WILLIAM M. CONLEY, District Judge.
This class action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., was filed on behalf of former or current employees of defendant Meriter Health Services, Inc., who were participating in defendant Meriter Health Services Employee Retirement Plan, as well as other beneficiaries of the Plan. Plaintiffs allege that defendants violated ERISA over a twenty-three year period in multiple respects. The court previously certified a class — really eleven subclasses — pursuant to Federal Rule of Civil Procedure 23(b)(2). Before the court are cross motions for summary judgment. (Dkt. ## 300, 302.)
Plaintiffs filed this lawsuit in July 2010, challenging administration of an employee pension plan dating back to 1987, with the most crucial developments to plaintiffs claims occurring in 2002 and 2003. Not surprisingly based on this timeline, defendants statute of limitations defense is the pivotal issue presented by the parties' motions for summary judgment. For the reasons that follow, the court will deny plaintiffs' motion in its entirety and grant in part defendants' motion. Defendants' motion is denied with respect to plaintiffs' breach of fiduciary duty claim premised on alleged failures to act for the exclusive purpose of plan participants by concealing defendants' failure to pay lump sum distributions as required under IRC § 417(e) from the Plan's inception on October 1, 1987, to December 31, 2002. In all other respects, the court will grant defendants' motion based on their statute of limitations defense.
At all times relevant to this action, defendant Meriter Health Services Employee Retirement Plan was an "employee benefit plan" and, more specifically, a "defined benefit plan" within the meaning of ERISA §§ 3(2)(A) and 3(35), 29 U.S.C. §§ 1002(2)(A) and 1002(35). Similarly, defendant Meriter Health Services, Inc., was the sponsor of the Plan and the "employer" defined in the Plan. Meriter was formed in 1987 as the result of a merger between Methodist and Madison General. The Meriter Plan, in turn, was the result of a merger of the Madison General defined benefit plans and Methodist defined contribution plan. The Plan was designed by Meriter's actuarial consultants Towers Perrin and labeled as a "pension equivalent reserve credit" plan or "PERC". Defendants do not dispute that Meriter acted as a fiduciary to the Plan in certain respects but disputes the proposition that Meriter was a "general fiduciary." (Pls.' Reply to Pls.' PFOFs (dkt. # 377) ¶¶ 16a, 16b.)
Plaintiffs are former and current employees of Meriter and participants in the Plan or other beneficiaries of the Plan. The court previously certified eleven subclasses
On October 1, 1987, Meriter created the Plan. Between 1987 and December 31, 2002, the Plan was governed by three different Plan documents. The court will refer to the first of the three pre-2003 Plan documents as the "1988 Plan." (Declaration of Steven D. Cohen ("Cohen Decl.") (dkt. # 304), Ex. 17 (dkt. # 309).) The 1988 Plan was signed by then-Meriter President William E. Johnson on September 30, 1988, and has an effective date of October 1, 1987. The second Plan document is the "1993 Plan." (Cohen Decl., Ex. 18 (dkt. # 310).) The 1993 Plan was signed on October 18, 1993, by Meriter's then-Director of HR William L. Morgan and has an effective date of October 1, 1987. The third, pre-2003 Plan document is the "February 2002 Plan." (Cohen Decl., Ex. 22 (dkt. # 312-2).) This document was signed on February 26, 2002, also by Morgan, and also with an effective date of October 1, 1987.
Under these Plan documents, Meriter had the discretionary authority and responsibility for appointing the Plan's administrator and named fiduciaries. Since October 1, 1987, the Plan Administrator has been the "Pension Committee" also known as the Executive Compensation & Pension Committee (or "ECPC").
The pre-amendment Plan documents all expressed participants' benefits in terms of an indexed annuity consisting of yearly accruals increased each year by an "indexing rate." The yearly accrual equaled 0.75% of a participant's annual salary; for those participants with at least ten years of service, the yearly accrual equaled 0.935%. The Plan adopted a constant factor of 8.0 to convert this annuity into a lump sum distribution. Defendants communicated the annual accrual benefit to participants as an annual "pay credit" or
In 2002, a Meriter management group called the "Pension Design Committee" was convened to conduct a multi-month study of Meriter's retirement benefits program. After reviewing various options, the Pension Committee of the Board of Directors recommended certain changes to the full board in August 2002. On August 28, 2002, the Board of Directors adopted a resolution, accepting the recommendation of the Pension Committee, directing amendment of the retirement plans, and requiring that the plans be kept on file once fully executed and approved by the IRS. (Defs.' PFOFs (dkt. # 316) ¶ 54.) The adopted changes were reflected in an operating plan document prepared by Meriter's attorney. (Declaration of Thomas A. Hoffner ("Hoffner Decl."), Ex. T ("2003 Operating Plan") (dkt. # 314-20).) That document, however, was unsigned and had handwritten on the cover: "5/2003 DRAFT." Material to plaintiffs' challenges, the operating plan document: (1) set an annual interest rate at the greater of 4% or equal to the annual yield on 10-year Treasury Constant Maturities; and (2) removed the 8.0 conversion factor in calculating a participant's annual pay credit.
Through its counsel, Meriter notified the Department of Labor and the IRS that the Plan had been amended effective January 1, 2003. Plan participants were also required to attend mandatory meetings in late 2002 regarding the amended plan and the roll-out of a 401(k) savings plan. Brochures and a 204(h) notice were also provided to plan participants. The Plan was administered consistent with the operating plan document. Until January 23, 2009, however, defendants still did not formally sign a written instrument that contained the amendments purportedly adopted in 2003.
Section 502 of ERISA, 29 U.S.C. § 1132, provides a civil remedy for participants or beneficiaries for violations of ERISA, either to recover benefits (§ 502(a)(1)(B)) or to obtain appropriate equitable relief (§ 502(a)(3)). Plaintiffs' § 502 claims can be roughly grouped into the following three categories: (1) administration of the Plan pre-amendment; (2) amendment of the Plan, including providing proper notice of that amendment; and (3) post-amendment administration of the Plan.
In the First Amended Complaint, plaintiffs allege the following claims concerning the administration of the Plan before its amendment (the date of which remains in disputed):
Lastly, plaintiffs assert claims concerning the amendment's effect on participants' benefits:
In addition to claims brought pursuant to ERISA § 502, plaintiffs also allege violations of ERISA § 404, 29 U.S.C. § 1104, which defines certain fiduciary duties, including the duty of acting: for the "exclusive purpose" of participants and their beneficiaries (§ 404(a)(1)(A)); with the care, skill, prudence and diligence of a "prudent man" (§ 404(a)(1)(B)); and in accordance with the plan documents to the extent those plan documents are consistent with ERISA (§ 404(a)(1)(D)).
