Erisa: Fumbling the Limitations Period

• Publication year: 2021

84 Nebraska L. Rev. 313. ERISA: Fumbling the Limitations Period

313

George Lee Flint, Jr.*

ERISA: Fumbling the Limitations Period

TABLE OF CONTENTS

I. Introduction ...................................................... 314
II. Circuit Court Decisions .......................................... 318
A. The Rule of State Statute of Limitations ...................... 319
1. The Informational Penalty Lawsuit .......................... 319
2. The Benefits Due Lawsuit ................................... 320
3. The Equitable Remedy Lawsuit to Enforce Plan
Provisions ................................................. 322
4. The Employer Retaliatory Discrimination
Lawsuit .................................................... 323
5. The Delinquent Employer Contribution
Lawsuit ..................................................... 325
B. Avoiding State Statutes of Limitations
Contractually ................................................. 327
C. Origins of the State Statute of Limitations Rule .............. 329
1. The Informational Penalty Lawsuit .......................... 330
2. The Benefits Due Lawsuit ................................... 330
3. The Equitable Remedy Lawsuit to Enforce Plan
Provisions ................................................. 332
4. The Employer Retaliatory Discrimination
Lawsuit .................................................... 332
5. The Delinquent Employer Contribution
Lawsuit .................................................... 333
III. Determinative Principles ........................................ 334
A. ERISA's Legislative History ................................... 335
1. The Mandate to Use the LMRA Practice ....................... 335
2. The Mandate for Interstate Uniformity ...................... 336
3. The Mandate for Trust Law .................................. 342
B. The Correct Rule .............................................. 344
IV. The Solution ..................................................... 348

314

A. The Congressional Specification of a Statute of
Limitations ................................................... 349
1. The Informational Penalty Lawsuit .......................... 352
2. The Benefits Due Lawsuit ................................... 354
3. The Equitable Remedy Lawsuit to Enforce Plan
Provisions ................................................. 355
B. Court Implication of a Limitations Period ..................... 356
1. The Employer as an ERISA Fiduciary ......................... 356
2. The Implication of a Limitations Period .................... 360
C. The Plan Specified Period of Limitations ...................... 365
V. Conclusion ........................................................ 366

I. INTRODUCTION

Current scholarly writings concerning the Employee Retirement Security Act of 1974 ("ERISA")(fn1) have noted recent problems arising in the development of the proper statute of limitations period for an ER-ISA action.(fn2) While the Supreme Court could reduce the amount of this ERISA litigation by declaring a simple uniform federal rule, it has not done so, leaving the federal circuit courts to develop their own ER-ISA jurisprudence.(fn3) These courts, no longer guided by such legal greats as Byron "Whizzer" White,(fn4) have fumbled the opportunity in favor of a litigious multiplicity rule, thus spawning much of the ER-ISA litigation.(fn5)

The decisions of the federal circuit courts, at times, seem amazing in their ability to evade the purposes of ERISA. For instance, Congress intended ERISA to elevate the behavior of the plan officials by imposing fiduciary duties.(fn6) Pre-ERISA benefit law used contract the

315

ories,(fn7) which ordinarily provide for a low standard of behavior to determine employee benefits.(fn8) On this body of existing law, the ERISA statute imposed the higher altruistic standard of fiduciary behavior on the parties to the employee benefit program, namely the sponsor, the trustees, and the plan administrator.(fn9) The federal circuit courts, however, initially tried to blunt this innovation(fn10) by reviewing the plan fiduciary decisions under the arbitrary and capricious rule. This rule was highly favorable to plan fiduciaries,(fn11) as opposed to the standard fiduciary behavior required by ERISA.(fn12) ERISA recognized the employer's promise of benefits, supported by the consideration of the employee's deferred compensation, as a contractual relationship.(fn13) Yet, the circuit courts determined that an ERISA lawsuit involved a matter of trust, and consequently denied jury trials.(fn14)

316

ERISA also contains a broad preemption provision obliterating state law as it relates to employee benefit matters.(fn15) Nevertheless, the circuit courts used state law to determine whether the federal spendthrift provision(fn16) protected pension benefits under bankruptcy law,(fn17) until that practice was corrected by the Supreme Court.(fn18)

