Richard B. Roush, Inc. v. New England Mut. Life, 01-4156.
| Citation | 311 F.3d 581 |
| Decision Date | 27 November 2002 |
| Docket Number | No. 01-4156.,01-4156. |
| Parties | RICHARD B. ROUSH, INC. PROFIT SHARING PLAN, by Richard K. Roush, Trustee; Roush Insurance Group, Inc., as successor to Richard B. Roush, Inc.; Richard B. Roush, Inc.; Richard K. Roush, Appellants v. THE NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY; New England Financial |
| Court | United States Courts of Appeals. United States Court of Appeals (3rd Circuit) |
E. Parry Warner (argued), William J. Leonard, Obermayer Rebmann Maxwell & Hippell LLP, Philadelphia, PA, for Appellants.
E. Thomas Henefer (argued), Stevens & Lee, Reading, PA, for Appellees.
Before BARRY, AMBRO and GARTH, Circuit Judges.
This appeal brings before us a claim by the plaintiff, Roush,1 that the fiduciary of his funds, the defendant, New England,2 failed to deposit and invest the funds as instructed and by that failure, among others, breached his trust under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461.
The District Court barred Roush's action pursuant to the three year statute of limitations period provided in 29 U.S.C. § 1113(2)3 and by so doing ruled against Roush in each of the breach of fiduciary duty claims alleged in Count I. The District Court ruled against Roush as well with respect to Count II (prohibited transactions). The District Court held that Roush had been obliged to file his action against New England by December of 1998,4 holding that Roush's cause of action commenced in December 1995.
Although our decisions in Kurz v. Philadelphia Elec. Co., 96 F.3d 1544 (3d Cir.1996), and its predecessors Gluck v. Unisys Corp., 960 F.2d 1168 (3d Cir.1992), and Int'l Union of Elect., Elect., Salaried, Mach. and Furniture Workers, AFL-CIO v. Murata Erie N. Am., Inc., 980 F.2d 889 (3d Cir.1992), were addressed by the District Court, the two-prong standard prescribed for the analysis of the ERISA statute of limitations bar was not employed in accordance with these precedents. Subsequent to the District Court's summary judgment ruling in favor of New England, Montrose Med. Grp. Participating Sav. Plan v. Bulger, 243 F.3d 773 (3d Cir.2001) was filed, clarifying the two-prong standard we discuss infra.
We hold that the District Court erred in barring Roush's claim against New England for breach of fiduciary duties (the delay in investment of his funds and the delay in accurate accountings) and we will remand to the District Court for further proceedings now that we have held that the statute of limitations is no bar to Roush's action.
The District Court had jurisdiction pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e)(1). We have jurisdiction under 28 U.S.C. § 1291. Our review of a district court's decision on summary judgment is plenary. Fogleman v. Mercy Hosp., Inc., 283 F.3d 561, 566 n. 3 (3d Cir.2002). On review, we are required to apply the same test the District Court should have utilized initially. J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1530-31 (3d Cir.1990).
For our purposes here, we have detailed only those facts that bear on our current disposition.
On December 6, 1994, Roush executed the New England Age Based Contribution Plus Profit Sharing Plan Adoption Agreement, which was designed by New England and constituted an amendment and restatement of Roush's existing Profit Sharing Plan. Roush then adopted The New England Age Based Contribution Plus Profit Sharing Plan (the "Plan"). New England issued a Group Annuity Policy ("Policy") on March 29, 1995, which it designed to pay the benefits under the Plan. The Policy provided that New England would maintain a General Account and various Separate Accounts in which it would invest funds received from Roush, according to Roush's employees' designations. Funds in the General Account earned a fixed rate of interest determined by New England. The General Account funds were unaffected by market movements, whereas funds deposited in the Separate Accounts received earnings based on market movements and thus had the potential for much higher returns to Plan participants. On May 24, 1995, Roush transferred Plan assets in the amount of $961,394.89 to New England for allocation into these Separate Accounts.
