CHARLES GUENTHER, Plaintiff-Appellant, v. LOCKHEED MARTIN CORPORATION; LOCKHEED MARTIN CORPORATION RETIREMENT PLAN FOR CERTAIN SALARIED EMPLOYEES, Defendants-Appellees.
Nos. 17-16984, 18-15823
United States Court of Appeals for the Ninth Circuit
August 25, 2020
D.C. No. 5:11-cv-00380-EJD
Before: Ronald M. Gould, Sandra S. Ikuta, and Ryan D. Nelson, Circuit Judges.
FOR PUBLICATION
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
OPINION
Appeal from the United States District Court for the Northern District of California Edward J. Davila, District Judge, Presiding
Argued and Submitted June 11, 2019 Submission Vacated June 13, 2019 Resubmitted August 18, 2020 San Francisco, California
Filed August 25, 2020
Opinion by Judge R. Nelson
SUMMARY*
Employee Retirement Income Security Act
Affirming the district court‘s summary judgment in favor of defendants, the panel held that a claim of breach of fiduciary duty in violation of the Employee Retirement Income Security Act was time-barred under
First, the panel held that the defendant did not waive its statute of limitations affirmative defense, raised in answer to a second amеnded complaint filed during proceedings on remand from this court, either by litigating the case to judgment without ever raising the defense or by compelling plaintiff to exhaust administrative remedies without asserting the defense.
Addressing the merits of the defense, the panel applied Intel Corp. Inv. Policy Committee v. Sulyma, 140 S. Ct. 768 (2020), which held that “actual knowledge” requires more than merely a possible inference from ambiguous circumstances, but rather knowledge that is actual. Plaintiff alleged that in a letter regarding bridging of service under a retirement plan, defendant breached its duty to make accurate representations to a beneficiary. The panel concluded that the sending of this letter provided the basis for plaintiff‘s claim, and he had actual knowledge of defendant‘s alleged misreрresentation upon receipt of the letter. The panel held that actual knowledge does not mean that a plaintiff has knowledge that the underlying action violated ERISA, nor does it merely mean that the plaintiff has knowledge that the underlying action occurred. Instead, the defendant must show that the plaintiff was actually aware of the facts constituting the breach, as well as the nature of the breach. The panel concluded that plaintiff‘s suit was barred by the statute of limitations because he did not file suit within three years of obtaining actual knowledge of the alleged breach. The panel held that an exception for fraudulent concealment, triggering application of ERISA‘s six-year statute of limitations, did not apply. The panel also held that the district court did not abuse its discretion in denying plaintiff‘s post-judgment motion for reconsideration.
COUNSEL
Andrew F. Pierce (argued), Pierce & Shearer LLP, Redwood City, California, for Plaintiff-Appellant.
Clarissa A. Kang (argued), R. Bradford Huss, and Dylan D. Rudolph, Trucker Huss APC, San Francisco, California, for Defendants-Appellees.
Stephanie B. Bitto (argued), Trial Attorney; Thomas Tso, Counsel for Appellate and Special Litigation; G. William Scott, Associate Solicitor for Plan Benefits Security; Kate S. O‘Scannlain, Solicitor of Labor; Office of the Solicitor, United States Department of Labor, Washington, D.C.; for Amicus Curiae United States Secretary of Labor.
R. NELSON, Circuit Judge:
This appeal arises from a fiduciary‘s alleged breach of its duty to make accurate reрresentations to a beneficiary under the Employee Retirement Income Security Act of 1974 (“ERISA“). Specifically, we determine whether the beneficiary had actual knowledge of the alleged breach and failed to bring suit within the statute of limitations prescribed under ERISA. Because the record establishes that the beneficiary had actual knowledge of the alleged breach and failed to bring suit within the required three-year period, we hold his claim is time-barred.
