Salyers v. Allied Corp.

• Decision Date: 25 March 1986
• Docket Number: Civ. A. No. 84-274.
• Citation: 642 F. Supp. 442
• Court: U.S. District Court — Eastern District of Kentucky
• Parties: Lewis F. SALYERS, Plaintiff, v. ALLIED CORPORATION, Defendant.

642 F. Supp. 442

Lewis F. SALYERS, Plaintiff, v. ALLIED CORPORATION, Defendant.

Civ. A. No. 84-274.

United States District Court, E.D. Kentucky, Ashland Division.

March 25, 1986.

George Howell, Adkins, Hall, Howell & Duggan, Ashland, Ky., for plaintiff.

Noel Crowley, Hinton & Williams, Morristown, N.J., Wendell S. Roberts, Gray, Woods & Cooper, Ashland, Ky., for defendant.

MEMORANDUM OPINION AND ORDER

WILHOIT, District Judge.

This action is before the Court upon the plaintiff's motion for partial summary judgment and upon the defendant's motion for summary judgment. This Court referred the matter to the United States Magistrate Joseph M. Hood for initial consideration and recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). The Magistrate has filed his report and recommendation, and both parties have filed objections to the report and recommendation.

Since neither party has taken exception to the Magistrate's statement of the facts, the Court accepts the facts as stated in the report and makes reference herein to only the basic facts. Briefly, the facts giving rise to this action are that the plaintiff had vested coverage under the defendant's Hourly Employees' Pension Plan hereinafter the Plan, and that the plaintiff elected to take a disability retirement under the Plan after he suffered a stroke. The plaintiff began receiving $309.66 per month under the Plan on June 1, 1974. On April 25, 1978, the Kentucky Workmen's Compensation Board ruled that the plaintiff had become totally and permanently disabled on December 1, 1973, as a result of his employment with the defendant. The Board awarded workers' compensation benefits of $351.00 per month to the plaintiff. Then, Allied advised the plaintiff on June 2, 1978, that pursuant to Article V (5) of the Plan, it was reducing his monthly pension benefit of $309.66 by the amount of his workers' compensation monthly benefit of $351.00, thus suspending the pension benefits. Six years and five months later, the plaintiff filed this action under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1132(a)(1)(B); the plaintiff contends that Article V (5) of the pension plan violates E.R.I.S.A.

Two issues exist in this action: (1) what is the most analogous state statute of limitations applicable to this action, and (2) what affect does the integration clause in Article V have.

Of course, the threshold issue is the statute of limitations question. Since E.R.I. S.A. does not include a statute of limitations, the controlling period is the one contained in the most analogous state statute of limitations. Jenkins v. Local 705 Int'l Brotherhood of Teamsters, 713 F.2d 247, 251 (7th Cir.1983). The plaintiff argues that the most analogous state statute is K.R.S. § 413.090 which prescribes a fifteen-year period for an action on a written contract. Several circuits have applied similar statutes of limitations from various states to actions brought under E.R.I.S.A. to enforce rights under pension plans; these circuits, however, have applied either a six-year, or in one case, a ten-year state statute of limitations to an action such as the one at bar. See Haynes v. O'Connell, 599 F.Supp. 59 (E.D.Tenn.1984) (applying a six-year statute); Jenkins, 713 F.2d 247, 251 (7th Cir.1983) (applying a ten-year statute).

The discussions found in the case law frequently address the reasons for applying the longer limitation period for actions on written contracts rather than applying a shorter period such as the six-month period for suing in a "hybrid" suit for breach of the union's duty of fair representation and for breach of contract under section 301 of the Labor Management Relations Act, 29 U.S.C. § 185. In his report and recommendation, the Magistrate notes that a strong argument can be made for characterizing an action brought under 29 U.S.C. § 1132(a)(1)(B) as one for breach of a written contract.

Allied claims that the most analogous state statute of limitations is the five-year period found in K.R.S. § 413.120(2), which applies to an action upon liability created by statute when the statute does not fix the period. The Magistrate agrees with Allied that the period is five years but states that the most analogous statute is either K.R.S. § 413.120(5) for an action for damages for withholding personal property or § 413.120(6) for an action for detaining personal property. In Patton's Executor v. Coldiron, 213 Ky. 709, 281 S.W. 812 (1926), the Kentucky Court held that the five-year statute of limitations applied to a constructive trust arising from the fiduciary's conversion of personal property. Thus, the Kentucky Court has applied the five-year statute of limitations to actions for breach of fiduciary duty. Furthermore, the Magistrate notes that prior to the enactment of E.R.I.S.A., suits to recover pension benefits were brought in state courts under the law of trusts. See e.g., Wilder v. United Mine Workers Welfare and Retirement Fund, 346 S.W.2d 27 (1961). In federal courts such actions were brought under diversity jurisdiction. E.g., Hall v. Mullins, 621 F.2d 253 (6th Cir.1980).