The parties have filed cross motions for summary judgment. Defendants' motion for partial summary judgment primarily concerns their statute of limitations defense. Specifically, Meriter seeks judgment that the following claims are barred by the applicable statutes of limitations: (1) all claims of class members who took lump-sum distributions before July 30, 2004 (six years before the filing date of this action); (2) all claims of class members who participated in the plan before July 30, 2004; and (3) all claims premised on plaintiffs' challenge of the 2003 Amendment's legality. Defendants also move for summary judgment on plaintiffs' claim that the Plan required the greater of 4% or 75% of the Plan's net assets as an interest rate. Plaintiffs move for summary judgment of a finding of liability on all claims. The court will consider the parties' cross motions together with respect to each of plaintiffs' claims.
The bulk of the parties' briefs concern pre-amendment Plan claims pursuant to ERISA § 502. Before addressing the substance of those claims, the court must first address two preliminary matters. First, the parties dispute the nature of plaintiffs' claims, both as pled and as pursued at summary judgment, particularly as they
Second, the parties dispute the nature of the pre-amendment plan: whether the plan was an indexed-annuity formula plan (plaintiffs' position) or whether it was a cash balance defined benefit plan (defendants' position). As described above, the plain language of the plan defines the accrued benefit in terms of an indexed annuity. Defendants explain that this annuity language was used so that the IRS would recognize and understand it, while defendants communicated to Plan participants in classic "cash balance" language, consistent with the practices of other early cash balance plans. Defendants' explanation seems plausible, but is largely inconsequential. Unless the terms are ambiguous, the express terms of the Plan govern the court's interpretation. See Cent. States Se. & Sw. Areas Pension Fund v. Waste Mgmt. of Mich., Inc., 674 F.3d 630, 634 (7th Cir.2012) (explaining that courts apply federal common law of interpreting contract in ERISA cases and "will not look beyond [the terms'] four corners in interpreting its meaning" if the terms are unambiguous). All of that said, even though the express terms describe an indexed annuity formula, defendants' description of the Plan as a cash balance plan to participants is not in and of itself problematic. Concerns only develop if defendants failed to follow the Plan and thus violated ERISA. Accordingly, the court will focus on plaintiffs' specific claims concerning defendants' failure to administer the Plan as
Before turning to the specific, pre-amendment Plan claims, the court must also address the law governing statute of limitations for claims brought under ERISA § 502, 29 U.S.C. § 1132.
The accrual rules for ERISA claims, however, are governed by federal law. Thompson, 651 F.3d at 604 (citing Young, 615 F.3d at 816). "The general federal common law rule is that an ERISA claim accrues when the plaintiff knows or should know of conduct that interferes with the plaintiff's ERISA rights." Thompson, 651 F.3d at 604 (quoting Young, 615 F.3d at 817). For a claim to recover benefits under § 502(a), accrual occurs "upon a clear and unequivocal repudiation of rights under the pension plan which has been made known to the beneficiary." Thompson, 651 F.3d at 604 (quoting Young, 615 F.3d at 817) (quotation marks omitted); see also Daill v. Sheet Metal Workers' Local 73 Pension Fund, 100 F.3d 62, 65 (7th Cir.1996).
In addition to this "discovery rule," there are at least two tolling doctrines that may stop the statute of limitations from running. See Cada v. Baxter Healthcare Corp., 920 F.2d 446, 450 (7th Cir.1990). First, equitable estoppel "comes into play if the defendant takes active steps to prevent the plaintiff from suing in time." Id. Efforts by a defendant to conceal the injury, however, do not fall within this doctrine; rather, those efforts are considered under the discovery rule for accrual purposes. Id. at 451. To demonstrate equitable estoppel, the plaintiff must show that a defendant took steps "above and beyond the wrongdoing upon which the plaintiff's claim is founded [] to prevent the plaintiff from suing in time," for example "by promising not to plead the statute of limitations." Id. at 450-51. The second doctrine concerns so-called "equitable tolling," which comes into play where "despite all due diligence [a plaintiff] is unable to obtain vital information bearing on the existence of his claim." Id. at 451. In such a case, the plaintiff may have discovered an injury, but lacks essential information to determine whether his injury is because of wrongdoing by the defendant. Id.
As previously mentioned, plaintiffs filed the present lawsuit on July 30, 2010. Thus, any § 502 claims which accrued before
First, plaintiffs argue that defendants miscalculated lump sum benefits by failing to calculate lump sums under § 4.2 of the Plan and to provide the greater of the amount under § 4.2 or § 4.3 (describing the 8.0 conversion factor). There is no dispute that from October 1, 1987, through the end of 2001, defendants calculated and paid lump sum distributions based on the factor of 8.0. (Pls.' Reply to Pls.' PFOFs (dkt. #377) ¶ 157a.) For example, Subclass A's class representative Phyllis Johnson received a lump sum benefit in February 1996 of $66,079.24 at the age of 65. (Pls.' PFOFs (dkt. # 345) ¶¶ 367a, 367b.) At that time, defendants determined her accrued benefit as a single life only annuity to be $8,259.90. (Id. at ¶ 368b.) Defendants multiplied that amount by the factor of 8.0 under Plan § 4.3 to arrive at the lump sum payment of $66,079.24. (Id.) The dispute here concerns calculations and payments of lump sums going back to 1987 although the cross motions address claims arising out of actions taken from 2001 through 2003.
While plaintiffs pursue this benefits-contract claim at summary judgment, the statutory context informs plaintiffs' theory of liability. In brief, Internal Revenue Code § 417(e)(3), 26 U.S.C. § 417(e), requires that lump sum distributions "shall not be less than the present value calculated by using the applicable mortality table and the applicable interest rate." See also ERISA § 205(g), 29 U.S.C. § 1055(g)(3)(A) ("[T]he present value shall not be less than the present value calculated by using the applicable mortality table and the applicable interest rate."). Plaintiffs also rely on a treasury regulation which provides that a defined benefit plan may have additional lump sum provisions that provide for lump sums that are more generous than the mandatory minimum established through § 417(e)-compliant provisions. Treas. Reg. § 1.417(e)1(d)(5).
As for the terms of the contract, plaintiffs rely on § 4.2 describing the benefit payment as the "actuarial equivalent" and § 1.2 defining the "actuarial equivalent."
(1993 Plan (dkt. # 310) ¶¶ 1.2, 4.2.)
Section 4.3 describes the lump sum or single sum equivalent distribution provides as follows:
(Id. at ¶ 4.3.)
In 2001, defendants recognized that their calculations of lump sum distributions may run afoul of the requirements in IRC § 417(e). Based on this, defendants began calculating and paying lump sum distributions consistent with their reading of § 417(e) sometime in late 2001 or early 2002. (Pls.' PFOFs (dkt. #335) ¶ 179.) In February 2002, defendants also amended § 4.3 of the Plan to adopt a provision in conformance with the requirements of § 417(e):
At the same time, defendants also adopted definitions of "Applicable Interest Rate" and "Applicable Mortality Table." (2002 Plan (dkt. # 312-2) §§ 1.57, 1.58.) These definitions reflect the so-called "GATT factors" generated by the 30-year Treasury bond rate and applicable mortality table (published by the IRS).
