143 F. Supp. 3d 397
E.D. Va.2015Background
- CCG Systems established an ESOP on May 31, 2004; the Plan purchased 100% of company stock based on a valuation (WEC Report) that relied heavily on information provided by founder/major shareholder and trustee Pamela Abadie.
- To finance the purchase the Plan executed promissory notes totaling ~$3.6M; Abadie’s note required annual payments equal to a percentage of CCG’s pre-tax profits plus 5% interest; valuation assumptions later changed.
- After Abadie resigned as CEO (2008) Healey became Company President and Plan trustee; the Department of Labor inspected the Plan and, following an independent review (WRV), concluded in 2013 that the original valuation overvalued stock by ~$1.7M.
- Healey sought a corrected promissory note reducing the balance; Abadie refused and Plan payments to her were placed in escrow in 2013.
- Healey, as Plan trustee, sued Abadie under ERISA §§ 502(a)(2) and (a)(3) alleging breaches of fiduciary duty related to the stock purchase and loan transactions; Abadie moved to dismiss under Rule 12(b)(6), asserting (1) lack of trustee authority to sue and (2) ERISA statute-of-limitations defenses.
- The court denied the motion to dismiss, concluding Healey has authority as a single fiduciary to sue and that the complaint does not conclusively show the claims are time-barred; plaintiff was granted leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Authority to bring suit on behalf of Plan | Healey, as a Plan fiduciary / minority trustee, may sue under ERISA §§ 502(a)(2),(a)(3) | Plan document §10.10 requires majority-trustee approval for actions on behalf of the Plan | Court: Healey may proceed as a single fiduciary; ERISA permits minority trustee suits where majority conflicted; motion denied on this ground |
| Statute of limitations — general timing under 29 U.S.C. § 1113 | Claims timely under fraud/concealment, omission, or continuing-violation doctrines; discovery in 2013 | Transactions occurred in 2004 so three- or six-year limitations expired before suit | Court: On Rule 12(b)(6) record, complaint does not conclusively show claims are time-barred; motion denied |
| Fraudulent concealment tolling | Abadie actively concealed wrongdoing; plaintiff discovered in 2013 so six-year discovery rule applies | No adequate allegations of fraudulent concealment; limitations should run from 2004 | Court: Allegations not pleaded with Rule 9(b) specificity, but on Rule 12(b)(6) record cannot conclude concealment inapplicable; denied dismissal on this ground |
| Action vs omission classification (when § 1113 six-year period runs) | Abadie’s ongoing trusteeship until Aug 2009 meant an omission to cure, so limitations run from 2009 | The transactions were discrete actions in 2004; limitations run from transaction date | Court: Insufficient facts to classify events as pure actions vs omissions on present record; denied dismissal |
| Continuing-violation re periodic payments on Note | Each May 31 payment is a fresh breach starting a new limitations period for loan-related claims | The payments result from a single wrongful 2004 decision; continuing-violation doctrine should not apply | Court: Circuit split exists; given factual posture and that wrongdoer also benefitted, court could not foreclose continuing-violation theory; denied dismissal |
Key Cases Cited
- Republican Party of North Carolina v. Martin, 980 F.2d 943 (4th Cir. 1992) (Rule 12(b)(6) tests complaint sufficiency)
- Goodman v. Praxair, Inc., 494 F.3d 458 (4th Cir. 2007) (affirmative defenses may be resolved on 12(b)(6) only if defense appears on face of complaint)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: plausible factual allegations required)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state plausible claim for relief)
- Corbin v. Blankenburg, 39 F.3d 650 (6th Cir. 1994) (minority trustee may sue on behalf of plan where conflicts exist)
- Tibble v. Edison Int'l, 135 S. Ct. 1823 (2015) (distinguishing actions and omissions for ERISA § 1113 timing; duty to monitor may give rise to continuing duty)
- Novella v. Westchester County, 661 F.3d 128 (2d Cir. 2011) (discussion of continuing-violation theory for periodic ERISA payments)
- Miller v. Fortis Benefits Ins. Co., 475 F.3d 516 (3d Cir. 2007) (declined to adopt continuing-violation rule for ERISA claims)