Ronald Fink v. National Savings and Trust Company

1709, 1016, of prejudicial publicity, ue because which 455 U.S. require seques- induced the trial court to (1982). 72 L.Ed.2d jury, arrangements for tered which caused IV of the from March delay trial 19 to March however, Assuming, 20. that that was com- his trial did not alleges that Hansen meant, March 19 what the extension to Speedy limits of the mence within the time consequence comply failure to Act, Trial 18 U.S.C. §§ simply would retraction of defend- it period specified seventy-day time rights speedy waiver of trial that ant’s 24, expire February the Act was due quid pro quo. 26, agreed to a January Hansen On 1984. authority have no to create a mini- would 1984, thereby waiv- date of March trial Speedy by judicial fiat, binding Trial Act right the trial start sooner. ing his to have dismissing prosecution itself to in ad- until March 20. trial did not commence Speedy Trial Act vance time the time from Janu Virtually all of allow, judg- would and even its own however, excluda 26 to ary March required. most, justice ment of what At Speedy Trial Act’s purposes ble then, reacquired Hansen his previously pro Act seventy-day time calculation. The rights Speedy Trial Act waived on March 3161(h)(1)(F) peri vides those rights 20. Since would still not have delay “resulting pretrial from ods of dismissal, him to entitled because motion, filing from of the motion tolling seventy-day period described on, through hearing the conclusion above, commencement the trial on of, disposition mo prompt other such March 20 was lawful. seventy- from may be excluded tion” period. During peri almost the entire day carefully have considered of Han- We all March numerous January od from 26 to arguments find sen’s other them be by government filed pretrial motions merit, substantially for the reasons without by and Hansen were under consideration rulings the District Court given during period, the the court. Likewise opinions We affirm convic- below. Representatives filed of the House of Clerk all tion on counts. case, subpoena in quash a motion to the court considered for several which So ordered. arising delays weeks. Hansen asserts already envi from such motions had been fixing, in the court’s and the defend

sioned date, acceptance, of the March 19 so

ant’s regarded as sub

that that date had to be

ject permitted to no further extensions Speedy Although Act. the trial Trial al., FINK, et Ronald setting judge’s order the trial date the extension March did state “allow of antici would revival AND NATIONAL TRUST SAVINGS might COMPANY, require pated motions which well et al. responses by parties,” substantial No. 84-5081. Hansen, No. 83- States v. Crim. United Appeals, United States Court (D.D.C. 27, 1984), 00075, slip op. at 2 Jan. District of Columbia Circuit. unlikely experi to us most that the seems Argued judge imply meant Dec. 1984. enced trial here That final and absolute. the extension was Sept. 1985. Decided foolhardy confi displayed have Sept. As Amended ability precisely in her calculate dence dispose yet-unfore the time needed pretrial as the defend

seen matters —such change of ven- last-minute motion

ant’s

Scalia, Judge, Circuit concurred in

part, part, dissented in opinion. and filed an

MIKVA, Judge: Circuit par- Fink and Kraft Ronald Charles sponsored ticipants employer retire- Upon em- plan. ment termination unsuccessfully sought ployment, they plan. due Fink obtain benefits under the brought suit in U.S. District and Kraft then rights enforce their to benefits Court to plan remedy and breaches of under plan’s led to the finan- duty which District Court held cial difficulties. The for relief time- that each of the claims was barred, summary judgment granted construing In for the defendants below. contained in the statute of limitations Security Income Act Employee Retirement (“ERISA”), (1982), we 29 U.S.C. § grant- erred in hold that the District Court ing judgment as claims that summary years prior in the arose six Appellants in lacked actual this suit which knowledge or constructive addition, disputed issues of breaches. present material fact were claims Accordingly, re- or concealment. we the District and remand this case to verse Court. Background I. D.C., Washington, Halpern, W. Samuel Fink Kraft are former Baird, Ray and Orrin