Plaintiffs maintain that § 4.2 and § 1.2 of the Plan meet the requirements of calculating lump sum distributions under Internal Revenue Code § 417(e), 26 U.S.C. § 417(e), and ERISA § 205(g), 29 U.S.C. § 1055(g). (See Pls.' PFOFs (dkt. # 345) ¶ 101b (describing these provisions of the Plan as "safety net actuarial equivalent provisions that prevented the Plan from violating 417(e) in calculating lump sum distributions of the accrued benefit"). While the 8.0 factor calculation ensured that defendants only had to pay the account balance as the lump sum distribution, calculating the lump sum distribution consistent with § 417(e) may have resulted in an amount in excess of the hypothetical account balance. According to the calculations performed by plaintiffs' expert, in every year from 1987 to 2002, the minimum lump sum payment generally exceeded the calculation relying on the 8.0 factor. (Expert Report of Lawrence Deutsch ("Deutsch Report") (dkt. #305) p. 50.) Based on the treasury regulation, Deutsch opines that defendants were required to calculate lump sums under both methods and a plan participant should have received the greater of the two amounts. (Id. at pp. 15-16.)
In response, defendants seek refuge in plaintiffs' admission that the pre-amendment Plan was legal as written (e.g., in compliance with ERISA) and argue that § 4.3 provides the sole mechanism for calculating lump sums. Though quoted in full above, that provision provides in relevant part that: "The Single Sum Equivalent shall be equal to the Participant's Accrued Benefit prior to any adjustment for early or postponed commencement multiplied by eight (8)." (1988 Plan (dkt.
Defendants appear to have the upper hand with respect to textual interpretation. Section 4.3 provides the specific method for calculating lump sum distributions regardless of the reference to the actuarial equivalent in § 4.2. See, e.g., 5308 FAB Ltd. v. Team Indus. Inc., No. 10-C-183, 2012 WL 1079886, at *23 (E.D.Wis. Mar. 30, 2012) ("[T]he Court relies upon the Wisconsin law principle of contract interpretation that in the event of a conflict among contract provisions, the more specific provision controls."). Even if it were a closer call, the Pension Committee was expressly granted discretionary authority to interpret the Plan document and resolve any ambiguities. Moreover, defendants' sole reliance on § 4.3 to calculate lump sum distributions is not unreasonable given the express language in that provision. (1988 Plan (dkt. # 309) § 8.7.) See also Conkright v. Frommert, 559 U.S. 506, 512, 130 S.Ct. 1640, 176 L.Ed.2d 469 (2010) (explaining that when a plan document grant a plan administrator the authority "to construe disputed or doubtful terms," that "interpretation will not be disturbed if `reasonable'" (quoting Firestone Tire & Rubber v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989))).
The court need not resolve this issue definitively, however, since these claims are barred by the statute of limitations. Defendants argue that the claims of class members who received lump-sum distributions prior to July 30, 2004, (members of subclasses A, B, E1 and a portion of C) are time-barred because "they were told at the time they elected a lump-sum distribution that their account balances would be their full benefit from the Plan, and they received that lump sum," placing them "on notice, without more, that Meriter had unequivocally repudiated any claim by them to future or different benefits under the Plan." (Defs.' Opening Br. (dkt. # 322) 29.)
In support of that argument, defendants largely rely on Thompson v. Retirement Plan for Employees of S.C. Johnson & Son, Inc., 651 F.3d 600, 606 (7th Cir.2011), in which the Seventh Circuit held that receipt of lump-sum distributions "served as an unequivocal repudiation of any entitlement to benefits beyond the account balance." In so holding, the court rejected an argument — similar to the one made here — that the plaintiffs "could not have understood their injury without seeing the full Plan document." Id. The court reasoned that (1) "the Plan defendants did not improperly conceal the wash calculation in the Plan document"; and (2) that even if the Plan had, the plaintiffs "did not need reference to the Plan to understand their injury; they needed to reference the ERISA statute and the law interpreting it." Id. at 606 & 606 n. 8.
Plaintiffs attempt to distinguish Thompson, arguing that unlike the claims in that case and in Ruppert v. Alliant Energy Cash Balance Pension Plan, they are not claiming that the pre-amendment Plan violated ERISA; rather, plaintiffs seek to enforce certain provisions of the Plan. Therefore, plaintiffs argue, knowledge of ERISA's statutory and regulatory scheme would not provide a source of knowledge of injury.
In that case, the plaintiff alleged that the plan failed to calculate her lump-sum distribution as required by the plan document. Specifically, the defendant in Young allegedly ignored the challenged feature of the plan's term (a "second transition factor"), "communicated that only a single transition factor would be used to calculate opening cash balances," and "consistently paid benefits using this formula." 615 F.3d at 817. The Young court held that the plaintiff did not receive a clear repudiation of her rights until the plan's review committee resolved her administrative appeal. Id. at 816.
In rejecting the defendant's position that accrual occurred at the time Young received her lump-sum benefit, the court reasoned as follows: "at that time, however, the parties' dispute over the correct interpretation of the Plan had not developed. And nothing suggests that the $286,095 payment that Young received should have been a red flag that she was underpaid." Id.; see also Thompson, 651 F.3d at 607 (distinguishing Young, in part, on the basis that "the lump-sum distribution did not place Young on notice that the Plan was ignoring one factor in a complex formula in the plan document").
Unlike in Young, however, ERISA required payment of lump sums consistent with a legal requirement. And like in Thompson and Ruppert, there is a reference point external to the Plan that could provide knowledge — actual or constructive — of plaintiffs' claim.
First, plaintiffs' focus on participants' lack of knowledge of the Plan's 8.0 factor — apparently a unique element of this particular plan — is a red herring. While plaintiffs have demonstrated that the 8.0 factor was generally unknown to plan participants, one would not need to know of the 8.0 factor to calculate the lump sum consistent with IRC § 417(e). In order words, just as the Seventh Circuit found the Thompson plaintiffs could have calculated a lump sum payment requirement under ERISA, a plan participant here could have calculated her benefit as required under § 417(e). In either case, a simple comparison of that calculation against a participant's actual lump sum payment would reflect an underpayment, even though she may be unable to discern how the Plan
Plaintiffs maintain that the Plan's consultants contradicted his conclusion by testifying that "absent affirmative disclosure of the Plan's use of the factor of 8.0 ..., they could not have and would not have thought there had been any underpayment." (Pls.' PFOFs (dkt. # 345) ¶ 168a.) Read in context, however, the actual deposition testimony merely indicates that the consultants could not have determined how the lump sum distribution was calculated without knowing of the factor of 8.0, which is quite different from a plan participant not knowing she had been underpaid. (Enderle Depo. (dkt. #286) 383.) While plaintiffs understandably focus on the 8.0 factor in an attempt to align the facts of this case with Young and avoid the statute of limitations defense, the undisputed facts show plaintiffs need not have referred to the Plan to know that they had been underpaid. Therefore, plaintiffs' § 417(e) claim is much more like the claim in Thompson.