The federal circuit courts have created a similar situation for the statute of limitations for employee benefit plan lawsuits. ERISA contains a statute of limitations for lawsuits concerning a breach of fiduciary duty.(fn19) However, ERISA limits the applicability of that statute of limitations to the fiduciary duty provisions contained in sections 401 to 414.(fn20) Participant-beneficiary lawsuits to enforce these provisions normally arise under sections 502(a)(1)(B) and 502(a)(3), providing legal and equitable remedies for ERISA violations.(fn21) But ERISA also provides a separate cause of action for plan recoveries of damages arising from fiduciary duty breaches.(fn22) Therefore, the circuit courts generally have refused to apply the ERISA statute of limitations to any ERISA action that arises under a provision other than the fiduciary duty section for plan recoveries.(fn23) These other ERISA causes of

317

action are most notably the informational penalty lawsuit,(fn24) the benefits due lawsuit,(fn25) the equitable remedy lawsuit to enforce various plan provisions,(fn26) the employer retaliatory discrimination lawsuit,(fn27) and the employer delinquent contribution lawsuit.(fn28) In these five situations, the circuit courts have opted to use other law to determine the limitations period.(fn29) Surprisingly, the circuit courts, rather than developing a uniform federal common law rule applicable to all persons similarly situated, have instead chosen to use the very same state law that ERISA supposedly preempted.(fn30) Even more shocking is that the state law generally chosen is the same contract law rejected for determining whether the court should conduct the ERISA lawsuit by jury trial.(fn31)

This article aims to show that this approach utilized by the circuit courts is incorrect. Part II performs a cursory investigation of the circuit courts' decisions narrowed in scope to their limitations period for the informational penalty lawsuit, the benefits due lawsuit, the equi

318

table remedy lawsuit to enforce plan provisions, the employer retaliatory discrimination lawsuit, and the delinquent employer contribution lawsuit. Then, Part III outlines the anomaly of using state statutes of limitations for ERISA lawsuits. Finally, Part IV demonstrates the reasoning that the circuit courts should have used to determine a uniform federal common law for the limitations period for all ERISA causes of action.

II. CIRCUIT COURT DECISIONS

When confronted with a statute of limitations defense in an ERISA lawsuit, a circuit court will first determine whether the cause of action involves a plan recovery of damages arising from a breach of fiduciary duty, for which the ERISA statute of limitations applies. That statute of limitations bars breach of fiduciary duty claims after the earlier of six years from the breach or three years from the date the plaintiff acquires actual knowledge of the breach.(fn32) Currently, the circuit courts only recognize two ERISA causes of action involving a breach of fiduciary duty to which the ERISA statute of limitations applies: (1) the action for plan recovery of damages from breaches of fiduciary duty(fn33) and (2) equitable relief for violation of the ERISA fiduciary provisions.(fn34) If the ERISA action does not involve one of these two

319

claims, the circuit court deems itself free to fashion a limitations period on its own.

A. The Rule of State Statute of Limitations

For ERISA causes of action other than plan recovery of damages arising from a breach of fiduciary duty, the circuit courts have settled on a rule of using the most analogous state statute of limitations. This practice has spawned much litigation, especially for the benefits due lawsuit, the employer retaliatory discrimination lawsuit, and the delinquent employer contribution lawsuit. Use of state law first requires the circuit court to determine which state's law applies. Then, for each state, the circuit courts need to resolve the issue of the most analogous state statute of limitations. Since states have a multiplicity of statutes of limitations, the circuit courts have a wide selection. As a result, the most analogous statute of limitations varies from state to state in subject matter, even for the same ERISA cause of action, and in length, even for the same type of state statute.

Besides the cost of litigating the choice of law and most analogous state cause of action issues, the problem worsens for interstate plans. Similarly situated employees in different states will have different rights with respect to bringing a lawsuit depending on which state's law applies.(fn35) Other litigants will have the opportunity to forum shop to locate a state that will not foreclose their lawsuit, or that will supply them with the limitations defense.(fn36)

1. The Informational Penalty Lawsuit

For the informational penalty lawsuit,(fn37) the circuit courts...