16,450, Pens. Plan Guide P 23915K Agnes LANDWEHR and Christopher Cole, Plaintiffs-Appellees-Cross-Appellants, v. Darren DuPREE, Defendant-Appellant-Cross-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 726

72 F.3d 726

19 Employee Benefits Cas. 2638, 95 Cal. Daily

Op. Serv. 9432,

95 Daily Journal D.A.R. 16,450,

Pens. Plan Guide P 23915K

Agnes LANDWEHR and Christopher Cole Plaintiffs-Appellees-Cross-Appellants, v. Darren DuPREE, Defendant-Appellant-Cross-Appellee.

Nos. 93-36166, 94-35003.

United States Court of Appeals Ninth Circuit.

Argued and Submitted June 6, 1995.

Decided Dec. 12, 1995.

Blair J. Henningsgaard, Brownhill & Henningsgaard, Astoria, Oregon, for the plaintiffs-appellees-cross-appellants.

Leslie L. Wellman, Portland, Oregon, for the defendant-appellant-cross-appellee.

Appeals from the United States District Court for the District of Oregon.

Before: CANBY, REINHARDT, and RYMER ^*, Circuit Judges.

OPINION

REINHARDT, Circuit Judge:

The plaintiffs are beneficiaries of the Astoria Seafood Company Profit Sharing Plan ("the Plan"). They brought this action on behalf of the Plan, alleging that Darren DuPree and his co-defendants violated the Employee Retirement Income Security Act of 1974 (ERISA). According to the plaintiffs, DuPree, a chauffeur for the company's owner, improperly received funds totalling $89,000 from the Plan. The district court granted in part the plaintiffs' motion for summary judgment against DuPree, concluding that DuPree was a "party in interest" with respect to the Plan and that he engaged in transactions prohibited by ERISA, 29 U.S.C. Sec. 1106(a). The court ordered that DuPree make restitution to the Plan totalling $58,000 in monthly installments of $600, but concluded that DuPree was not liable for an additional $31,000 that he transferred to a Louisiana bank at the request of the Plan's fiduciary.

We conclude that DuPree is liable to the Plan for at least $54,000 of the sums that he improperly received, but agree with the district court that he is not liable for the $31,000 that he transferred to Louisiana. We remand for further proceedings on the question whether he was unjustly enriched by the remaining $4,000 in Plan funds he received.

I. FACTS AND PROCEDURAL HISTORY

Most of the relevant facts are undisputed. Astoria Seafoods Company ("the Company") is a closely held corporation that, at all relevant times, was owned by Thomas Kindred and his then-wife Brenda Tarabochia. In 1984, the Company created the Profit Sharing Plan to provide retirement benefits to its employees. Kindred was a fiduciary of the Plan. Beneficiaries of this plan include Kindred, Tarabochia, and the plaintiffs.

In January 1988, defendant DuPree began working as Kindred's personal chauffeur. Although DuPree considered himself to be an employee of Kindred and not the Company, he received a $2,000 check each month from the Company and appeared on the Company's payroll as an employee. In addition, Kindred routinely supplemented DuPree's salary with substantial cash "tips," which amounted to thousands of dollars per month.

The record contains several references to Kindred's lavish spending habits, both for himself and others. Unfortunately, much of the money spent by Kindred came from the Plan's account, which Kindred used for his own personal activities. Between 1988 and 1991, the Plan's assets dwindled from $490,000 to almost nothing.

Among the checks that Kindred wrote on the Plan's account was one for $54,000, issued to DuPree in April 1988 to enable DuPree to buy a home. It is not clear whether the money was intended to be a gift or a loan. Although the $54,000 check showed that it was written on the account of the "Astoria Seafoods Pension & Profit Sharing Trust," DuPree does not recall observing the name of the account holder when he received the check. He further asserts that, even if he had noticed that the check was written on the Plan's account, that fact would have meant nothing to him. DuPree used the funds, along with his own money, to purchase the home in which he has since lived.

In October 1988, Kindred wrote DuPree another check on the Plan's account, this one for $35,000. Following Kindred's instructions, DuPree transferred $31,000 of this money to a bank account in Louisiana. Also at Kindred's instruction, DuPree deposited the remaining $4,000 in an account in DuPree's name. Although the $4,000 was commingled with DuPree's personal assets, DuPree has introduced evidence showing that he wrote checks from this account to pay Kindred's expenses. DuPree retained receipts from the expenditures he made on Kindred's behalf and kept records of the balance in Kindred's "expense account." These records purport to show that DuPree spent the entire $4,000 on Kindred's expenses.