Second, in determining whether the statute of limitations barred plaintiffs' claims, the Thompson court offered an alternative reason for finding accrual: "the Plan defendants did not improperly conceal the wash calculation in the Plan document." Thompson, 651 F.3d at 606. The record is undisputed that plaintiffs could have sought the Plan documents at any time, and those documents would have revealed (1) the adoption of § 4.2 and § 1.2 calculation method to comply with § 417(e); and (2) the § 4.3 method utilizing the 8.0 factor. Moreover, there is no requirement that a pension plan provide plan documents to participants unless a request is made. 29 U.S.C. § 1024(b)(2), (b)(4); 29 U.S.C. § 1132(c).
Even if the court were to find that lump sum distributions did not trigger accrual, there still must be some other triggering event. See Thompson, 651 F.3d at 607 (distinguishing Young on the basis that the plaintiff there exhausted her internal remedy thereby furnishing an alternative accrual date and rejecting plaintiffs' invitation to let them "slip by with no accrual date"). There is no dispute defendants here learned in 2001 that they may have failed to calculate lump sum distributions as required by IRC § 417(e). By 2003, the possibility of underpayment was flagged in publicly-accessible forms submitted to the IRS. Moreover, plaintiffs were alerted — at least sufficiently to find constructive knowledge — of a possible issue. Specifically, around that time, an audit statement which was filed as part of the Plan's IRS 5500 filing with the IRS, Department of Labor and the PBGC, and available for public inspection explained: "During 2002, the Plan sponsor became aware that additional amounts may be due to some former participants of the Plan that were paid out in prior years." (Cohen Decl., Ex. 225 (dkt. # 325-14) 13.)
Putting aside the issue of whether plaintiffs knew or should have known by 2003 of a possible claim concerning payment of lump sum distributions made before 2002, plaintiffs contend that (1) defendants "repudiated any repudiation" by opening the door as to whether they would issue corrective payments; and (2) did not close that door until 2008 when they made a "final decision" not to issue corrective payments." (Pls.' Opp'n (dkt. #354) 43.) However, the undisputed facts do not support
(Cohen Decl., Ex. Ex. 205 (dkt. # 325-8) (emphasis added); see also Pls.' PFOFs (dkt. # 345) ¶¶ 360, 361(a), 361(b) (describing annual Form 5500s submitted for year 2002 through 2008, in which defendants similarly stated a willingness to reevaluate the need for corrective payments if further guidance suggests corrective payments are warranted).) While defendants stated that they would reassess if Congress or the IRS issued further guidance, these statements did not "leave the door open" to the possibility of corrective payments in any meaningful way. Rather, defendants simply confirmed the obvious: they would reevaluate if prompted by some external force, whether it be the Congress, IRS or courts.
Even if defendants had made a promise to reconsider corrective payments based on further contingencies, and then somehow broke that promise by later definitively finding no such contingencies, this would not be a sufficient basis to find a later accrual date. The Seventh Circuit in Ruppert rejected a similar argument, finding that while a later amendment was a "fresh violation," it was not a fresh injury for purposes of determining when a claim accrued. 726 F.3d at 941. The amendment "did not revive claims ... extinguished by the statute of limitations because [those claims] accrued when the claimants received their lump sum payouts more than six years before the suit was filed." Id. at 941-42. As such, the court finds that plaintiffs' claims accrued when the lump sum distributions were paid or, in any event, no later than 2003 when defendants made publicly-accessible statements about possible underpayment of lump sum distributions.
On the other hand, defendants would move up the accrual date by arguing that various communications to Plan participants (e.g., SPDs, brochures and individual accounts statements) beginning in 1987 consistently and clearly provide that the account balance equals the lump sum distribution. (Defs.' PFOFs (dkt. #316) ¶¶ 31-41.) Indeed, plaintiffs' own expert concedes that Meriter consistently communicated that the account balance equaled the lump sum distribution. (Id. at ¶ 16 (citing Deutsch Report (dkt. # 305) pp. 48-49).) From this, defendants argue that all claims of participants who were participating in the Meriter Plan (regardless of whether they had received a lump sum distribution yet) as of July 29, 2004, are barred by the statute of limitations.
Perhaps these various communications offer more information than available in the communications at issue in Ruppert and Thompson — where the courts rejected similar arguments that the claims accrued based on communications pre-dating lump sum distributions — the defendants' own actions here call into question whether they repudiated any claim to a lump sum distribution greater than a participant's account balance. After recognizing that their practice of paying the account balance as
In addition to targeting the accrual date, plaintiffs also seek to toll the statute of limitations through the doctrines of equitable estoppel and equitable tolling. Neither doctrine, however, applies because both presuppose earlier knowledge of the injury. First, with respect to equitable estoppel, plaintiffs contend that defendants "effectively promised" their auditors that they would not plead the statute of limitations by promising to make corrective payments. (Pls.' Opening Br. (dkt. #337) 162.) As described above, the record simply does not support this characterization, even viewed in a light most favorable to plaintiffs. Defendants simply promised to make corrective payments if the IRS or Congress issued further guidance on the requirement. There was no outright promise to correct past payments.
Even if plaintiffs had met their burden of establishing an issue of fact as to defendants' supposed promise to make corrective payments, that promise was not to waive any applicable statute of limitations as a matter of fact or equity. Stated another way, there is no evidence that defendants took affirmative steps to lull plaintiffs and thereby warrant equitable estoppel — as distinct from efforts to conceal the injury, which would simply alter the discovery of the injury and would not serve as a basis to toll the statute of limitations. See Cada, 920 F.2d at 450-51.
Second, equitable tolling does not apply, because there is no evidence that plaintiffs had discovered an injury but lacked vital information to know whether the injury was caused by defendants' wrongdoing. See id. at 451. The court concludes that a participant's claim premised on defendants' failure to pay the actuarial equivalent as defined in § 4.2 and § 1.2 of the Plan accrued at the time a plaintiff received his or her lump sum distribution as a matter of law and equity. As such, any distributions plaintiffs received before July 30, 2004, are barred.