I
Appellant Charles Guenther began working for Lockheed Martin Corporation (“LMC“) in 1983. From 1983 to 1991, he was an active participant in the company‘s retirement plan (the “Plan“), a defined benefit pension plan. He left LMC in 1991, but returned to work for the company again in 1997 аnd was able to “bridge” his previously accrued service credit under the Plan with his new service credit—meaning that upon starting his new term of employment with LMC, he was credited for his prior eight years of accumulated service under the Plan and could resume where he left off—in accordance with the Plan provisions in effect at the time.1
In 2001, Guenther left LMC for the second time, having accrued approximately 11.5 years of credited service under the Plan. While Guenther was employed elsewhere, the Plan was amended in 2005 (the “Plan Amendment“). The Plan Amendment provided that “no person who is re-employed by [LMC] on or after January 1, 2006 shall become an active Participant or earn Credited Service under the Plan with respect to any period commencing with such reemployment.” Under the Plan Amendment, therefore, returning LMC employees hired after January 1, 2006, could participate in a different retirement
In 2006, Guenther began negotiations with an LMC human resources representative to return to work for the company. Prior to interviewing with LMC, Guenther heard a “rumor” that the company “was going to be changing around their [retirement] plan.” This was an important issue for Guenther. So during the negotiations that followed, he made clear that one of his “key conditions” of returning was that his “prior service be bridged so that he could receive the full benefit of the company‘s defined benefit retirement plan.” The LMC representative indicated it was possible to bridge his prior service with his proposed new service, as Guenther had done when he previously returned to LMC in 1997, and provided him a form entitled “Application for Bridging of Prior Service,” which Guenther submitted to LMC on July 17, 2006. The bridging form stated in part: “If your request is approved, the date you submit this application is the effective date that your current period of service will bridge with your prior service.” On July 25, 2006, LMC Pension Plan Operations replied to his bridging request form in a letter (the “July Letter“), stating in relevant part:
Since you were vested in a pension benefit provided by the Lockheed Martin Corporation Retirement Plan for Cеrtain Salaried Employees, your prior periods of Lockheed/Lockheed Martin service will be bridged with your proposed current Lockheed Martin service.
According to Guenther, this was the only communication from LMC that he believed told him he would be accruing ongoing credited service in the Plan. No other retirement plan (including CAP) was brought to his attention at that time. The next month, Guenther terminated his then-existing employment, and then rejoined LMC in September.
After rejoining LMC, Guenther received a November 7, 2006 letter (the “November Letter“) from LMC Pension Plan Operations which stated, in part, the following:
Since you were vested in a pension benefit provided by the Lockheed Martin Corporation Retirement Plan for Certain Salariеd Employees, your prior periods of Lockheed/Lockheed Martin service will be bridged with your current Lockheed Martin service. Consequently, your accrued benefit under the Capital Accumulation Plan has immediately become vested because the combined total of your Lockheed Martin controlled group service exceeds five years.
It should be noted that because you are not currently participating in a Lockheed Martin defined benefit pension plan, you are not entitled to a pension benefit from Lockheed Martin for your current period of service.
Guenther was “surprise[d]” by this letter because he believed it contradicted LMC‘s assurance in the July Letter that he could bridge his prior service under the Plan. Guenther had checked his account numerous times online after he started at LMC in September to see whether he had begun accumulating time for his pension. No accumulated time was ever indicated. He stopped checking his account online once he received the November Letter.
Soon after receiving the November Letter, he contacted LMC‘s Employment Service Center (“ESC“) to ask about the status of his pension, but was told the bridging issue was handled by CitiStreet, LMC‘s employer benefits service provider. CitiStreet then instructed him to contact ESC, which he did again, but “got the run around.” In late November, after several more calls, Guenther asked to speak with someone at LMC‘s Human Relations office,
In 2009, Guenther spoke with another LMC employee who was hired several months before him. That employee indicated that he, like Guenther, had received a similar letter promising bridging but was later informed that his credited service under the Plan would not bridge. Aftеr speaking with his manager, Guenther contacted the ESC again in March 2010 but received no information regarding the specifics of his plan. However, the ESC did discuss information from a Plan Amendment provision with him, stating that employees “[n]ewly or rehired on or after January 1, 2006 will not participate in [the] defined pension benefit plan.” He later asked the legal department for a point of contact but was again told to contact HR.
Guenther never received additional credited service for his third period of employment with LMC, leaving his years of credited service at 11.5. Guenther was never given a plan summary or any other indication that he could appeal the issue to anyone other than those he had already сontacted.
