In Fish v. GreatBanc Trust Company, No. 12-3330 (7th Cir. 2014), the central issue in the appeal is the application of the statute of limitations for claims for breach of fiduciary duty under ERISA. The presumptive limitation period for violations is six years from the date of the last action constituting part of the breach or violation, but the statute provides a limited exception. The time is shortened to just three years from the time the plaintiff gained “actual knowledge of the breach or violation.” 29 U.S.C. § 1113. (The six-year limit can also be extended in cases of fraud or concealment, but neither was at issue here.)
The plaintiffs in this case were employees of The Antioch Company who participated in an employee stock ownership plan or ESOP. Their claims arise from a buy-out transaction at the end of 2003 in which Antioch borrowed money to buy all stock except the stock owned by the employee stock ownership plan. The buy-out ended badly, leaving Antioch bankrupt and the employee stock ownership plan worthless. The plaintiffs have sued under ERISA for breach of fiduciary duties in the buy-out. The district court granted summary judgment for the defendants under the three-year limit of ERISA § 413(2), finding that proxy documents given to plaintiffs at the time of the buy-out transaction and their knowledge of Antioch’s financial affairs after the transaction gave them actual knowledge of the alleged ERISA violations more than three years before suit was filed.
The Seventh Circuit Court of Appeals (the “Court”) reversed the district court’s summary judgment. It said that the plaintiffs’ claims for breach of fiduciary duty do not depend solely on the disclosed substantive terms of the 2003 buy-out transaction. Their claims also depend on the processes that defendant GreatBanc Trust used to evaluate, to negotiate, and ultimately to approve the ill-fated transaction. The plaintiffs’ knowledge of the substantive terms of the buyout transaction itself therefore did not give them “actual knowledge of the breach or violation” alleged in this case. Without actual knowledge, the three-year limit does not apply.