Plaintiffs also assert a claim that defendants violated the terms of the pre-amendment Plan by failing to provide projected indexing through the normal retirement age of 65 for those plan participants who opted to receive benefits before age 65, either in the form of a lump sum distribution (subclass B) or annuity (subclass
Section 1.1 of the pre-amendment Plan defines "accrued benefit" as follows:
(1988 Plan (dkt. #309) § 1.1 (emphasis added).) The Normal Form is defined in § 1.32 with reference to § 3.12, which, in turn, describes a monthly annuity equal to one-twelfth of the accrued benefit. (Id. at §§ 1.32, 3.12.) Section 3.14 is discussed in greater detail below, but in brief, provides an indexing or interest rate of 4% per year, absent an increase adopted by the Pension Committee.
The 2002 Plan amended § 4.3 to provide for indexing to age 65: "The Single Sum Equivalent shall be the Participant's Accrued Benefit payable at Normal Retirement Date multiplied by an Actuarial Equivalent Factor." (2002 Plan (dkt. # 312-2) ¶ 4.3.) Even before this amendment, however, defendants concede that "as of January 1, 2002, the Plan was changed prospectively to include future indexing through normal retirement age," though future indexing was only included in calculating lump sum distributions under the § 417(e) method and not when calculated using the factor of 8.0. (Defs.' Resp. to Pls. PFOFs (dkt. # 358) ¶ 200a.)
In sole support of their claim of future indexing, plaintiffs rely on their expert's testimony about what the Plan requires. While the court struck any legal opinion in Deutsch's report, the court will nonetheless consider his interpretation of § 1.1 as plaintiffs'. Deutsch recognizes "two distinct
In their reply brief, plaintiffs point to language in § 4.3 quoted in full above, which provides that "[t]he Single Sum Equivalent shall be equal to the Participant's Accrued Benefit prior to any adjustment for early or postponed commencement multiplied by eight (8)." (1988 Plan (dkt. # 309) § 4.3 (emphasis added).) The use of "prior to" need not mean that the Plan requires indexing to age 65; rather § 3.10 and § 3.11 provide for pension benefits in the case of early retirement (between age 55 and 65) and late requirement (after age 65) and require adjustments in both instances. As such, the use of "prior to" in § 4.3 means multiplying the accrued benefit by an 8 before applying the provisions of § 3.10 and § 3.11. Regardless, § 4.3 refers to the definition of accrued benefit in § 1.1 and that provision does not require future indexing to age 65.
Plaintiffs alternatively argue that § 1.1 must be read to require future indexing because the accrued benefit was not conditioned on future employment and is therefore "nonforfeitable." (Pls.' Opening Br. (dkt. # 337) 81 (citing Williams v. Rohm & Haas Pension Plan, 497 F.3d 710, 714 (7th Cir.2007)).) This argument presupposes that the Plan document provided for future indexing to age 65, like the plan in Williams provided for a cost of living increase allowance. In other words, plaintiffs' argument puts the cart before the horse — there is nothing about the language of § 1.1 alone or in other provisions of the Plan that requires future indexing to age 65. The fact that the accrued benefit was not conditioned on future employment does not further plaintiffs' argument that the Plan contains this requirement.
Plaintiffs also challenge whether defendants: (a) properly amended the Plan as required under § 10.1; and (b) provided notice of the changes in the amended plan consistent with the requirements of ERISA § 204(h), 29 U.S.C. § 1054(h)(6)(A).
Section 10.1 of the Plan — both in the pre-amended Plan documents, as well as the May 2003 operating plan reflecting the amended plan — provides in pertinent part:
(1988 Plan (dkt. # 309) § 10.1; 1993 Plan (dkt. # 310) § 10.1; 2002 Plan (dkt. # 312-2) § 10.1; 2003 Operating Plan (dkt. # 314-20) § 10.1.) In addition, ERISA itself requires that "a plan may be amended only pursuant to its express terms." Downs v. World Color Press, 214 F.3d 802, 805 (7th Cir.2000) (citing 29 U.S.C. § 1102(a)-(b)); Brewer v. Protexall, Inc., 50 F.3d 453, 457 (7th Cir.1995); see also Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 84, 115 S.Ct. 1223, 131 L.Ed.2d 94 (1995) ("The procedure may be simple or complex, but whatever level of specificity a company ultimately chooses, in an amendment procedure or elsewhere, it is bound to that level.") (internal quotation marks omitted).
Despite being directed to do so by formal resolution of the Board of Directors, there is no meaningful dispute that defendants failed to execute a written, amended Plan containing the changes approved by the Board in August 2002 with an effective date of January 1, 2003. Indeed, the undisputed record demonstrates that defendants did not execute an amended Plan until January 23, 2009. The only "evidence" to the contrary is defendants' equivocal representation that they "have not located a copy of this Board-approved plan document [referring to the May 2003 operating plan] signed by a company executive." (Defs.' Resp. to Pls.' PFOFs (dkt. # 358) ¶ 247c; see also Defs.' PFOFs (dkt. #316) ¶¶ 54-56.) Even with respect to the apparent implication of this representation — that perhaps such a document may exist or once existed — defendants offer no record support. For example, defendants offer no affidavit or declaration from anyone that the document ever existed. Indeed, defendants do not even include a declaration of the custodian of plan documents about his or her search efforts. Such a barebones representation is insufficient to raise a genuine issue of material fact as to whether the written Plan was formally amended in 2003.
Instead, defendants argue that "the Board of Directors['] resolution constituted a written instrument executed on behalf of the Company and which resolved that the Plan be amended in accordance with the recommendations of the [Pension Committee], a set of written recommendations that represented the amendments to take place on January 1, 2003." (Defs.' Opp'n (dkt. # 363) 88.) In support of this argument, defendants submit three, contemporaneously written documents. The first document is meeting minutes, dated July 31, 2002, of the Pension Design Committee, in which the committee
(Hoffner Decl., Ex. G (dkt. # 314-7).) The committee also discussed the "Factor of 8 Change." (Id.)
The second document is meeting minutes from the Executive Compensation and Pension Committee ("ECPC") from August 16, 2002. (Hoffner Decl., Ex. H (dkt. # 314-8).) In that meeting, the committee reviewed two options, and ultimately voted to recommend Option B to the full Board of Directors. (Id.) The meetings described Option B as
(Id.) During the meeting, the committee also discussed the impact of the Plan changes on "older employees (age 60 and up)" and agreed to "grandfather them into the old annuity calculation." (Id.)
As reflected by minutes from a meeting of the full Board held on August 28, 2002, the Board also considered and voted on ECPC's plan redesign recommendation (along with several other topics). (Hoffner Decl., Ex. I (dkt. # 314-9).) Those minutes indicate that Mr. Pollock, a member of the ECPC, "explained the issues that require Meriter to redesign its pension plan and described the main features of the proposed design, as well as the alternatives considered." (Id. at p. 5.) After some discussion, the Board of Directors passed the following resolution:
(Id.) The meeting minutes were signed by Regina Millner, Chair of the Board of Directors. (Id. at p. 6.)