with whom James S. Group, United employees of Consumers brief, D.C., for Washington, on the were (“CUG”), holding company engaged Inc. appellants. administration, marketing, un- in D.C., Moses, for Washington, Alfred H. derwriting programs, group insurance Schoen, et al. appellees, Ap- nonprofit primarily associations. for founder, CUG, James P. are its pellees and Jonathan Gins- E. Wesner James Trust Gibbons, Profitsharing and the CUG D.C., brief, on the burg, Washington, (the “Plan”) the National as well as appellee, Company. NS T & T”), (“NS a bank Savings and Trust Co. Holzman, Atty., Dept, of La- Thomas L. trustee, and serving as Plan’s currently D.C., brief, bor, Washington, on the was Plan, D. Richard the first trustees urging reversal. for amicus curiae T. Schoen, and Robert Denis G. Baron Trus- the “initial (collectively, Freeman SCALIA, Circuit MIKVA and Before tees”). appointed T succeed NS & was BAZELON, Judges, Senior Circuit necessity of Trustees to avoid initial Judge. registering Securi- CUG’s stock 77a ties Act filed Circuit Opinion for the Court T 77c(a)(2). NS & assumed See 15 U.S.C. § Judge MIKVA. January its in duties in 1973 at established dissenting The Plan was part concurring Opinion name, Despite request Gibbons. Judge SCALIA. part filed Circuit provide retirement income The designed percent Note called for six interest at by essentially conveying employees per unpaid annum on principal. CUG ownership interest CUG to the Plan also Security Agreement, 50% executed a retirement, employees; upon employees granting security CUG interest in all portion of the could convert their Plan’s shares for which it had yet paid. been Security account into cash. Benefits were The Agreement express- balance Note and payable ways, ly provided in one three elec- that in the event Plan did lump tion timely of the Plan Administrator: not make full and payments on the sum, Note, yearly extending over installments sole recourse to repos- CUG’s years, a maximum of ten the form of payment sess those shares which had annuity. not been made. Plan, inception At Initially, Gibbons half of the Plan’s assets consist- stock, stock, owned 250 shares CUG which ed with the other half con- common sisting liquid constituted of CUG’s stock. of 100% instruments such as Trea- 1974, sury In December CUG issued 250 addi- purchased Notes also with monies tional of the by shares stock sold entire arrangement contributed CUG. This to new issue the Plan. The value of these in conformity was with the Internal Reve- by shares was determined Alexander nue ruling requirement Service’s advance Sons, Brown firm banking & an investment that not more than one-half the of assets of profit Ex- sharing plan member of the New York Stock placed employer a in change. approval The Plan received the of enacted, securities. When ERISA was the September removed, Internal in Revenue Service limitation permitting profit was 1974. sharing plans like the Plan 100 to invest funding the Plan was somewhat convoluted tions under the Plan. CUG’s method of due to two limits the extent CUG was able to make contribu- tions were allowed under the Plan tions from market for the have ever been dividends. CUG to the Plan could Plan was funded Thus, CUG; made. There was no stock, imposed the 250 shares sold no nor did employee only solely by paid it pay contribu- contribu- public for to Inter- none by percent of the Trust’s assets were invested the entire Trust in CUG stock. Accordingly, percent ties. 2d Sess. toed Code the Company.” Company See Cong. provide of 317-18, reprinted H.R.Rep. their & in desires that “the Ad.News 1976 assets Fund No. From 1977 in 93-1280, in employer Trustee Trust was amend- Trustee 4639, in capital on, 5038, ^[1974] 93d may, to, over 90 securi- Cong., invest stock 5097. U.S. nal employer Plan, Revenue Code on inception contribu- From the value First, tions. steadily consistent with status of the CUG stock increased and profit sharing, the Plan one contribu- CUG made maximum contributions tions could be made by However, out current the Plan allowed law. in 66-174, profits. 1979, accumulated Rev.Rul. CUG’s business took a serious down- Second, 1966—1 C.B. 81. total largest contribu- turn due loss of their custom- tions were percent result, limited fifteen er. As a no CUG made contribu- payroll. 404(a)(3)(A). CUG’s subsequent tions the Plan in 1978 or Plan, turn, years; in could not make principal selling price for the 250 payments Note after $1,711,000. stock shares of Of and was payments unable to make benefit total, $191,802.49 the Plan paid CUG in provided in the manner for under the Plan. cash in 1974. These monies had con- been page See supra. 954 previously tributed the Plan CUG. addition, gave In promisso- the Plan a employ CUG When Fink and Kraft left the ry $1,519,197.15 note for the balance of each received statements (the “Note”), payable from contributions with the In accounts Plan. accord- Plan, made years. CUG to the Plan over ten Fink ance with the terms