On November 8, 2010, Guenther filed his complaint (“FAC“) against LMC alleging breach of contract and ERISA claims to recover benefits, and the case was removed to federal court. The district court dismissed his breach of contract claim and granted summary judgment on the ERISA claim in favor of LMC. On appeal, we affirmed the district court‘s determination, but remanded the case because Guenther alleged sufficient facts to raise a previously unasserted ERISA claim against LMC for breach of fiduciary duty under
On remand, Guenther filed a Second Amended Complaint (“SAC“) pursuing the
The district court granted LMC‘s motion for summary judgment, finding Guenther‘s claim barred by the statute of limitations. The court found that Guenther obtained “actual knowledge” of the breach when he received the November Letter from LMC, more than three years before he filed his claim. See
Guenther then moved for reconsideration, citing previously unconsidered testimony from two fact witnesses affiliated with LMC. Guenther argued that these statements demonstrated the fraud and concealment necessary to invoke ERISA‘s six-year statute of limitations, rendering his claim timely. The court denied Guenther‘s request for reconsideration because the evidence could have been discovered earlier with reasonable diligence, no circumstances beyond his control prevented him from obtaining it, and the testimony would not have changed the disposition of the case. This timely appeal followed.
After oral argument, we vacated submission and stayed this case pending a decision by the Supreme Court in Intel Corporation Investment Policy Committee v. Sulyma, 140 S. Ct. 768 (2020). In Sulyma, the Supreme Court affirmed the Ninth Circuit‘s determination that “actual knowledge” under
II
Congress enacted ERISA “to protect ... the interests of participants in employee benefit plans ... by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.”
ERISA authorizes participants and beneficiaries to seek equitable relief for violations of this duty.
III
We review the district court‘s order granting summary judgment de novo. Sulyma, 909 F.3d at 1072, aff‘d, Sulyma, 140 S. Ct. 768. “[V]iewing the evidence in the light most favorable to the nonmoving party,” we determine “whether there are any genuine issues of material fact and whether the district court correctly applied the substantive law.” Id. LMC bears the burden of proving that Guenther filed suit outside the limitation period. See Payan v. Aramark Mgmt. Servs. Ltd. P‘ship, 495 F.3d 1119, 1122 (9th Cir. 2007).
At the heart of this dispute is whether Guenther had “actual knowledge” of an alleged fiduciary breach within the meaning of ERISA
Even if LMC shows Guenther had actual knowledge, he may still demonstrate LMC committed “fraud or concealment” under
A
As an initial matter, Guenther argues LMC waived its statute of limitations affirmative defense by (1) litigating the case to judgment without ever raising the defense and (2) compelling him to exhaust administrative remedies without asserting the defense. We disagree.
First, the statute of limitations defense was unavailable to LMC in response to Guenther‘s FAC because no brеach of fiduciary duty was alleged in the FAC. LMC‘s statute of limitations defense under
Second, Guenther‘s argument that LMC waived the statute-of-limitations defense by advocating that Guenther exhaust administrative procedures also fails. Exhaustion is required prior to bringing
B
Guenther‘s sole cause of action in his SAC is for “Breach of Fiduciary Duty” under
The facts as Guenther pled them in the SAC are sufficient to support the claim that when LMC sent the July Letter, it breached its fiduciary duty to not “mislead plan participants or misrepresent the terms or administration of a plan,” Barker, 64 F.3d at 1403. LMC allegedly falsely represented to Guenther that he could bridge his prior and future credited service under the Plan, even though the Plan Amendment explicitly prevented him from “becom[ing] an active Participant or earn[ing] Credited Service under the Plan” upon rejoining LMC. This alleged misrepresentation took place when LMC sent the July Letter.3
Guenther separately contends, however, that LMC‘s failure to disclose the Plan Amendment to Guenther “until 2010 at the earliest” constitutes a “breach” distinct from its asserted misrepresentation in the July Letter, and that this
breach continued after the time LMC sent the July Letter. He argues this continuing breach should extend his
Because Guenther asserts no separate underlying violation beyond breach of fiduciаry duty, LMC‘s act of sending the July Letter to Guenther is the violation providing the basis for his equitable surcharge claim. See Sulyma, 909 F.3d at 1072-73. LMC has thus met its burden of showing that the alleged underlying violation occurred on July 25, 2006. We therefore look at that violation for purposes of determining Guenther‘s “actual knowledge.”