Defendants urge the court to consider the recommendations of the ECPC and recorded vote of the Board alongside the resolution as sufficient to satisfy the requirements of § 10.1, since it purports to incorporate the recommendations and amendments. (Defs.' Opp'n (dkt. #363)
The July 2002 minutes from the Pension Design Committee fare better; but in those minutes, there was no action taken by that committee and no link between the terms of the amendment described in those minutes and the "Option B" presented to the full Board for approval. Further, § 10.1 contemplates a written instrument of an amendment as distinct from the Board's resolution approving the amendment. The court, therefore, finds that the August 28, 2002, board resolution fails to satisfy the requirements of § 10.1 in amending the plan.
Alternatively, defendants argue that the amendment was ratified based on their subsequent actions. (Defs.' Opp'n (dkt. #363) 89.) For support, defendants cite to Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 115 S.Ct. 1223, 131 L.Ed.2d 94 (1995), in which the Supreme Court held that the amendment procedure in a welfare plan satisfied the requirements of ERISA § 402(b)(3), vacated a court of appeal's order holding otherwise, and remanded for consideration of whether the amendment procedure was followed. In remanding, the Supreme Court specifically also instructed the court of appeals to consider if the amendment of the plan — termination of post-retirement health care benefits — was ratified through subsequent actions: "If the new plan provision is found not to have been properly authorized when issued, the question would then arise whether any subsequent actions ... served to ratify the provisions ex post." Id. at 85, 115 S.Ct. 1223.
Schoonejongen and the other case cited by defendants, Halliburton Co. Benefits Committee v. Graves, 463 F.3d 360 (5th Cir.2006), decision clarified in denial of rehearing by 479 F.3d 360 (5th Cir.2007), both involve ratification of amendments impacting welfare plans, as compared to the pension plan at issue here. The Supreme Court in Schoonejongen stressed the difference between a welfare plan and a pension plan, specifically noting that employers are "generally free under ERISA, for any reason at any time, to adopt, modify or terminate welfare plans," in part because ERISA does not establish the same protections for welfare plans as for pension plans. Id. at 78, 115 S.Ct. 1223. As plaintiffs point out, cases concerning ratification of an amendment of a welfare plan through subsequent actions arguably have limited weight in the context of an amendment of a pension plan.
Still, it is undisputed that the defendants here: (1) intended to amend the plan; (2) timely advised Plan participants, the Department of Labor and the IRS of the amendment; and (3) subsequently administered the Plan consistent with the amendment. While the court is reluctant to endorse a theory of ratification which would effectively swallow ERISA's requirement that a plan may be amended only through its terms, ratification seems an appropriate remedy even under ERISA where defendants apparently failed to execute the final document through sheer oversight after being formally "authorized and directed" to so do by Board resolution; where the defendants contemporaneously notified all impacted parties, including Plan participants, that they had done so and subsequently consistently acted accordingly; and where there is no argument that plaintiffs were prejudiced by the failure to execute the document.
In the alternative, defendants seek reformation from the court, finding the May 2003, unsigned operating plan executed for purposes of satisfying § 10.1 and ERISA. The court previously denied
In any event, in finding both ratification and reformation, the May 2003 operating plan satisfied § 10.1 and ERISA's written plan requirement. Even if it did not, the fact that the amendment of a plan be accomplished consistent with its express terms is an ERISA requirement, as well as the fact that defendants did not improperly conceal any failure to follow this technical requirement, means that plaintiffs' claim premised on defendants' failure to properly amend the Plan in 2003 accrued at that time and is now time-barred. See discussion, supra, Section I; see also 29 U.S.C. § 1024(b)(2), (b)(4) (requiring the plan administrator to make copies of the plan available upon written request); Thompson, 651 F.3d at 606 (finding claim time-barred where ERISA's statutory and regulatory scheme provided knowledge of injury and defendants did not "improperly conceal" the basis of the claim in Plan documents").
In a related claim to the 2003 amendment, plaintiffs challenge the adequacy of the notice issued to participants in late 2002. Specifically, plaintiffs contend that the notice failed to provide sufficient information to allow participants to understand the effect of the amendment and that this failure was "egregious."
Section 204(h) of ERISA provides in pertinent part:
Moreover, an "intentional failure" to comply with the notice requirement or a "failure to provide most of the individuals with most of the information they are entitled to receive under this subsection" is deemed an "egregious" failure by ERISA § 204(h)(6)(B). 29 U.S.C. § 1054(h)(6)(B).
Section 204(h) was amended as part of the Economic Growth Act and Tax Return Reconciliation Act of 2001 ("EGTRRA"). That amendment contained a safe harbor until regulations were adopted. During the interim period, "a plan shall be treated as meeting the requirements of such sections if it makes a good faith effort to comply with such requirements." EGTRRA § 659(c)(2). The regulations that were subsequently adopted similarly provided for plan amendments taking effect before September 2, 2003 (the effective date of the regulations), the requirements of "section 204(h), as amended by EGTRRA, are treated as satisfied if the plan administrator makes a reasonable, good faith effort to comply with those requirements." 68 Fed.Reg. 17, 277, Q & A(18) (Apr. 9, 2003) (codified 26 C.F.R. pts. 1, 54, and 602).
Defendants issued the applicable § 204(h) notice in October 2002, thus falling within the "safe harbor" period. The three-page notice described an amendment to the Plan effective January 1, 2003, which may change "the rate at which your accrued benefit grows in the future." (Hoffner Decl., Ex. (dkt. # 314-10) p. 2.) The notice also describes (1) changes to the annual employer credits (4.5% of earning for employees with less than 10 years of service, 6.0% for employees with between 10 and 20 years of service, and 7.5% for individuals with 20 or more years of service) and (2) changes in the annual interest credits to be established based on interest rates and mortality tables prescribed by the Internal Revenue Service. (Id.) The notice also acknowledges that "future annuity accruals for some participants under the new version of the Plan will be reduced, meaning that the future value of Company-paid annuity benefits will be less than it would have been had the provisions of the prior version of the Plan remained in effect." (Id.) On the second page, the notice reiterates that "[a]s a result of the use of interest rates and mortality tables prescribed by the IRS in the new Plan, the monthly annuity benefit payable to you may not increase for several years, even though your account balance will grow as a result of annual employer credits and interest credits." (Id. at p. 3.) Lastly, participants were informed that the effect of this change "will vary from participant to participant, based on each participant's age, service and pay level," and the notice encourages participants to review examples attached to the
Despite these disclosures, plaintiffs maintain the notice failed to provide most of the information the participant needed to understand the effect of the amendment, including concealing or failing to disclose the fact that:
(Pls.' Opening Br. (dkt. # 337) 99.) While the plain language of the notice appears to undermine plaintiffs' challenges, especially giving defendants the benefit of the good faith safe harbor provision, the court need not resolve the arguable merits of this claim, however, because any claim based on the inadequacy of the § 204(h) notice is barred by the statute of limitations.
