Blogging Employee Benefits

January 27, 2006

Failure to Discover Breach Doesn’t Toll ERISA Statute of Limitations

Filed under: Litigation — Fuguerre @ 9:58 pm

Starting the running of the statute of limitations on the date of discovery of the breach, absent “fraud or concealment,” would prevent the fiduciary from being able to recognize a firm cutoff date for future breach of duty claims, which is inconsistent with a statute of repose.

Pension plan participants’ complaint alleging breach of fiduciary duties was time-barred by ERISA’s 6-year statute of limitations, according to a divided 3rd Circuit Court of Appeals affirming district court dismissal of the complaint. [Ranke v. Sanofi-Synthelabo Inc., CA3, No. 04-4514, 1/27/06] Circuit Judge Alito concurred with Circuit Judge Lourie writing the majority opinion of the court.

Plaintiffs were former employees of Kodak who had accepted transfer to a subsidiary on the basis of pension promises made by human resources personnel. The Kodak subsidiary was later acquired by Sanofi-Synthelabo, whereupon again pension promises were made to the affected employees. Not until 8 years later, when the employees received benefit election forms with estimates of pension benefit amounts, did they realize that those amounts were not what they believed had been promised. The employees filed suit. The district court dismissed the suit, ruling that the period for ERISA’s 6-year statute of limitations started at the latest point of the fiduciaries’ alleged misrepresentations, absent fraud or concealment. The appellate court has affirmed the dismissal, finding that the employees’ detrimental reliance had accrued when the alleged misrepresentations were made and that the clock was not reset by later detrimental reliances.

In dissent, Circuit Court Ambro gave weight to a fiduciary’s duty to disclose, failure of which would start the limitations clock only upon a participant’s discovery of the omitted information. “A duty to inform would further ERISA’s goals and protect ERISA beneficiaries from being cheated out of their rightful claims by a fiduciary’s six-year wall of silence,” Ambro concluded.

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