955 93-127, approx- Cong., No. S.Rep. trusts. 93d 2d of his balance of payment promised installments; reprinted in 1974 U.S.Code Sess., Cong. $5,600 five annual imately 4639, 4838, (“The approxi- his promised fiduciary balance of Ad.News Kraft was section, $10,800 essence, responsibility in ten annual installments. mately codifies $1,000 pay- applicable and Kraft received and makes to these fiduciaries Both Fink $1,000 in and another principles developed ment late certain the evolution payments were received. trusts.”) No further A of the law of court’s task in timely inability Plan’s make evaluating fiduciary When the compliance with this apparent, this suit was payments became to inquire standard is “whether the individ- action. al- trustees, initiated as class they engaged ual at the time alia, inter leged, breaches contract transactions, challenged employed fiduciary duty under ERISA. Dis- appropriate methods denied certification and trict and to structure merits of of action were time- Mazzola, held all causes the investment.” Donovan v. (9th Cir.1983), barred. 716 F.2d — -, U.S. S.Ct. reviewing grant a district court’s L.Ed.2d summary judgment, court of motion for the case de novo. Calla- appeals looks at applicable This standard (9th Woods, han v. funds, including ERISA those like the to all Cir.1984). do not restrict our We therefore pay derive funds to benefi which disposition review ownership employer through ciaries the District Court to whether claims “eligible stock. The Plan is an individual discretion, but instead examine its abused (“EIAP”) in plan” as defined ERI- account the same closely consider the record SA, 1107(d)(3)(A). An EIAP 29 U.S.C. § is there put the District Court: question may comprised solely employer’s be as to material fact? See a genuine a issue running afoul of ERISA’s stock without Diebold, 369 U.S. v. United States employer limitation securi percent ten 993, 994, (1962). 8 L.Ed.2d 176 1107(a)(2). in 29 ties contained U.S.C. § present. find such issues We 1108(e). See also Dono See 29 U.S.C. § Cunningham, van v. 716 F.2d 1465 Duty Fiduciary II. Breach — U.S.-, (5th Cir.1983), allegation is Appellants’ principal Ac 104 82 L.Ed.2d 839 S.Ct. fiduciary T for violations of NS & employer by an quisition of securities ERISA, in 29 specified U.S.C. duties itself, not, does in and of violate EIAP (B). requires 1104(a)(1)(A) ERISA a § ERISA, prohibitions 29 of the absolute fiduciary “solely to act trust fund Don 1108(e); See U.S.C. U.S.C. § participants and bene- plan’s interest” of Cunningham, 716 F.2d at 1465. ovan v. ficiaries, discharge his “with and to duties addition, ERISA, requirement of In skill, care, diligence prudence, and ... 1104(a)(1)(C), plan diversify U.S.C. § acting capacity in a like prudent man assets, holding apply to the does matters use with such familiar by EIAP’s. 29 U.S.C. employer securities enterprise of a like of an in the conduct Penn, Eaves v. 1104(a)(2). See § 1104(a)(1)(B). 29 U.S.C. character ...” § However, (10th Cir.1978). to these fiduci- If a trustee fails to adhere de requirement prudence investment standards, may personally held ary he be acquisi requirement that all cisions and the losses for whatever liable under ERISA partic solely plan in the interest tions be plan from his misconduct. result to a 459-60; See id. apply. ipants continue to 1109(a). U.S.C. § Cunningham, v. 716 F.2d at Donovan of a decisions The investment measured 1467-72. under ERISA is Prudence subject fiduciary sharing plan’s are profit objective prudent person according scrutiny prudent under to the closest common law of developed standard rule, spite “strong person policy knowledge violation, of the breach or preference (B) favor of investment or report which a from which he employer stock.” Burud Acme Elec- could reasonably expected to have tric, (D.Alaska 1984). F.Supp. knowledge obtained of such or breach violation was Secretary filed with the fiduciary apply duties to bank ERISA’s subchapter; trustees, private as well as to individual except that in the case of or fraud con- trustees. ERISA does not create classes of cealment, such action be commenced trustees, subjecting rigorous some less years not later than six after the date of fiduciary standards. The trustees of the discovery of such breach or violation. to, not, appoint free Plan were but did an manager manage investment Plan’s 29 U.S.C. 1113. § 1102(c)(3). assets. See Where short, In peri- basic ERISA limitation made, appointment such an the trustees od of six years runs from the date of the obligation of their are relieved to invest or violation, or except breach in case manage plan. otherwise the assets Id. concealment, or when runs from the date addition, trustees are not for the liable discovery of the breach If or violation. manag- acts or omissions of an investment concealment, there is no fraud or the six 1105(d)(1). However, er. See U.S.C. § year period can years be reduced to if three manager even where has the defendant plaintiff can show that the appointed, fiduciary been trustees’ duties had either or actual constructive knowl- abrogated. 1105(d)(2). are not 29 U.S.C. § edge of violation; the breach or three & T appointment, NS did not make such an year period plaintiff runs from the time the thereby reserved for itself the full gained knowledge. such pro- The statute panoply ERISA, duties under vides that knowledge constructive is ob- duty manage as well as the the funds’ through reports tained filed with the Secre- prudently. assets tary of from plaintiff Labor which the ob- According Appellants’ First Amended reasonably tained “could expected Complaint, &’T NS breached its knowledge have obtained of such by acquiring retaining duties and CUG violation.” These forms are reports annual stock, by continuing payments to make on required under 29 U.S.C. 1023 & §§ Note, by failing to, rescind or undo and are referred parlance, common the stock transactions. The District ERISA, Court “Forms 5500.” Under a Form include, held that each of alia, these ERISA claims 5500 must a inter statement against T liabilities, NS & were time-barred. of Suits assets and a statement of fiduciary duty for breach of changes must be plan net assets available for brought benefits, peri- within ERISA’s limitations a of statement income and ex- penses, ods: any and the terms amount of (a) 1023(b)(2) indebtedness. See U.S.C. No action be commenced un- (3). subchapter respect der this with to a fiduciary’s of any responsiblity, breach Appellants’ principal allegation referenc- duty, obligation part, or or this es a of number events that occurred within respect to part, with a violation of this action, six years filing of the present of the after the earlier of— including, alia, payments inter on the Note (1) years (A) six after date of the 14, 1978, made on April 1977 and last part action which constituted a of yearly as well as assessments the invest- violation, (B) or or breach in the ments the Plan. The District Court test- case of an omission the on latest date ed these transactions ERISA’s fiduciary which the could have cured year limitations, examining three statute of violation, the breach or appellees whether had actual construc-

(2) years knowledge three after the earliest date tive of the violations which (A) plaintiff on they complain. which the had actual The District Court correct- applying tigating evaluating the Plan’s test invest- ly recognized the period: a year limitations whether three ments. could rea-

