Stockwell v. Hamilton
| Decision Date | 16 February 2016 |
| Docket Number | Civil Case No. 15-11609 |
| Citation | 163 F.Supp.3d 484 |
| Parties | Douglas W. Stockwell and International Union of Operating Engineers Local 324, Plaintiffs, v. John M. Hamilton and William B. Rough, Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
Megan B. Boelstler, Christopher P. Legghio, Legghio & Israel, P.C., Royal Oak, MI, for Plaintiffs.
Christopher J. Rillo, Maynard Cooper and Gale, L.L.P., San Francisco, CA, Diane M. Soubly, Butzel Long, P.C., Ann Arbor, MI, Anna Valk, Edward C. Cutlip, Jr., Robert E. Forrest, Kerr, Russell, Detroit, MI, for Defendants.
On May 5, 2015, Plaintiffs Douglas Stockwell and the International Union of Operating Engineers Local 324 (“Union”) (collectively “Plaintiffs”) initiated this action against Defendants John Hamilton and William Rough.1 Stockwell is a Trustee and participant in the ERISA-regulated Union Pension Fund (“Pension Fund”). He also is the Union's Business Manager and Chief Financial Officer. Hamilton served as the Union's Business Manager and as a Trustee of the Pension Fund until Fall 2012. Rough is a former employee of the Union's fringe benefits funds, including the Pension Fund. In their Complaint, Plaintiffs allege that Defendants breached their fiduciary duties while acting as officers and employees of the Union and the Pension Fund, in violation of Sections 404 and 406 of ERISA, 29 U.S.C. §§ 1104, 1106.
Presently before the Court are Hamilton's Motion to Dismiss Plaintiffs' Complaint, filed pursuant to Federal Rule of Civil Procedure 12(b)(6) on July 29, 2015 (ECF No. 20), and Plaintiffs' Motion for Leave to File First Amended Complaint, filed pursuant to Federal Rule of Civil Procedure 15 on September 30, 2015. (ECF No. 31.) In his motion to dismiss, Hamilton argues that Plaintiffs' claims are time-barred under ERISA's statute of limitations, 29 U.S.C. § 1113. Hamilton also argues that the Union lacks standing to sue under ERISA, 29 U.S.C. § 1132(a). In their response to Hamilton's motion, filed September 30, 2015, Plaintiffs argue that their claims are timely-filed and the Union has standing. (ECF No. 30.) Plaintiffs further sought leave to file an amended complaint in response to Hamilton's motion in order to allege those facts necessary to establish the timeliness of their claims. (ECF No. 31.) In a response to Plaintiffs' motion filed October 21, 2015, Hamilton argues that Plaintiffs' proposed amendment is futile and, therefore, Plaintiffs' request for leave to file their amended pleading should be denied. (ECF No. 35.) Because the Court finds the facts and legal arguments sufficiently presented in the parties' pleadings, it is dispensing with oral argument with respect to the pending motions pursuant to Eastern District of Michigan Local Rule 7.1(f) For the reasons that follow, the Court denies Hamilton's motion to dismiss and grants Plaintiffs' motion for leave to file their proposed First Amended Complaint.
A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of the complaint. RMI Titanium Co. v. Westinghouse Elec. Corp. , 78 F.3d 1125, 1134 (6th Cir.1996). Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” To survive a motion to dismiss, a complaint need not contain “detailed factual allegations,” but it must contain more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action ...” Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A complaint does not “suffice if it tenders 'naked assertions' devoid of 'further factual enhancement.' ” Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ).
As the Supreme Court provided in Iqbal and Twombly, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' ” Id. (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). The plausibility standard “does not impose a probability requirement at the pleading stage; it simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of illegal [conduct].” Twombly , 550 U.S. at 556, 127 S.Ct. 1955.
Federal Rule of Civil Procedure 15(a) instructs the courts to “freely grant[ ]” leave to amend “where justice so requires.” This is because, as the Supreme Court has advised, “[i]f the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits.” Foman v. Davis , 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). However, a motion to amend a complaint should be denied if the amendment is brought in bad faith or for dilatory purposes, results in undue delay or prejudice to the opposing party, or would be futile. Id. An amendment is futile when the proposed amendment fails to state a claim upon which relief can be granted and thus is subject to dismissal pursuant to Rule 12(b)(6). Rose v. Hartford Underwriters Ins. Co. , 203 F.3d 417, 420 (6th Cir.2000).