Under the law of trusts, a beneficiary has a remedy against a trustee with respect to the money which the trustee is under a duty to pay unconditionally and immediately to the beneficiary. Wardle v. Central States Southeast & Southwest Areas Pension Fund, 627 F.2d 820, 829 (7th Cir.1980), cert. denied, 449 U.S. 1112, 101 S.Ct. 922, 66 L.Ed.2d 841 (1981). Thus, the plaintiff's action against the defendant accrued on June 2, 1978, when Allied, as trustee, notified the plaintiff that his pension benefits were suspended pursuant to the Plan. Since the plaintiff waited more than six years to file this action, the action should be dismissed as barred by the five-year statute of limitations in K.R.S. § 413.120(5) or § 413.120(6).

Even if the fifteen-year period of K.R.S. § 413.090 were to apply to this action, the plaintiff would still not be entitled to damages, because the record does not establish that the suspension of the plaintiff's pension benefits by Allied was "arbitrary or capricious" or unsupported by substantial evidence. Blakeman v. Mead Containers, 779 F.2d 1146, 1149-50 (6th Cir.1985).

Allied interprets Article V (5) as allowing Allied to offset the amount of pension benefits paid under the Plan by the entire amount of the plaintiff's workers' compensation benefits. Article V (5) provides:

Any amount paid to or on behald of any pensioner as reimbursement for loss of earnings resulting from occupational injury or disease for which the Company is liable whether pursuant to Workers' Compensation or occupational disease law, or arising otherwise from the statutory or common law ...

On the other hand, the plaintiff argues the phrase "for which the Company is liable" modifies "any amount," thus allowing Allied to offset the plaintiff's pension benefits by only the amount that Allied has to contribute to the workers' compensation benefit which the plaintiff receives. What the plaintiff would like to receive each month is his pension benefit of $309.66 offset by the twenty-five percent of the workers' compensation benefit which Allied must actually pay, plus the workers' compensation benefit of $351.00.

According to the Supreme Court's decision in Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 509-20, 101 S.Ct. 1895, 1899-1904, 68 L.Ed.2d 402 (1981), an integration clause which offsets the workers' compensation or black lung benefits against the pension is enforceable. Therefore, Allied's decision to apply the integration clause as described above is not arbitrary or capricious or unsupported by substantial evidence. The plaintiff contends that Allied applied the integration clause arbitrarily by having paid pension benefits to several pensioners without having offset the amounts of occupational disease or workers' compensation benefits which those pensioners were receiving. Affidavits were submitted on this claim, and the Magistrate reported that the affidavit of Bernie Moore, filed on behalf of the plaintiff, is replete with hearsay instead of personal knowledge and does not establish that Allied knew that duplicative benefits were being paid. Record No. 26. The Magistrate afforded greater weight to the affidavit of Charles F. Norris, Allied's Supervisor of Retiree Benefits Administration, which indicates that Allied was unaware of the duplicative benefits. Record No. 32.

The Court has considered the points raised by the parties in their objections and has determined that these objections do not raise points not addressed by the Magistrate. Contrary to the plaintiff's objections, this Court finds that the Magistrate gave the affidavit of Bernie Moore sufficient weight and states that the statute of limitations does run against the beneficiary when the trustee breaches a fiduciary duty. See K.R.S. § 413.340 and Potter v. Connecticut Mutual Life Insurance Company, 361 S.W.2d 515, 516-17 (Ky.1962). Contrary to the defendant's objections, the Magistrate properly referred to Allied as a trustee: a plan administrator is considered a trustee. Blake v. Mead Containers, 779 F.2d at 1150.

In summary, the Court finds that the applicable state statute of limitation is five years as provided by K.R.S. § 413.120(5) or (6), and that this action is therefore barred by the statute of limitations. Moreover, even if this action were not so barred, there is no genuine issue of material fact remaining.

Accordingly,

This Court having reviewed the entire record herein and being sufficiently advised,

IT IS THEREFORE ORDERED AND ADJUDGED AS FOLLOWS:

(1) That the report and recommendation of the Magistrate is approved, confirmed and adopted as and for the opinion of his Court;

(2) That in conformity with the Magistrate's recommendation, the plaintiff's motion for partial summary judgment is OVERRULED; the defendant's motion for summary judgment is SUSTAINED;

(3) That the complaint is...