report from which beneficiaries performance Full of a trustee’s duty expected to have obtained sonably be requires comple much more or violation was than mere knowledge of such breach Secretary. primarily The District filed tion of ministerial task filed annual the Plan filing Court noted that required reports. provide Forms required on the reports 1977 and 1978 beneficiaries brief narrative of the Secretary of Labor Forms with the during past year; fiduciaries’ acts ben 30, 1979, respec- July 1978 and October are eficiaries entitled to assume that found these tively. The Court District acts, performing these the fiduciaries purchase reports the terms disclosed thought so, not about them. If this were given Note stock and of the of CUG lengthy fiduciary list of duties under therefor, dispositions of exchange and the nothing ERISA would mean more than ca expense principal and interest balance emptor. fiduciary’s independent A veat disclo- following payment. the annual investigation particular of the merits of a information, according to the sure of this prudent is at the heart Court, put appel- sufficient to District person standard. See Donovan Cun all breaches of lants notice of 1467; ningham, 716 F.2d Donovan v. duty, calling fiduciary into effect ERISA’s Bierwirth, F.Supp. (E.D.N.Y. period. all year limitation Because three 1981), grounds, on other modified more causes of actions accrued than three (2d Cir.), F.2d 263 U.S. initiated, action years before 74 L.Ed.2d 631 held all were time- District Court perform Unfortunately, a failure to barred. duties, fiduciary most basic inde Appellees, as well Both evaluation, pendent simply is not disclosed curiae, Department as amicus U.S. required forms. For Labor, decision as read the Court’s reason, Depart forms filed with the diligence on ERISA imposing duty alone, cannot, standing con ment of Labor beneficiaries, i.e., duty knowledge to benefi stitute constructive ERISA-required reported facts forms in Department of ciaries or to the all breaches any lurking breaches of order to discover fiduciary of a duty. The disclosure However, duty. the District inherently not a statu transaction that is diligence import did (in tory contrast period. into ERISA limitations hold- to, party-in-interest loan which is e.g., a to a provided ing in the forms all data prohibited explicitly under 29 U.S.C. needed for a rea- the relevant information 1106(a)) breach, communicate the exist cannot person of a sonable to know underlying the nature of ence of an breach. See Dono District Court misconstrued 79-914-CIV-JWK, Appellants’ allegations. Tricario, van Nos. 79-5580-JWK, (S.D.Fla. slip op. at 19-20 complaint Appellants’ The gravaman of Apr. 1984), sub nom. Brock v. aff'd payments on is not NS T’s continued that & (11th Cir.1985); Fricario, 768 F.2d 1351 of fiduci- the Note constituted breach Cook, F.Supp. 567 235 & Davidson v. certainly acts dis- ary duty; those (E.D.Va.1983), mem., 14 n. by the Forms 5500. closed to beneficiaries aff'd — -, (4th Cir.), U.S. 10 payments standing alone were at If those (1984). 83 L.Ed.2d S.Ct. action, agree we would the heart this require not information Forms 5500 did with the District Court that claims are (nor regarding provided), any however, allege, time-barred. Plaintiffs NS T’s fail liquidity problems or Plan’s fiduciary duty that & T NS breached continuing prudence of ure evaluate the to making payments without ever those purchase stock. statutory of inves- performing their duties addition, filing Secretary is leaves untouched an action based on a fidu- equivalent approval ciary not of a Plan’s Appellees may omission. not inter- heavy operations by Secretary. pose the governing statute limitations facing Department, which is burden fiduciary’s duty objective pru- make 800,000 obliged Forms to receive some 5500 dent investments as a timebar when the unfortunately thorough means that yearly, fiduciary’s action is based on the breach of each form review of transactions separate duty to conduct an indepen- is, described, if impossible, not least dent Appel- evaluation investments. unlikely. See Central States Pension primary allegation lants’ precisely —Inc., Transport, Fund v. Central U.S. perform NS & T omitted to duty as a —, —, 105 2833, 2844, S.Ct. 86 L.Ed.2d fiduciary. appellants Therefore the must Centralized federal does given opportunity prove that NS & requirement beneficiary not read perform duty T’s failure to since knowledge out of the ERISA limitations 6, 1977 constituted a of fiduciary breach period. duty. sleep may