ERISA bars actions for breach of fiduciary duty “after the earlier of (1) six years after ... the date of the last action which constituted a part of the breach or violation, ... or (2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation.” 29 U.S.C. § 1113 (emphasis added).2
In his motion to dismiss, Hamilton argues that the shorter three-year limitations period applies to Plaintiffs' action because the allegations in their Complaint establish that the Pension Fund Trustees and counsel for the Board of Trustees and Pension Fund had actual knowledge of the purportedly wrongful conduct more than three years before this lawsuit was filed.3 (See ECF No. 20-1 at Pg ID 112.) Because Plaintiffs are seeking recovery for the Pension Plan, Hamilton contends that the actual knowledge of other Pension Plan Trustees must be imputed to Plaintiffs to render their claims time-barred. Plaintiffs argue in response that, as their First Amended Complaint would allege, Stockwell only became a Pension Fund Trustee and the Union's Business Manager in September 2012, and he and the Union lacked knowledge of the purported wrongful conduct prior to Stockwell assuming those positions. (See ECF No. 30 at Pg ID 204-05; see also ECF No. 31, Ex. A ¶¶ 2, 15, 95-100.) In reply, Hamilton “reiterates” that where a majority of a plan's trustees were aware of the facts supporting the alleged fiduciary breach, that knowledge is imputed to a trustee seeking recovery for the plan. (ECF No. 34 at Pg ID 270.) In support, Hamilton cites New Orleans Employers International Longshoremen's Association, AFL – CIO Fund v. Mercer Investment Consultants , 635 F.Supp.2d 1351, 1378 (N.D.Ga.2009) (“Mercer ”).
“Courts have construed the 'actual knowledge' requirement [of § 1113(2) ] strictly; constructive knowledge is inadequate[.]” Mercer , 635 F.Supp.2d at 1378 (citing Martin v. Consultants & Adm'rs, Inc. , 966 F.2d 1078, 1086 (7th Cir.1992) ); see also Gluck v. Unisys Corp. , 960 F.2d 1168, 1176 (3d Cir.1992) (). Quoting “[a] leading case on the actual knowledge exception[,]” the Sixth Circuit Court of Appeals has stated that “ '[t]o charge [the plaintiff] with actual knowledge of an ERISA violation, it is not enough that he had notice that something was awry; he must have had specific knowledge of the actual breach of duty upon which he sues.' ” Rogers v. Millan , No. 89–3707, 1990 WL 61120, at *4 (6th Cir.1990) (quoting Brock v. Nellis , 809 F.2d 753, 755 (11th Cir.1987) ). As some courts have observed, “ 'Section 1113 sets a high standard for barring claims against fiduciaries prior to the expiration of the section's six-year limitations period.' ” Reich v. Lancaster , 55 F.3d 1034, 1057 (5th Cir.1995) (quoting Gluck , 960 F.2d at 1176 ); Montrose Med. Grp. Participating Savings Plan v. Bulger , 243 F.3d 773, 787 (3d Cir.2001). Courts have found that “ 'Congress evidently did not desire that those who violate [ERISA fiduciary] trust could easily find refuge in a time bar.' ” Rogers , 1990 WL 61120, at *4 (quoting Brock , 809 F.2d at 754 ) (bracketed language added here).
In Mercer, the District Court for the Northern District of Georgia addressed the issue of whether the actual knowledge of trustees other than the trustee named as the plaintiff should be imputed to the plaintiff, resulting in his action being barred under ERISA's three-year limitations period. 635 F.Supp.2d at 1379. The plaintiff in Mercer, like Hamilton, became a trustee and learned of the defendants' alleged breaches of fiduciary duties less than three years before filing suit. Id. Although finding that no circuit court had addressed whether the three-year statute of limitations bars an action in such a case and that the few district courts confronting similar situations, with one exception, declined to find the three-year limitations period applicable, the court held that the actual knowledge of the other trustees should be imputed to the plaintiff and concluded that the three-year limitations period therefore barred the lawsuit. Id. at 1379–80. The court reasoned that a contrary result would enable plaintiffs “to avoid the...
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