Sandberg v. KPMG Peat Marwick, L.L.P.

Decision Date17 April 1997
Docket Number1180,Nos. 96-9099,s. 96-9099
Citation111 F.3d 331
Parties21 Employee Benefits Cas. 2301, Pens. Plan Guide (CCH) P 23933M Jerome SANDBERG, Plaintiff-Appellant, v. KPMG PEAT MARWICK, LLP, Defendant-Appellee.
CourtU.S. Court of Appeals — Second Circuit

Donald E. Creadore, Kupferman & Creadore, New York City, for Plaintiff-Appellant.

Dennis H. Tracey, III and John Houston Pope, Davis, Scott, Weber & Edwards, New York City, for Defendant-Appellee.

Before WALKER, McLAUGHLIN, and WOOD, * Circuit Judges.

McLAUGHLIN, Circuit Judge:

Plaintiff appeals from an order entered May 16, 1996 in the United States District Court for the Southern District of New York (Rakoff, J.) granting defendant's motion to dismiss plaintiff's claim as time-barred. We review de novo the grant of the dismissal motion. Eagleston v. Guido, 41 F.3d 865, 870 (2d Cir.1994).

BACKGROUND

Plaintiff Jerome Sandberg was an accountant in the offices of defendant KPMG Peat Marwick, L.L.P. in New York, New York from December 1987 to August 1992, when he was fired. Although his last day of work at Peat Marwick was apparently August 28, 1992, he remained on the payroll until October 1992.

Sandberg was a qualified participant in Peat Marwick's employee benefits plan (the "Plan"). As such he would become fully vested in the Plan after five years of service. He was on the payroll of Peat Marwick for approximately four years and ten months. In response to Sandberg's inquiries after he was fired, Peat Marwick told him several times in the spring of 1993, and for the last time in August 1993, that he was not entitled to benefits under the Plan because he had not worked for the full five-year period.

In October 1995 Sandberg sued, alleging that Peat Marwick fired him to prevent him from becoming fully vested in the Plan, in violation of section 510 of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1140 (1985), and breached its employment contract with Sandberg. Peat Marwick moved to dismiss or, in the alternative, for summary judgment. Peat Marwick argued that Sandberg's claim under section 510 of ERISA was barred by a statute of limitations of either two or three years, and that ERISA preempted Sandberg's state-law breach of contract claim.

The district court concluded that the applicable period of limitations for Sandberg's ERISA claim was two years, the period borrowed from the most analogous state-law claim, section 120 of the New York Workers' Compensation Law. N.Y. Work. Comp. Law § 120 (McKinney 1994). Accordingly, the court granted the motion to dismiss Sandberg's section 510 claim, observing that the limitations period had expired, regardless of

whether his claim accrued on August 28, 1992 (Sandberg's last day of work) or in August 1993 (when Sandberg was last informed that he was not going to get benefits under the Plan). The court also dismissed Sandberg's breach of contract claim, finding that it was preempted by ERISA. Having abandoned the state-law claim, Sandberg now appeals only the district court's dismissal of his ERISA section 510 claim.

DISCUSSION

Section 510 of ERISA makes it unlawful for an employer

to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan ... or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan....

29 U.S.C. § 1140.

Section 510 may be enforced by an action under section 502(a)(3), to protect employees from actions designed to prevent the vesting of pension rights. Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142-44, 111 S.Ct. 478, 484-86, 112 L.Ed.2d 474 (1990); Dister v. Continental Group, Inc., 859 F.2d 1108, 1111 (2d Cir.1988). Section 502(a)(3) authorizes an individual to institute a civil action "(A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." 29 U.S.C. § 1132(a)(3). Congress has neglected, however, to establish a statute of limitations for this enforcement section of ERISA.

When Congress fails to provide a statute of limitations for claims arising under federal statutes, a court must apply the limitations period of the state-law cause of action most analogous to the federal claim. North Star Steel Co. v. Thomas, 515 U.S. 29, ----, 115 S.Ct. 1927, 1930, 132 L.Ed.2d 27 (1995); Wilson v. Garcia, 471 U.S. 261, 267-68, 105 S.Ct. 1938, 1942-43, 85 L.Ed.2d 254 (1985). This requires the court to "characterize the essence" of plaintiff's federal claim. Wilson, 471 U.S. at 267-70, 105 S.Ct. at 1942. New York is the forum state, and the parties agree that New York law applies. See Ceres Partners v. GEL Assocs., 918 F.2d 349, 353 (2d Cir.1990) (analogous state statute of limitations should be adopted by reference to the pertinent laws of the forum state); Arneil v. Ramsey, 550 F.2d 774, 779 (2d Cir.1977) (same).