Beneficiaries on their they rights, given oppor must some but Cofiduciary Breach III. tunity to discover a that the Forms breach provides that a fiduciary ERISA year do not reveal. ERISA’s three limita may also be liable for another fiduciary’s period apply tion does not here because 1105(a). breaches. U.S.C. § people expected reasonable cannot be allege Schoen and Gibbons are liable fully completed discern from forms that by knowingly participating co-fiduciaries utterly perform has trustee failed knowingly concealing the acts and Instead, fiduciary Congress duties. has omissions of NS & T. Schoen serves as provided year period six bring which to fiduciary Administrator the Plan and is a the fiduciary actions where breach is one of (We of the Plan. note that Schoen was This omission. conclusion follows from a one also initial Trustees of the Plan. plain reading statutory language long statute has since run on ERISA, syllogism rather than from the may violations that he have committed dissenting opinion suggests. that the In role.) while in may Whether Gibbons deed, dissenting opinion offers its own fiduciary be said to have acted as a is a syllogism. major premise The dissent’s disputed Additionally, a issue. district duty investments, prudent that the to make may against court award relief nonfiduciar outcome, as measured was the knowingly participate ies who in a breach duty. premise Its minor is that of trust. Ilsley Freund v. Marshall & duty apparent of this from the Bank, (W.D.Wis.1979). F.Supp. reports. fiduciary’s The dissent concludes fiduciary’s reports that the made clear any may Schoen Gibbons therefore fiduciary duty, breach of so the three- be liable for all fiduciary duty breaches of year applies. statute of limitations This for which NS & T is liable. For those syllogism major premise. founders on its claims NS T are not & which time- prudent Over and above its make barred, allegations that Schoen and Gib investments, has a bons also be liable as cofiduciaries are independent investigation conduct an similarly We not time-barred. therefore particular merits of a investment. See su question remand to the District Court dissenting opinion ap pra p. The 957. liability of Schoen as of and Gibbons cofi pears accept dispositive as NS & T’s duciaries. argument reports that the would disclose person to a reasonable the trustee’s breach IV. Claims That Time-Barred Are investments, prudent make year commencing Appellants thus alleged three limitations have follow period. argument dispositive; ing This is not violations in ERISA which fraud or allegation The plead ure to fraud. first of at issue and which do are not concealment period appears Opposition fraud in Plaintiff’s year discussed the three fall outside acquisition Summary Judg- Motion for first, initial of Defendant’s that the above: requires 9 of of the Note consti- ment. Rule the Fed.R.Civ.P. and creation the stock duties; second, mistake, of of that “in all averments fraud or tuted a breach T to sue the initial constituting of NS & the circumstances fraud that the failure law fiduci- of common particularity.” Trustees for breach mistake shall stated with acquisition of stock ary duty Rule is to be read tandem with the ER- Fed.R.Civ.P., under requirement a breach of constituted Rule sim- third, breaches; past remedy ISA to plicity drafting flexibility review- CUG, T& to includ- payments from NS ing pleadings. Wright 5 C. & A. Mil- See actions, prohibit- constituted a ing Schoen’s ler, Federal Practice Procedure § under ed transaction (1969). However, allegation some fourth, 1106(a)(1)(A) (D); and that the the pleading stage. fraud must be made at similarly Plan consti- loan from CUG made, none was was no Because there ba- As the prohibited transaction. Dis- tuted a findings. sis for the District Court’s We found, trict each these transac- Court grant therefore vacate the District Court’s on ERISA-re- tions had been disclosed summary judgment on this issue. On reports by 1979. The quired October remand, appellants may seek leave sufficiently disclosed these Forms 5500 Court, pursuant to District Rule Fed.R. into bring play ERISA’s transactions Civ.P., complaint amend their include period. Because the year three limitations sufficiently particularized allegation disclosing these transactions report last fraud; freely given “leave shall when years more three before was dated than requires.” justice so Fed.R.Civ.P. suit, affirm the inception we summary grant judg- District Court’s Contract VI. Breach of addition, allegations. ment those as to acquisition alleged initial CUG also Appellants Plan’s have years well over six before for its failure to stock occurred of contract CUG Accordingly, suit. we Plan a sound financial instant continue the on basis holding timely that the have permitted affirm the District Court’s full is now acquisition payments initial of the stock be- to beneficiaries. The District summary on yond judgment reach of ERISA remedies. granted Court count; affirm. we V. Fraud or Concealment up Sharing as a Profit The Plan was set allege appellees also en- profit Employer to a Plan. contributions fraud concealment. Where gaged in contingent definition sharing plan are committed, provides are ERISA such acts surrounding profits. documents discovery of years from date of six obliged to the Plan reiterate that CUG was in which to file suit. fraud or concealment as their make contributions insofar rejected Appellants’ alle- position permitted, and obli- financial concealment, finding gations of responsibility gation did not confer particu- plead fraud with both a failure of benefits. payment for the larity required under Rule Fed.R. as Agreement provides that: Civ.P., insufficient facts to create a the Plan and Former Members dispute to the existence of genuine only to the Trust shall look Members fraud or concealment. under the Plan established Fund payable Report the benefits Comptroller’s re satisfaction

While Plan, Employer shall have no and the by the District Court raises ferred to to make or continue fraud, obligation to make specter are con significant we pay to the or Plan contributions under by appellant’s fail- strained in our review 960 contemplated by benefits

directly any certification appellants states Plan. to meet the requirements failed of Fed.R. 23(a)(3) (“the Civ.P. claims or defenses of Agreement, Art. Sec. 3. Addition- Plan representative parties are typical of the Agreement ally, explicitly Plan ad- class”), claims or defenses of the and of might possibility dressed the CUG 23(a)(4) (“the representative Fed.R.Civ.P. contributions: unable to make parties fairly adequately will protect Em- 1. Discontinuance Section class”). the interests of the Employer ployer Contributions. A District Court is accorded broad the Plan with bona has established in determining discretion whether a suit year year that from it fide intention proceed should as a class action. Our re to and will deem it advisable will be able inquiring view is confined to whether the the Plan. contributions under make grant Court abused that of discre not now foreseen or cir- Circumstances tion. Bermudez v. Depart United States beyond the control cumstances Agriculture, ment 490 F.2d 725 impossible may make it either Employer (D.C.Cir.), 414 U.S. Employer continue or inadvisable S.Ct. L.Ed.2d 559 While Plan to make under the or contributions explicit there no requirement in this Cir necessary may make to terminate grant cuit that a District hearing Court Directors Plan. If the C.U.G. Board of provide findings issue, on the class our impossible it is may decide or inadvisable reviewing here, limited, task however Employer to make for the to continue impossible rendered in their absence. See Plan[,] contributions In re Franklin Nat’l Bank Securities Lit may C.U.G. Board Directors resolu- (2d igation, Cir.1978). Employer contri- tion discontinue further There were disputes numerous factual be the Plan. butions under regarding fore the District Court “typi Agreement, Plan Art. Sec. 1. Appellants’ cality” claims and defenses Appellants essentially adequacy and their argue representa that other as class communications, oral, both The brief provides written and tives. Order here no support notion implied of an indication that the contract District Court even con between and the sidered the possibility CUG beneficiaries where- subclasses or of obligated class, certifying CUG was payments. po to make narrower to avoid a We note prohibited that CUG was tential conflict from between interests of making any employees past contributions to current and those of ex- em cept profits ployees out of surplus. earned CUG. Nor is there See evidence 66-174, Rev.Rul. that the District Court appoint C.B. 81. The writ- considered ings proffered by ing representative class Appellants other sup- do not than Fink port their argument. We or Kraft. therefore affirm grant District Court’s summary Contrary position that the dissent-

judgment. may operated While have ing adopts, opinion reviewing court as a liability incurred in that require court district to consider capacity, appellants say cannot be heard possibility on the record the certifying perform CUG failed a contractual subclasses. dissent cites United perform. where there was none to Parole Geraghty, States Comm’n v. 388, 408, 1202, 1214, U.S. S.Ct. of Class Certification