Defendants posit that the appropriate statute of limitations for § 204(h) claims is found in Wisconsin's six-year statute of limitations for breach of contract claims, Wis. Stat. § 893.43. (Defs.' Opening Br. (dkt. #322) 31-32 n. 15.) As far as the court has been able to discern, the Seventh Circuit has not yet considered the statute of limitations for such a claim, though another district court in this circuit has applied the contract statute of limitations to § 204(h) claims. See Hakim v. Accenture U.S. Pension Plan, 656 F.Supp.2d 801, 818 (N.D.Ill.2009) (applying Illinois's 6-year statute of limitations for contract claims to § 204(h) claims). In any event, plaintiffs do not challenge the applicability of a six-year statute of limitations in their opposition brief, and the court finds its application to be reasonable. Moreover, § 204(h) claims accrue when "the employee knew or should have known that the amendment has brought about a clear repudiation of certain rights that the employee believed he or she had under the plan." Romero v. Allstate Corp., 404 F.3d 212, 223 (3d Cir. 2005); see also Hirt v. Equitable Retirement Plan for Employees, Managers & Agents, 285 Fed.Appx. 802, 804 (2d Cir. 2008) (holding that a § 204(h) claim "accrues upon a clear repudiation by the plan that is known, or should be known, to the plaintiff").
Plaintiffs argue that participants did not have actual or constructive knowledge of defendants' repudiation because they could not understand what they were giving up. This argument fails for a variety of reasons. As an initial matter, the notice itself describes an amendment which would change both the annual employer credits and the interest rate. The notice also stated future annuity accruals would be reduced for some participants and that the future value of the annuity benefits will be less than under the prior version of the Plan and encouraged them to review specific attached examples illustrating the effect of the change depending on a participant's "age, service and pay level." Even if these statements were lacking, plaintiffs were certainly on notice of defendants' repudiation of benefits under the prior plan. Moreover, as set forth in the court's prior determination, defendants' publicly-accessible statements in a 2003 audit and in Form 5500s beginning in 2002 placed plaintiffs on notice of a possible error in calculating plaintiffs' benefits. All of this knowledge (whether actual or constructive) was sufficient to trigger accrual of any claims premised on the inadequacy of the § 204(h) notice, providing participants with six years — until late 2008 — to bring a challenge
Plaintiffs also raise challenges concerning defendants' administration of the Plan after January 1, 2003.
Plaintiffs spend a significant portion of their brief describing "wear-away" associated with defendants' post-2003 administration of the Plan, contending that "[i]n transitioning to a cash balance formula, Defendants created an opening account balance which produced an accrued benefit payable as an annuity at retirement that was lower than the benefit to which participants were already legally entitled." (Pls.' Opening Br. (dkt. # 337) 102.) This is because defendants calculated the account balances based on the pre-January 2002 method of calculating lump sums without including (1) an alternative lump sum distribution calculation pursuant to § 417(e) and (2) indexing through normal retirement age. Plaintiffs' expert estimates that the transition created a 33% deficit.
As far as the court can discern, plaintiffs have not alleged a stand-alone, wear-away claim. Rather, plaintiffs claim that wear-away or freezing of benefits were the result of defendants' (1) failure to amend the Plan in 2003, which meant benefits should have accrued under the pre-amendment Plan until early 2009; (2) egregious failure to provide sufficient information for participants to understand the effect of so-called wear-away as required by § 204(h); and (3) breach of fiduciary duty claims. The court's conclusions above in Section II of this opinion moot any recovery premised on the first two claims. The court will take up plaintiffs' claim that defendants breached their fiduciary duties in failing to disclose wear-away in the section III below.
To the extent plaintiffs intended to allege an independent claim for wear-away, it would also be time-barred because the alleged wear-away or freeze occurred (or at least commenced) in early 2003 when defendants began administering the Plan based on the May 2003 operating plan. By that time, defendants had transitioned plaintiffs' benefits to the new plan, and plaintiffs knew or should have known about any wear-away claim based on the § 204(h) notice. See Winnett v. Caterpillar, Inc., 609 F.3d 404, 410 (6th Cir.2010) ("[T]he accrual of a cause of action turns on when subclass members knew of Caterpillar's change in benefits, not when they felt its effects.").
Plaintiffs cite to this court's opinion in Ruppert v. Alliant Energy Cash Balance Pension Plan, 255 F.R.D. 628 (W.D.Wis. 2009), to rebut defendants' argument that a claim accrues when participants know of a change, not when they feel the effect of the change. In Ruppert, however, the court concluded that the claim did not accrue until the calculation had been completed, because it was the calculation that caused the injury. Id. at 634. Similarly, the court finds here that the statute of limitations accrued once the participants' benefits were transitioned to the new plan and defendants calculated the benefits — reflecting any claimed wear-away — based on the amended plan.
Alternatively, plaintiffs argue that "even if [defendants] committed an actionable
Plaintiffs also allege that the 2009 amendment of the Plan violated ERISA's anti-cutback claims. Under ERISA § 204(g), 29 U.S.C. § 1054(g), "[t]he accrued benefit of a participant under a plan may not be decreased by an amendment of the plan, other than an amendment described in section 1082(d)(2) or 1441 of this title." See also IRC § 411(d)(6), 26 U.S.C. § 411(d)(6) ("A plan shall be treated as not satisfying the requirements of this section if the accrued benefit of a participant is decreased by an amendment of the plan...."). Plaintiffs allege that the amendment violated the anti-cutback provisions by eliminating (1) the greater of 4% or 75% of the return on the plan's net assets indexing rate; and (2) the 8.0 factor. (Pls.' Opening Br. (dkt. #337) 137.)
These claims, however, hinge on plaintiffs' theory that the plan was not properly amended in 2003, and therefore plaintiffs continued to accrue benefits under the old Plan until cutback by the 2009 amendment. Absent this theory, there is no "accrued benefit" that was decreased by a later amendment of the Plan. And again, even if the court were to consider the merits of plaintiffs' indexing rate theory, that claim would be barred by the statute of limitations because plaintiffs knew or should have known in late 2002 that the amendment repudiated any right to indexing based on the performance of the Plan. Specifically, communications to plan participants, including the § 204(h) notice, disclosed that the indexing rate going forward under the amended Plan would be the greater of 4% or equal to the annual yield on 10-year Treasury Constant Maturities.
Finally, plaintiffs allege breach of fiduciary duty claims pursuant to ERISA § 404(a)(1), 29 U.S.C. § 1104(a)(1). This provision of ERISA defines four specific fiduciary duties. Of those, plaintiffs allege defendants violated the duties to act: for the "exclusive purpose" of participants and their beneficiaries (§ 404(a)(1)(A)); with the care, skill, prudence and diligence of a "prudent man" (§ 404(a)(1)(B)); and in accordance with the plan documents to the extent those plan documents are consistent with ERISA (§ 404(a)(1)(D)).
