ERISA-Second Circuit Rules That New York’s Borrowing Statute, Combined With Pennsylvania’s 4-Year Limitations Period, Cause Plaintiff’s Suit For Benefits To Be Time-Barred

In Muto v. CBS Corporation, No. 10-3038-cv (2nd Cir. 2012), the plaintiffs were appealing the judgment of the district court dismissing as time-barred their class action claim under ERISA for pension benefits. The plaintiffs agree that since ERISA contains no express limitations period for bringing benefit claims under 29 U.S.C. § 1132, the district court correctly looked to analogous New York law-the law of the forum state- to determine the applicable period. They argue on appeal that the district court erred, however, when it looked past the six-year New York limitations period for contract actions, the seeming analogous rule; applied part of the New York regime known as the “borrowing statute,” which directed it to Pennsylvania law; and ruled that Pennsylvania’s four-year limitations period barred plaintiffs’ claims.

In this case, the plaintiffs are residents of Pennsylvania, who had worked for Westinghouse Electric Corp. (“Westinghouse”) in Pittsburgh in the 1990s. During that time, Westinghouse offered its employees a pension plan (the ” Plan”). The Plan provided a pension benefit, in which a participant vests after completing 5 years of service. The plaintiffs did not have 5 years of service, and therefore were not vested in their benefit under the Plan, when their employment with Westinghouse ended. The plaintiffs’ terminations occurred during a series of layoffs and business divestitures implemented by Westinghouse from 1994 through 2000. They claim that the layoffs resulted in a partial termination of the Plan, under which they would become vested in, and thus entitled to receive, their benefits under the Plan. The defendants deny that a partial termination occurred, and thus refuse to have the Plan pay the benefits.

This suit was initially filed in 2000. The court rejected the plaintiffs’ claims, in 2001, on the grounds that they had not exhausted their administrative remedies. The plaintiffs next sought to pursue their administrative remedies, in 2003, by sending correspondence of their claims to the defendants. In April 2009, more than a decade after Westinghouse terminated their employment and more than five years after they sent their 2003 letters, the plaintiffs filed this class action in the U.S. District Court for the Southern District of New York, seeking to recover benefits under the Plan on the partial termination theory. As indicated above, the district court dismissed the claim as being untimely. Was it correct?

In analyzing the case, the Second Circuit Court of Appeals (the “Court”) noted that, in determining whether a suit is timely brought under ERISA, courts should refer to the statute of limitations of the forum state, including any “borrowing statute” of the forum. In its borrowing statute, § 202, New York law provides that “when a nonresident plaintiff sues upon a cause of action that arose outside of New York, the court must apply the shorter limitations period. . . of either: (1) New York; or (2) the state where the cause of action accrued.” Here the plaintiffs reside, and the cause of action arose (that is, the place of injury is), in Pennsylvania. Consequently, the Pennsylvania 4-year statute of limitations on breach of contract actions applies. As such, due to the more than 5 year gap between sending the correspondence (in 2003) and filing this suit (in 2009), the Court concluded that the plaintiffs’ suit was not timely, and it affirmed the district court’s judgment.

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