VII. Denial (1980) proposition L.Ed.2d for the sponte also raise the District Court’s court has district no sua obli- refusing gation denial of certification. class construct subclasses. This obser- class, certify vation, however, the District neither proper must be read hearing, findings. conducted nor In Geraghty, made context. the Court Ap- denying peals District Court’s order for the Third Circuit had remanded fiduciary duty investigate breach and court to evaluate the of ease to the district the investments, proposed subdividing the evaluate and breach of of possibility approved prudently Supreme fiduciary Court invest subse- class. impose remand, not un- finding quent did the district court. on

due burdens simply once the sub- directed that Court I court, question is the district before class concealment, fraud or suit Absent a and not the party seeking subclasses alleging of a breach violation the duties constructing of has the burden court I imposed by Title the Employee of Retire need not them. While the court proposing Security ment Income Act of Pub.L. holds, initiative, it must Geraghty take 93-406, No. 88 Stat. codified as amend possibilities of or of subclasses weigh (1982)(“ERI- ed at 29 U.S.C. §§ 407-08, class. Id. at certifying narrower SA”), must be commenced within three at 1214. years of the earliest date “on a re which on the bulk light In of our remand port plaintiff] which from ... could [the below, factors that and the claims raised reasonably expected to be have obtained litigation affecting a conducting favor knowledge of such breach violation action, find the class as a we group class Labor],” Secretary filed with [of appropriate for fuller consideration. issue 1113(a)(2)(B). The Court U.S.C. District § remand, then, the District Court should On provision appellants’ held that this barred fashioning consider what extent appellee, Savings claims National alleged cure defects subclasses (“NS&T”), Company Trust had breached whether, if certification is the class and various duties may per- there appropriate, otherwise 1104(a)(1)(B) respect with assets of requirements could fulfill son who (“Plan”) Sharing Profit Plan Trust representative. trustee, reports which filed it was because Secretary with of Labor more than VIII. Conclusion years three before the commencement grant reverse the Court’s We appellants’ suit had disclosed “all of the summary judgment on the claims described material facts relevant transactions lacked knowl- herein which complain.” plaintiffs of which Fink v. Na constructive, of breaches of edge, actual or Co., No. 83- Savings tional & Trust Civil fiduciary duty that occurred within six 22, 1983) (D.D.C. slip op. at 4 Nov. filing years this suit. These (“Mem. op.”). pursued against both NS claims reasoning reversing majority’s addition, In we T and cofiduciaries. regard to NS&T’s determination grant summary judgment vacate the continuing role in Plan’s or concealment the claims which fraud Group, Inc. of Consumers United stock plead involved; failure to appellants’ (“CUG”) (and payments related Plan’s through may be rectified remand CUG) appears payable to be note particularized pleadings. We (1) captured by following syllogism: claims, these to the District Court remand evalu- failure to NS&T’s issue, as the class certification as well made ate the investments resolution. fuller fiduciary duty would constitute breach so It is ordered. continuing invest- sufficient to render the payments on the ment in CUG stock and SCALIA, Judge, concurring in Circuit actionable; (2) note that fail- accompanying dissenting part: part and reports filed with ure was not disclosed (3) a Secretary; view, therefore my judgment of the District the in- to render respects, sufficient in all should be affirmed payments actionable was the claim for vestment except for its dismissal of mer, reports in with Secre tending disclosed filed to show that the trustee tary consequence that the three- should have known more than he knew. —with year apply. does statute limitations appellees argued present What the in the major pre syllogism is its flaw was, essentially, case that in order for the fiduciary duty to in mise: Breach of the perceive they appellants to that had a claim vestigate and evaluate sustain imprudent investment in connection trustee, enjoin see, action to or remove the note, with CUG stock and it was unnec- Bierwirth, e.g., F.Supp. v. Donovan essary for them to be aware that the trus- (E.D.N.Y.1981),or even perhaps tee should have known more than he did— investiga for the paid recover trustee fees i.e., that the trustee had not been investi- that un tive and evaluative services went gating evaluating investment, a performed. But it not sustain an ac does fact reports; undisclosed the filed that damages arising losing tion from if, appellants contend, the investment of I investments. know of no case in which a ERISA funds in the stock employing happened through pray trustee who has — company is measured the same er, astrology just or luck—to make blind prudent applicable standard of (or hold) objectively prudent investments to other fiduciary, investments then regarded {e.g., highly an investment in a breach prudent make invest- stock) chip” “blue has been held liable for apparent ments was on the basis of what losses from those investments because concededly knew, the trustee as set forth investigate his failure to and evaluate be reports, probe in the with no need to fur- Similarly, forehand. I know of case in no That ther. seems to me In correct. (or held) which a trustee has who made year $100,000, which the Plan lost over patently unsound investments has been ex nearly continued to all of the NS&T invest liability cused objectively from because his Plan’s assets the nonmarketable stock of imprudent preceded action careful company that did the bulk of its business