As an initial matter, defendants challenge whether plaintiffs pled a breach of fiduciary duty claim, insisting instead that they only allege "Meriter failed to properly calculate benefits," and "assert no harm connected with any of the[] alleged `misrepresentation's or failure to disclose." (Defs.' Opp'n (dkt. #363) 48.) As the court reads the amended complaint, plaintiffs do allege breach of fiduciary duty claims generally. (Am. Compl. (dkt. #39) ¶ 208.) Plaintiffs also allege defendants failed to act for the exclusive purpose of the participants in failing to disclose information about the Plan or their administration of the Plan. (Id. at ¶ 156 (alleging
Defendants also argue that plaintiffs' amended complaint did not specifically seek a sur-charge as a remedy for a breach of fiduciary duty claim. However, plaintiffs did seek equitable relief from this court, and sur-charge is simply an equitable remedy available under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3). See Killian v. Concert Health Plan, 742 F.3d 651, 672 n. 50 (7th Cir.2013) (en banc) (describing equitable relief under ERISA as including "monetary payments through estoppel and `surcharges'") (citing CIGNA Corp. v. Amara, ___ U.S. ___, 131 S.Ct. 1866, 179 L.Ed.2d 843 (2011)). Moreover, defendants' argument that plaintiffs may not rely on the catchall provision of § 502(a)(3) as a remedy for their breach of fiduciary claim directly contradicts the Supreme Court's core holding in Amara, affirming district court's award under § 502(a)(3) of "reformation of the terms of the plan, in order to remedy the false or misleading information CIGNA provided." CIGNA Corp., 131 S.Ct. at 1879-80.
Defendants' objections aside, plaintiffs posit the following basic theories at summary judgment in support of their breach of fiduciary claims, all of which are premised on defendants' alleged actions in response to the § 417(e) issue: (1) questioned whether to provide corrective lump sum payments in 2001 and left that question open until at least 2008; (2) conducted claims review without telling participants that their "claim" for corrected payments was denied; (3) promised plan auditors and the Department of Labor that they would make corrective payments; and (4) fraudulently concealed from participants the existence of their claims. Plaintiffs also claim that defendants breached their fiduciary duties by both failing to disclose and in concealing the alleged wear-away provision in the amended plan.
Defendants move for summary judgment on plaintiffs' breach of fiduciary duty claims, arguing that plaintiffs had actual knowledge of the alleged breach by January 1, 2003, and therefore the claim needed to be filed within three years, by January 1, 2006. (Defs.' Opening Br. (dkt. #322) 39.)
Unlike the other provisions discussed above, the statute of limitations for a breach of fiduciary duty claim under ERISA § 413, 29 U.S.C. § 1113, is the earlier of:
Here, defendants' alleged acts constituting a breach of their fiduciary duties occurred in 2001 or 2002, and certainly by 2003. Six years after would be no later than 2009. As for when plaintiffs had actual knowledge of defendants' breach or violation, that date is difficult, if not impossible, to determine on summary judgment. Since ERISA § 413 provides that the statute of limitations runs out on the earlier of these dates, however, the limitations period
Still, as plaintiffs point out, "the statute does allow an exception under the limitations period in instances of fraud or concealment." Laskin v. Siegel, 728 F.3d 731, 735 (7th Cir.2013). "Under those circumstances, the statute of limitations period allows an action to be commenced six years after the plaintiff actually learned of the breach." Id. The Seventh Circuit recognized two types of "fraud" for purpose of determining the statute of limitations for ERISA breach of fiduciary claims: "(1) overt acts that misrepresent the significance of facts of which the beneficiary is aware; and (2) underlying ERISA violations that are self-concealing." Id. "[A] finding of concealment requires evidence that a defendant took affirmative steps to hide the violation itself." Id.
For reasons already explained above, the court has already rejected plaintiffs' characterization of the record as permitting a finding that defendants (1) misled plaintiffs by leaving open the possibility of corrective payments until 2008, (2) conducted a claims review without informing participants in writing of the denial, or (3) promised in any meaningful way to make future payments. With respect to plaintiffs' breach of fiduciary duty claims premised on defendants' alleged failure to timely disclose the § 417(e) issue, plaintiffs have, however, put forth sufficient evidence to overcome defendants' statute of limitations defense with respect to their claim that defendants (1) knew that the Plan had failed to pay lump sum distributions as required by IRC § 417(e) and ERISA § 205(g) in late 2001, and (2) took affirmative steps to hide the violation.
For example, in early 2002 — after defendants had begun to calculate an alternative lump sum distribution as required by § 417(e) — defendants issued a lump sum distribution to one pension participant for approximately $1400 more than his account balance. (Pls.' PFOFs (dkt. #345) ¶¶ 244a, 244b.) In explaining the reason, defendants simply stated that the increased amount was from delay in the Board approving an interest rate. (Cohen Decl., Ex. (dkt. #338-1).) This letter at least raises an inference defendants were attempting to conceal the fact that they had shifted the method for calculating lump sum distributions to avoid raising questions about past calculations. This inference finds additional support in notes from meetings of the Pension Committee in 2002 suggesting members were concerned about the statute of limitations of such claims and had also raised concerns about whether issuing corrective payments would trigger legal challenges. (Cohen Decl., Ex. 108 (dkt. #336-2); id., Ex. 100 (dkt. #334-16).) Lastly, the fact that defendants rolled out an amended Plan in the wake of warnings by their auditors also raises questions about whether defendants hoped to hide past mismanagement of plaintiffs' benefits as part of a redesign effort. In total, plaintiffs have put forth sufficient evidence to demonstrate defendant took affirmative steps to conceal the § 417(e) violation and, in turn, breached their fiduciary duties of acting for the exclusive purpose of plan participants and their beneficiaries.
With respect to the wear-away claim, plaintiffs simply argue that defendants failed to adequately disclose this provision of the amended plan. (Pls.' Opening Br. (dkt. #337) 141-12.) To extend the statute of limitations, however, plaintiffs must point to evidence demonstrating that defendants either "misrepresent[ed] the significance of facts the beneficiary is aware of (fraud) or [hid] facts so that the beneficiary does not becomes aware of them (concealment)." 29 U.S.C.
In light of this decision, the court trial set to begin on Monday, July 28, 2014, will solely address whether defendants breached their fiduciary duty to act for the exclusive purpose of plan participants and beneficiaries by concealing defendants' failure to pay lump sum distributions as required under IRC § 417(e) from the Plan's inception on October 1, 1987, to December 31, 2002.
IT IS ORDERED that:
1) plaintiffs' motion for partial summary judgment (dkt. #300) is DENIED; and
2) defendants' motion for partial summary judgment (dkt. #302) is GRANTED IN PART AND DENIED IN PART as described above.
