By:  Mark Casciari and Violet Borowski

If a participant never received notice of a plan’s termination and suffered injury as a result, is the ERISA statue of repose nonetheless a time-bar to the litigation?

On August 29, 2013, in a decision on which Seyfarth Shaw served as appellate counsel for one of the defendants, the Court of Appeals for the Seventh Circuit answered YES.

In Laskin v. Siegel, Nos. 12-3041 & 12-3153, 2013 WL 4577123 (Aug. 29, 2013 7th Cir.), the plaintiffs alleged a fiduciary breach when their ERISA pension plan was terminated without the distribution of their accrued benefits.  Plaintiffs alleged that they never received notice of the termination.  They sued 17.5 years after the termination.

The district court granted summary judgment in favor of the defendants, holding the claims time barred by ERISA’s six-year statute of repose in 29 U.S.C. § 1113.

The Seventh Circuit affirmed.  The Court found the last act or omission in this case occurred in 1991 when the plan was terminated, and that plaintiffs did not sue six years thereafter.

Plaintiffs said that they learned that they would not be receiving a payout under the plan until September 2008, and that the three-year limitation period in the statute should apply.  But 29 U.S.C. § 1113 requires that the earlier of the two dates be used, so, the Court said, the limitations period still expired in 1997.

Plaintiffs argued as well that the Court should grant an exception due to the defendants’ fraudulent concealment.  The ERISA limitations statute allows the commencement of an action six years after the plaintiff actually learned of the breach in the instance of fraud or concealment.  The Court rejected this argument because plaintiffs offered no evidence that fraud or concealment actually occurred.

There was evidence that the defendants failed to send Summary Plan Descriptions to the plaintiffs (and, as noted, did not inform them of the plan’s dissolution).  But the Court said that concealment requires evidence that a defendant took affirmative steps to hide the violation itself.  The Court said that plaintiffs did not produce any evidence that the ERISA violations involved some “trick or contrivance intended to exclude suspicion and prevent injury.”

So, if an employer commits a fiduciary breach and engages in no cover-up, but the plaintiff waits more than six years to sue, is the breach nonetheless a non-event under the law?  The answer is YES.  ERISA is a carefully calibrated statute and is intended to offer plan sponsors incentives to establish plans voluntarily, and one incentive is a very favorable statute of repose for fiduciary breaches.