Sandberg argued below that his claim was most analogous to section 214(2) of the New York Civil Practice Law and Rules ("CPLR"), which applies a three-year period to actions brought under New York's anti-discrimination law, see, e.g., N.Y. Exec. Law § 296 (age discrimination section); Murphy v. American Home Prods. Corp., 58 N.Y.2d 293, 461 N.Y.S.2d 232, 448 N.E.2d 86, 92-93 (1983). He further argues on appeal that his claim is analogous to a breach of contract, governed by the six-year period of CPLR 213(2). Peat Marwick counters that, as the district court concluded, Sandberg's claim is most analogous to section 120 of the New York Workers' Compensation Law, the statute governing actions to redress wrongful termination in connection with the collection of workers' compensation benefits.

This Court has not considered which New York cause of action is most analogous to a section 510 ERISA claim, and two district courts in New York reached different conclusions. Compare DeSimone v. Transprint USA, Inc., No. 94 Civ. 3130(JFK), 1996 WL 209951, at * 6 (S.D.N.Y. April 29, 1996) (applying the six-year limitations period for contract claims) with Barnett v. IBM, 885 F.Supp. 581, 592 (S.D.N.Y.1995) (applying section 120 of New York Workers' Compensation Law). The DeSimone court, however, clearly conflated a claim under section 502(a)(1)(B) of ERISA, which applies where an employee is in fact entitled to benefits and has not received them, and a claim under section 502(a)(3), which applies where an employee has been fired to prevent the vesting or enjoyment of pension rights. See Teumer v. General Motors Corp., 34 F.3d 542, 544-46 (7th Cir.1994); McClure v. Zoecon, 936 F.2d 777, 779 n. 3 (5th Cir.1991).

The circuit courts have reached disparate conclusions. See Teumer, 34 F.3d at 547 (citing cases). As the Seventh Circuit recently pointed out in Teumer, "[w]hat may be contributing toward this lack of consensus in the grafting of limitations periods for actions on § 510 rights is the variant nature of the several rights recognized in that one provision." Id. Section 510 protects against (1) the disruption of employment privileges to prevent the vesting or enjoyment of benefit rights; (2) the disruption of employment privileges to punish the exercise of benefit rights; and (3) the disruption of employment privileges to prevent or punish the giving of testimony in any proceeding relating to ERISA or a sister act. Id. This Court has explained that "[s]ection 510 was designed primarily to prevent 'unscrupulous employers from discharging or harassing employees in order to keep them from obtaining vested pension rights.' " Dister, 859 F.2d at 1111 (quoting West v. Butler, 621 F.2d 240, 245 (6th Cir.1980)). Sandberg too emphasized this as the primary purpose of the statute, claiming that he was fired to prevent the vesting of his pension rights.

The circuits courts that have considered claims similar to Sandberg's--that is, claims that an employer aborted the vesting or enjoyment of benefits--have almost unanimously concluded that the most analogous state-law cause of action under section 510 is "wrongful termination" or "retaliatory discharge," catch-all descriptions of state-law causes of action encompassing an employee's claim that he was discharged in violation of public policy. See Teumer, 34 F.3d at 549-50 (retaliatory discharge encompassing interference "with the exercise of favored rights."); Hinton v. Pacific Enters., 5 F.3d 391, 394 (9th Cir.1993) (wrongful termination in contravention of a public policy grounded in either a constitutional or statutory provision); Byrd v. MacPapers, Inc., 961 F.2d 157, 159 (11th Cir.1992) (discharge in retaliation for filing workers' compensation claim); Felton, 940 F.2d at 510-13 (wrongful termination in violation of public policy, such as discharge "for exercising a legal right."); McClure, 936 F.2d at 778-79 (wrongful discharge and employment discrimination). But see Gavalik v. Continental Can Co., 812 F.2d 834, 846-47 (3d Cir.1987) (race-based employment discrimination).

Sandberg, however, points to Held v. Manufacturers Hanover Leasing Corp., 912 F.2d 1197 (10th Cir.1990), where the Tenth Circuit, looking to New York law because of New York's "significant relationship" to plaintiff's claims, concluded that plaintiff's claim that his employer fired him to prevent the vesting of his pension rights is most analogous to a claim for employment discrimination. Id. at 1205. The events giving rise to the action in Held, however, pre-dated the enactment of the limitations period of section 120 of the New York Workers' Compensation Law, and thus the court did not consider the applicability of that statute. Barnett, 885 F.Supp. at 593.

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