The plaintiffs first suspected that something was awry in January 1990, when they received a financial report stating that DuPree had received a $54,000 loan from the Plan's funds. In June 1992, plaintiffs brought suit in district court against Kindred and DuPree, among others, alleging violations of ERISA and state law. Only the claims against DuPree are before us on appeal.

After the district court dismissed the plaintiffs' state-law claim against DuPree on the ground that it was preempted by ERISA, the parties filed cross-motions for summary judgment. The district court granted in part and denied in part each party's motion. The court concluded that DuPree was not a fiduciary of the Plan, but that he was a party in interest with respect to the Plan. The court found that DuPree had engaged in transactions prohibited by 29 U.S.C. Sec. 1106(a), by improperly receiving $54,000 and $4,000 in Plan assets, and held him liable for these amounts. However, the court concluded that DuPree was not liable for the $31,000 in Plan funds that he had wired to a Louisiana bank at Kindred's instruction.

The district court ordered restitution, ostensibly in the form of a "constructive trust," on the $58,000 that DuPree had improperly received, and instructed the parties to develop a "commercially reasonable" repayment plan. The parties subsequently agreed to a schedule requiring DuPree to make payments of $600 per month for 120 months, with a balloon payment for the remainder due in the 121st month. The court approved this arrangement, but granted judgment to the plaintiffs without costs or prejudgment interest.

DuPree appealed and the plaintiffs cross-appealed.

II. DUPREE'S APPEAL

DuPree raises several challenges to the district court's decision granting summary judgment to the plaintiffs with respect to their claims for $54,000 and $4,000. First, DuPree argues that the statute of limitations bars the plaintiffs' action. Second, he asserts that the district court erred in holding him liable to the Plan, since he is not a fiduciary of the Plan. Third, he argues that there is a triable issue of fact as to whether he was unjustly enriched by the $4,000 deposited into his account. Fourth, DuPree contends that there is a triable issue of fact as to whether the Plan was reimbursed for the $54,000 that he received and used to purchase his home. Finally, DuPree argues that the plaintiffs are barred from obtaining equitable relief because they have an adequate remedy at law. We agree that there is a triable issue on the question whether DuPree was unjustly enriched by the $4,000 deposited into his account, but reject his other challenges to the district court's decision granting partial summary judgment to the plaintiffs.

A. Statute of Limitations

As a general rule, ERISA's statute of limitations requires that an action be filed no more than "three years after the earliest date on which the Plaintiff had actual knowledge of the breach or violation." 29 U.S.C. Sec. 1113. ¹ In this case, Landwehr and Cole first learned of the ERISA violation in January 1990. They filed this action in June 1992, well within the three-year period.

While DuPree does not dispute the date on which Landwehr and Cole first had knowledge of the ERISA violations, he contends that the real "plaintiff" in this case is the Plan. Therefore, DuPree argues, the statute of limitations should start to run on the first date that any agent of the Plan had "actual knowledge" of the breach or violation. Defendant Kindred, a fiduciary of the Plan, had actual knowledge of the $54,000 transfer on April 25, 1988 and knowledge of the $35,000 transfer on October 30, 1988--the dates that he wrote the two checks to DuPree on the trust fund's account. Kindred's wife Brenda Tarabochia, a plan beneficiary and co-defendant in this action, had knowledge of the $54,000 transaction by February 1989. In addition, attorneys and accountants hired by Kindred to provide services to the Plan learned of the transaction by late 1988 or early 1989. According to DuPree, the knowledge of all these agents should also be attributed to the Plan so as to trigger the statute of limitations.

DuPree cites no cases holding that the ERISA statute of limitations starts to run from the first date that a covered plan, through any of its agents, learns of the breach. To the contrary, our cases assume (without expressly holding) that the limitations period begins to run on the date that the person bringing suit on behalf of the plan learned of the breach or violation. See Meagher v. IAM Pension Plan, 856 F.2d 1418, 1423 (9th Cir.1988); Ziegler v. Connecticut General Life, 916 F.2d 548, 550 (9th Cir.1990); Blanton v. Anzalone, 760 F.2d 989, 991 (9th Cir.1985). Cases from other circuits likewise measure the limitations period from the date the person bringing suit, and not the plan itself through one of its agents, learned of the violation. See Gluck v. Unisys Corp., 960 F.2d 1168, 1176-77 (3rd Cir.1992); Radiology Center, S.C. v. Stifel, Nicolaus & Co., 919 F.2d 1216, 1222 (7th Cir.1990).

We now expressly hold that the limitations period in an ERISA action begins to run on the date that the person bringing suit learns of the breach or violation. It is true that beneficiaries, participants, and fiduciaries of an ERISA plan ordinarily may bring an action for breach of fiduciary duty only on...