Fish v. GreatBanc Trust Co.
890 F. Supp. 2d 1060
N.D. Ill.2012Background
- ERISA fiduciary breach suit against GreatBanc, Morgan, Moran, Attiken, and others, timeliness at issue after earlier denial of plan-knowledge theory.
- Defendants argued actual knowledge existed >3 years before filing; argued plan as true plaintiff; court rejected due to disputed empowerment of plan trustees.
- Discovery revealed plaintiffs received proxy materials and letters in 2003 giving actual knowledge of alleged breaches.
- 2003 transaction: ESOP-owned Antioch controls; plan would end up 100% owner but Morgan family retained control; Put Price Protection impacted redemption.
- Redemption terms, Plan funding via cash/debt, and subsequent stock valuation (Prairie) spurred large redemptions and eventual bankruptcy; stock now worthless.
- Statute of limitations under ERISA §1113: three-year knowledge trigger or six-year period after breach unless discovery rule applies; court analyzes willful blindness vs. constructive knowledge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs had actual knowledge or willful blindness in 2003 triggering §1113 clock | Plays down actual knowledge; argues delayed discovery | Plaintiffs lacked actual knowledge; plan-related knowledge irrelevant | Plaintiffs had actual knowledge or willful blindness in 2003; claims time-barred |
| Whether willful blindness equates to actual knowledge for limitations | Willful blindness should not equate to actual knowledge | Willful blindness functions as actual knowledge for §1113 | Willful blindness equates to actual knowledge for purposes of §1113 |
| Alleged Breach No. 1 (Section 1106) time-barred | Redemption of individual defendants’ shares violated 1106 | Plan never bought/sold securities; 1106 not applicable | Time-barred under §1113 due to knowledge in 2003/Willful blindness |
| Alleged Breach No. 2 (Section 1104) time-barred | Prudent-man standard breached by decision | Relation to transaction and consequences; discovery rule does not save claims | Time-barred; knowledge/willful blindness established in 2003 |
| Impact of constructive knowledge vs willful blindness on tolling | Constructive knowledge should toll limitations | Willful blindness applies; constructive knowledge insufficient | Willful blindness found; constructive knowledge analysis not controlling |
Key Cases Cited
- Martin v. Consultants & Adm’rs, Inc., 966 F.2d 1078 (7th Cir.1992) (actual knowledge requires knowledge of the facts constituting the violation; not necessary to know illegality)
- Lorillard Tobacco Co. v. A & E Oil, Inc., 503 F.3d 588 (7th Cir.2007) (actual knowledge can be satisfied by willful blindness)
- Edes v. Verizon Commc’ns, Inc., 417 F.3d 133 (1st Cir.2005) (supports treating willful blindness as actual knowledge)
- Brown v. Owens Corning Inv. Review Comm., 622 F.3d 564 (6th Cir.2010) (reads actual knowledge to include willful blindness)
- United States v. Nobles, 69 F.3d 172 (7th Cir.1995) (illustrates willful blindness concepts in criminal law)
- Eckstein v. Balcor Film Investors, 58 F.3d 1162 (7th Cir.1995) (defines constructive knowledge as reasonable diligence; distinguishes from willful blindness)