C
The
ERISA does not define “actual knowledge.” But the Supreme Court recently confirmed that the plain language of
impute knowledge of facts to a person when a reasonably diligent person would have (or should have) learned them. Id. Instead, actual knowledge under
Regarding what facts a defendant must show that a plaintiff was aware of, “actual knowledge of the breach” (1) “does not mean that a plaintiff has knowledge that the underlying action violated ERISA” and (2) “does not merely mean that a plaintiff has knowledge that the underlying action occurred.” Sulyma, 909 F.3d at 1075. Instead, a defendant‘s burden is to show “the plaintiff [was] actually aware of the facts constituting the breach, not merely that those facts were available to the plaintiff,” as well as something “extra,” meaning that that the plaintiff “was actually aware of the nature of the alleged breach.” Id. at 1075-76 (emphasis added).5
A defendant‘s disclosure of all relevant information to a plaintiff strongly suggests that the plaintiff gained knowledge of the disclosed information. Sulyma, 140 S. Ct. at 777. To meet the actual knowledge threshold though,
Here, direct evidence demonstrates Guenther had actual knowledge of LMC‘s alleged breach of its fiduciary duty more than three years before this action was filed. Guenther‘s deposition confirms he was fully aware upon receiving the November Letter that LMC had misrepresented in its July Letter that it would bridge his previously accrued credited service. For instance, Guenther testified: “I didn‘t find out that I‘m not in the pension fund until I got a letter in November that Lockheed said, Oh, by the way, we didn‘t mean pension plan when we told you pension plan in the earlier [July] letter that was your basis for why you came back.” He thus understood the November Letter‘s representation to be “[c]ompletely opposite of the first letter,” and even asserted it was “obvious” that LMC contradicted itself in the two letters. When asked whether he understood at the time he read the November Letter that he was no longer able to participate in the Plan, he answered affirmatively that “[u]nfortunately, I understood what they
were saying, yeah,” namely, “[a]t that point, I wasn‘t in any plan.” His testimony thus confirms that on November 7, 2006, he was aware of the nature of LMC‘s alleged breaсh, even if he didn‘t know that LMC‘s actions violated ERISA specifically. See Sulyma, 909 F.3d at 1075. This qualifies as actual knowledge for purposes of
Circumstantial evidence of Guenther‘s actions taken before and after receiving the November Letter bolsters the conclusion that he had actual knowledge of LMC‘s alleged misrepresentation upon receipt of the November Letter. Guenther could have only viewed the November Letter to be a misrepresentation if he first interpreted the July Letter to mean he could bridge his prior credited service under the Plan as he asserts (rather than just under the CAP). Circumstantial evidence supports his assertion: while negotiating with the LMC recruiter earlier that year, the fact that Guenther explicitly stated that bridging his credited service under the Plan was a “key condition[]” of his return, coupled with the fact that receiving the July Letter was apparently sufficient for him to end his existing employment in
More importantly, after starting at LMC, Guenther regularly checked his account online to see if he was accumulating additional credited service under the Plan (he
was not),8 but stopped checking after receiving the November Letter. This behavior suggests he no longer maintained his expectation that his prior credited service would bridge under the Plan after receiving the November Letter. Finally, Guenther contacted various company HR representatives immediately after receiving the November Letter, indicating his concern LMC had made a misrepresentation to him, causing him to urgently seek clarification regarding the status of his pension.
Guenther argues that under Waller v. Blue Cross of California, 32 F.3d 1337 (9th Cir. 1994), he could not have had actual knowledge until he understood the Plan Amendment had ended accrual of credited service for employees rehired after January 1, 2006. However, Waller is distinguishable because in that case the beneficiary only knew that the fiduciaries had purchased annuities for the employee benefits plan (not inherently a breach of fiduciary duty), but did not know they had used an infirm bidding process to select the annuity providers. Id. at 1341, 1345-46. Accordingly, the beneficiary‘s partial knowledge was insufficient to rise to the level of actual knowledge of a breach. Id. at 1341-42. Here, by contrast, Guenther testified he was fully aware at the time he received the November Letter that LMC‘s representation in the July Letter was not accurate.