During the period of May 24 to September 30, 1995, Roush made numerous requests to New England for a complete accounting of the funds transferred to New England and the return on those funds. In September 1995 and later in November 1995, New England provided accountings to Roush but did not furnish information as to the specific principal amounts transferred into each fund, nor the return on such funds for each participant. Roush informed New England, several times, that the account allocation and balances were incorrect and demanded that adjustments be made, and that correct accountings be provided.
On December 12, 1995, Stephen Chiumenti, an attorney employed by New England, wrote a letter to Roush admitting New England's failure to invest properly Roush's funds. Among other matters, Chiumenti represented that:
... we want to confirm that the instructions that we received dated May 22, 1995 continue to be valid directions. If so, we will implement them immediately without prejudice to your rights regarding the intervening delay.
Subsequently, most of the Plan funds in the General Account were transferred to the Separate Accounts on December 14, 1995, except for approximately $25,000 which, contrary to Roush's instructions, apparently remained in New England's General Account. In a July 17, 1996 letter to Roush, Chiumenti wrote that New England wished to put Roush in the "same place" he would have been put, as "[i]t is our intention, as expressed in my prior letter and every communication we have had, to adjust your plan accounts to reflect the instructions as you believe they should have been implemented."
On July 13, 1996, Roush demanded by letter to Chiumenti that funds be increased to account for the loss of interest from the investment delay, that an accurate and complete accounting be provided, and that all funds be transferred out of New England without a surrender charge.5 In an August 2, 1996 letter, however, Chiumenti stated that New England would not waive the surrender charge nor make any adjustment for the lost interest should Roush decide to transfer the funds. He also wrote that New England would adjust the balance to reflect dividends from the investment delay, in the amount of $101,727.87, only if Roush executed a settlement agreement and release or rolled over the funds into a new policy. Based on an independent audit, Roush claimed that New England owed Roush at least $313,000.
Roush filed a complaint against New England in the United States District Court for the Middle District of Pennsylvania on March 26, 1999. Roush alleged ERISA and state law claims regarding mismanagement of assets under an employee pension benefit plan. After New England filed a motion to dismiss Roush's state law claims based on ERISA preemption, Roush filed an amended complaint on June 14, 1999. Roush asserted, in Count I, breaches of fiduciary duty under ERISA from the investment delay; failing to provide a complete accounting; failing to credit accounts according to Roush's instructions; failing to provide administrative services and failing to return the Plan funds with the returns generated by the funds. The amended complaint also asserted, in an alternative Count II, various prohibited transactions under ERISA. Complaint ¶¶ 76-82.
Roush moved for partial summary judgment on liability on June 19, 2000. New England moved for summary judgment on July 13, 2000. On October 16, 2001, the District Court denied Roush's motion and granted New England's motion. Roush filed a timely notice of appeal on November 14, 2001, seeking reversal of the District Court's judgment.
As we have earlier noted, this case presents the issue of when the three year limitations period in ERISA, 29 U.S.C. § 1113(2), which is triggered by the plaintiff having "actual knowledge" of a breach or violation under ERISA, begins.
The applicable statute of limitations for breach of fiduciary duty under ERISA is found in 29 U.S.C. § 1113. It provides:
No action may be commenced under this subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of —
(1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission, the latest date on which the fiduciary could have cured the breach or violation, or
(2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation;
except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation. (Emphasis supplied).
Because the statute of limitations is an affirmative defense and because New England is the movant for summary judgment, the burden of proof that the statute of limitations bars Roush's action rests on New England. Thus, to prevail in its summary judgment motion, New England had to prove that Roush had "actual knowledge of the breach" more than three years before his action was filed on March 26, 1999, which would be before March 26, 1996. We have interpreted "actual knowledge" in the context of 29 U.S.C. § 1113 as requiring not only actual knowledge of the facts giving rise to the fiduciary violation but also as requiring actual knowledge that those facts support a cause of action under ERISA. Montrose, 243 F.3d at 787.
Gluck v. Unisys Corp., 960 F.2d 1168 (3d Cir.1992), is the seminal case in the Circuit on the issue of "actual knowledge" under 29 U.S.C. § 1113. In Gluck, we held that "`...
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