investigation short, and evaluation. In one customer under a contract that there are two but related distinct duties expire, soon to pay and continued to upon imposed investigate trustee: accompanying interest note. Each investments, pru evaluate and to invest NS&T, of these facts was known to dently. Neither discharge does the faithful each of them in the was recited filed re- second, satisfy of the first nor does ports. fiduciary duty The breach of breach the first constitute breach was, prudent make investments it seems to sure, second. To be the extent of the trus me, plain reports. face investigation tee’s and evaluation often is insisting that the nondisclosure of failure imprudent-invest of inquiry focus investigate and evaluate caused nondis- See, ment e.g., suits. Donovan Cun v. breach, majority closure that is ei- Cir.1983), ningham, (5th (1) confusing imprudent ther the claim for — U.S.-, rt. ce separate entirely investment with the claim 82 L.Ed.2d But is investigate evaluate, for failure to because the determination of whether an (2) confusing imprudent the claim for in- objectively imprudent investment was is vestment with evidence of the claim for made on the basis what the trustee investment, imprudent so that unless and known;' knew or should have and the lat all until the evidence is disclosed—no mat- necessarily ter involves consideration previously ter how clear and conclusive the what facts would come to atten have his three-year disclosed evidence be—the fully complied tion if he had with his statute does not run. and evaluate. It is the im however, prudent note, Appellants rightly investment rather than the failure to investigate three-year the basis evaluate is statute limitations cannot suit; duty merely their claim alleged the latter bar for NS&T’s failure bearing upon prudently during period evidence breach of for- to invest with- why plaintiffs’ It unfathomable commencement of years of in three 9(b) comply plead- failure to with the Rule damages suit, i.e., from (rather ing requirement should cure than course, recoverable, would be those aggravate) plaintiffs’ further fatal fail- or failed NS&T took to action attributable Complaint in their ure to set forth—either during period. See Buccino to take affidavits, depositions, answers in- Co., F.Supp. Assurance Continental permitted terrogatories or admissions to be (S.D.N.Y.1983).* 1518, 1520-23 56(c) under Rule suffi- considered —facts therefore, that the Com- agreeing, While preclude of fraud cient to dismissal the properly not present case was plaint in the majority claim. The concealment effect the sought it relief for insofar as dismissed for plaintiffs disregarding the rewards to trustee’s breach of 9(b), by giving them another chance Rule investments, or for the trus- and evaluate (which plaintiffs pleaded who properly had 6, after investment imprudent tee’s have) present not to would facts sufficient holding 1980, majority’s I dissent from judgment. summary withstand This imprudent damages recovery for that of 9(b) if Rule were make sense would for ac- stock and paternalistic provision intended for sort 6, prior April payments note companying plaintiffs’ they benefit—to assure that own Complaint allege 1980 not time-barred. their some facts that is uncontroverted, (at least if see Fed.R.Civ. 56(e)) summary P. will defeat a motion for II judgment. Heaping upon pater- solicitude rejected appel- The District also Court nalism, appellate might court reason six-year limita- argument lants’ that plaintiffs (through their that since the own governing cases of fraud or period fault, that) tions did have but never mind 1113, concealment, 29 should be protection, they U.S.C. benefit this should be § appellants’ summary judg- claims. run applied given to certain of another at 9(b) But course Rule is noting appellants had ment motion. passing After that all, plaintiffs’ at not intended for benefit particularity with plead failed to fraud “give rather to defendants fair notice but required 9(b), the District Fed.R.Civ.P. grounds plaintiffs’ there- claims had failed to appellants held that [sic], they that can frame their fore so re- genuine raise issue material fact and defenses.” Ma- answers op. garding fraud or concealment. Mem. Kaufman 1088, (D.Mass.1982) 1093 gid, F.Supp. 539 majority at 7. The vacates omitted). (citations grant summary judgment on Court’s issue, appellants to seek leave advises majority’s point on this is com- error Complaint, to amend their and stresses that practice, pounded by the fact that sound given freely ambigu- leave to amend should be adopts interpretation of that which when than im- justice op. supports rather requires. Maj. so ous events which unsupported by disposition judgment, This authori- Court’s peaches the District regard already me Court as ty argument, and seems to inconsist- the District 9(b). having motion to plaintiffs’ allowed purpose ent of Rule * (other Plan documents argue claim NS& act in accordance with also for adequate according specified) T’s failure to distribute benefits which failures were Plan, 1104(a)(1)(D), doubtful), (which present § in violation of claim time-barred, three-year even could not impropriety failure to raise issue limitations, it did not accrue statute of because applying limitations until the statute of to distrib- until when the failure October summary judgment precludes considera- after Explicit allegedly began. ute assertion that argument appeal. "[A]n of the issue tion constituted failure to distribute benefits simply postjudgment motion is raised in a first 1104(a)(1)(D) appeared for the first breach of time, however, Fehlhaber, 681 F.2d late.” Fehlhaber v. too appellants' for recon- motion (citation (5th Cir.1982) and internal summary judgment. Even if sideration omitted). quotation generalized Complaint’s references to failure to ary suggestion they guilty