We also reject Guenther‘s argument that the three-year limitation period should start running on a later date based on LMC‘s separate alleged breach of its fiduciary duty to disclose the Plan Amendment to him. The district court correctly determined that the effect of the Plan Amendment (i.e., preventing bridging of his prior credited service) is what mattered to Guenther, rather than the Plan Amendment‘s existence, and the November Letter “related the effect of the 2005 plan amendment, and [Guenther] stated he understood it.”9 His awareness from the November Letter was thus also sufficient to trigger the three-year limitation period for the alleged breach of LMC‘s duty to disclose, even without specific knowledge of the Plan Amendment‘s existence per se. We need not determine whether LMC breached its duty to disclose exclusively with the July Letter, or continuously thereafter as Guenther contends, because either way the date he obtained actual knowledge of the effect of that breach remains the same: November 7, 2006. See Phillips, 944 F.2d at 520 (“The earliest date on which a plaintiff became aware of
date on which [he] became aware of any breach[.]” See id. (emphasis added).
Because Guenther failed to bring suit within three years of November 7, 2006 (the earliest date he had actual knowledge of LMC‘s alleged breach of its fiduciary duty), his suit is barred by ERISA‘s statute of limitations. See
D
Alternatively, Guenther claims that even if he had actual knowledge of the breach, because LMC engaged in fraud via the July Letter and concealment via LMC‘s failure to disclose the Plan Amendment “both prior to and after the July 25, 2006 Letter,” ERISA‘s six-year limitation period applies instead of the three-year period. See
Our circuit has held that this exception only applies when a defendant has “taken steps to hide [its] breach of fiduciary duty.” Barker, 64 F.3d at 1402 (emphasis added). Under this approach, incorpоrated from the common law doctrine of fraudulent concealment, a plaintiff must establish “affirmative conduct upon the part of the defendant which would, under the circumstances of the case, lead a reasonable person to believe that he did not have a claim for relief.” Id. (internal quotation marks and emphasis omitted). Plaintiff bears the burden of pleading and proving that such affirmative acts occurred. See Hexcel Corp. v. Ineos Polymers, Inc., 681 F.3d 1055, 1060 (9th Cir. 2012).
To be sure, Guenther has set forth facts suggesting that LMC misrepresented his ability to bridge his terms of service, and failed to disclose material information regarding the same while Guenther was negotiating renewed employment with LMC. But his claim does not rise to the level of “fraud or concealment” under our precedent. Guenther has failed to produce any evidence that LMC made “knowingly false misrepresentations with the intent to defraud” Guenther when it sent him the July Letter, see Barker, 64 F.3d at 1401, much less evidence of affirmative acts taken by LMC to hide that misrepresentation as required in our circuit, see id. at 1402. Mere failure to disclose the Plan Amendment‘s existence does not demonstrate that LMC hid its breach from Guenther. Evidence that Guenther was “bounced . . . from one department to another, never answering his questions” over the course of several years is indicative of bureaucratic inefficiency, but does not on its own rise to the level of affirmative concealment.10 Absent the necessary record evidence, Guenther‘s argument for application of the fraud or concealment exception fails.
Accordingly, the district court correctly determined ERISA‘s six-year limitation
IV
The district court‘s order denying Guenther‘s post-judgment motion for reconsideration of summary judgment
is reviewed for abuse of discretion. Latshaw v. Trainer Wortham & Co., 452 F.3d 1097, 1100 (9th Cir. 2006). “Judgment is not properly reopened absent highly unusual circumstances, unless the district court is presented with newly discovered evidence, committed clear error, or if there is an intervening change in the controlling law.” Weeks v. Bayer, 246 F.3d 1231, 1236 (9th Cir. 2001) (internal quotation marks omitted).
Guenther fails to show how the new deposition testimony he obtained from two witnesses affiliated with LMC rises to the level of “highly unusual circumstances,” nor does he cite any circumstances beyond his control which prevented him from obtaining and producing the deposition testimony of LMC officials for the district court‘s rеview before it issued its summary judgment order. Instead of raising the kind of newly discovered evidence that would merit reconsideration, Guenther is using
The district court therefore did not abuse its discretion by denying Guenther‘s motion for reconsideration.
* * *
Because Guenther had actual knowledge of LMC‘s alleged breach of its fiduciary duty, yet failed to bring suit within the applicable three-year limitation period under ERISA, his action is time-barred.
AFFIRMED.