amend. Because there was no were also Beeman, prejudiced by here defendants were fraud.” Renz v. plead failure fraud with plaintiffs’ (2d Cir.1978), 444 U.S.

particularity, prop- District Court could 62 L.Ed.2d 43 I erly plaintiffs’ have Memoran- treated judgment would affirm the District Court’s Motion Opposition dum to Defendants’ appellants genuine that the failed raise allega- Summary Judgment which —in issue material fact as the existence of tions concealment were first fraud or concealment. with some factual detail —as a advanced See Bucci- pleadings. motion to amend Ill Co., no v. Continental Assurance (S.D.N.Y.1983); F.Supp. n. appellants’ District Court denied mo- (2d 56.10 ed. Federal Moore’s Practice U certification, holding ap- tion 1985). pellants requirements failed to meet the above, 23(a)(3) suggested I (“typicality”) But as all dis- have Fed.R.Civ.P. 23(a)(4) pleading really cussion of the failure is (“adequacy”). Fink v. National Co., point. beside the The District dis- Savings & Trust Civil 83-992 No. missed the or not fraud concealment claim (Order (D.D.C. 20,1983) Sept. denying class appellants comply had failed to because certification). majority The acknowledges 9(b), they Rule with but because had failed that the has District Court broad discretion and, genuine to I raise issue determining fact — pro- in whether a suit should add, might only not failed to it in had do action, ceed as a class and that there no pleadings, depositions, in any their or an- requirement in judges this Circuit that trial interrogatories, swers admissions and hearings findings or respect hold issue with 56(c) affidavits that Rule allows to be con- to class certification determinations. The sidered, but had even failed to do it in holds, however, majority incapable that it is in Opposition either their Memorandum deciding whether the District Court Summary Judg- Defendants’ Motion for case, citing its discretion in this abused the ment or their Motion Pursuant to Rule disputes” existence of “numerous factual 59(e), F.R.C.P., to Reconsider and Vacate the and absence of “evidence” that the Summary Judgment Deny Defend- seeking District Court considered out other Summary Judgment. ant’s Motion for The possible representatives, creating class correct, dismissal for that reason was subclasses, certifying or class. narrower pleading all discussion of the is ir- failure Maj. op. at majori- 960-961. Unlike the relevancy. I ty, myself capable performing my find majority question does not reach the task,” I id. at “reviewing cannot whether District Court was correct judgment find that the District Court’s was plaintiffs its assessment that had failed to undisputed abuse on an of discretion regarding raise an issue fact of material Postow v. OBA facts of this case. Cf. concealment, although or it hints Association, Savings Federal & Loan significant specter “a that fraud” was (D.C.Cir.1980) (dis- F.2d 1380-81 n. by “Comptroller’s Reports raised re- holding trict court certified class without by Maj. op. ferred the District Court.” hearings, making nonconclusory findings, Comptroller’s Reports at indi- giving explanation implicit of its cate that NS&T was criticized holding predominated common issues that Comptroller for failure issues; no over individual abuse discre- prudence of plan’s and evaluate the case). tion the facts inaction, if proven, investment. Such certainly there It true that were factu- likely constitute a of fiduci- disputes regarding issues connect- ary duty, al some but not fraud or concealment. un with was “It not fact ed class certification. But it does follow from the ... that, members, disputed of fiduci- unlike other class committed a breach [defendants] of their formulation of als between the denial motion for participated Fink had very likely Plan, September had done and Kraft class certification on might sub appellants entry summary that both judgment so—so and the inapplicable to estoppel ject (made to defenses only proposal their November members; appellants, class other September in Reply Memorandum Plan were deter whose benefits Opposition Motion to Defendants’ significantly dif might have mined in Certification) of all Class for- partici from other ferent interests rejection employees. CUG mer later; left Plan earlier pants who in way could no alternative abuse of mem unlike other class appellants, discretion, given fact that the named bers, employees and currently plaintiffs’ employment by at the time company whose owners beneficial participation creation of the Plan and Plan; stock owned estoppel questions. its creation raised This pay sought preferential Fink to obtain had atypical thus inap- would make them De Compare his Plan benefits. ment of pro- even propriate representatives Opposition fendants’ Memorandum employ- all former posed narrower class of Certification Motion for Class Plaintiffs’ ees. (setting aforementioned forth the Finally, majority notes lack facts) Plaintiffs Fink Memorandum of “evidence that Court con Opposi Reply to Defendants’ and Kraft appointing representative a class sidered (dis tion to Motion for Class Certification Maj. op. other than Fink or Kraft.” of, legal implication but not puting the authority I of no for the propo 960. know facts). These denying, aforementioned the District Court has an sition that obli enough more than undisputed facts are repre out class gation seek alternative finding the District Court’s prevent our See, Payne e.g., sentatives. v. Travenol requested class an certify refusal (5th Laboratories, Inc., F.2d See, e.g., Phillips v. discretion. abuse of denied, Cir.), 459 U.S. cert. (D.C.Cir.), Klassen, 502 F.2d (1982) (district 451, 74 L.Ed.2d 605 court 309, 42 S.Ct. 419 U.S. plaintiffs). no to recruit new has (affirming (1974) district L.Ed.2d certification because denial of class court’s sum, majority’s opinion while likelihood of conflicts there was some aspect expressly of the case acknowl- among representatives). judge’s trial “broad discre- edges both the specific necessity lack of faults Dis- tion” majority opinion also however, holding Court, “provid[ing] findings, compatible no seems trict pos- represents my principle. even considered the It view indication neither [it] certifying a nar- upon or of thé domain of sibility deep of subclasses encroachment class, potential conflict to avoid rower the District Court. employees of current the interests

between above, I Except forth concur as set op. at past employees.” Maj. and those of majority’s disposition. clear, has made Supreme 960. The however, that that is not the District Court is [I]t constructing subclass-

bear the burden upon respondent

es. That burden required he submit it is who has no court. The court

proposals to the act. obligation so to sponte

sua v. Ger- Parole Comm’n United States 388, 408, 100 S.Ct.

aghty, 445 U.S. (1980). Though the L.Ed.2d 479 propos- to make ample had time

appellants

Case Details

Case Name: Ronald Fink v. National Savings and Trust Company

Court Name: Court of Appeals for the D.C. Circuit

Date Published: Sep 3, 1985

Citation: 772 F.2d 951

Docket Number: 84-5081

Court Abbreviation: D.C. Cir.