The Sixth Circuit Court of Appeals recently affirmed the dismissal of a lawsuit brought by 225 current or former Lorain, Ohio employees of U.S. Steel Corporation. In Cataldo, et al. v. United States Steel Corp., et al., the plaintiffs sued U.S. Steel, their union, and the administrator of their pension plan for allegedly violating provisions of the Employee Retirement Income Security Act (“ERISA”) and Ohio common law by intentionally misleading them with respect to pension benefit calculations.
The primary issue in the case, at least initially, was ERISA’s statute of limitations. The statute requires breach of fiduciary duty claims to be filed within three years of the date the plaintiff first obtained “actual knowledge” (knowledge of the conduct, not knowledge that the conduct violates ERISA) of the breach but no later than six years after the breach. The plaintiffs filed their complaint in June 2009, alleging that they learned in 2003 that they would not receive the allegedly promised benefits. The district court reasoned that they should have filed suit within three years of that discovery, or by 2006, and that their claims were therefore time-barred.
On appeal, the plaintiffs argued that the district court applied the wrong limitations period because they had asserted fraud in their complaint. ERISA provides that “in the case of fraud or concealment” a fiduciary duty action “may be commenced not later than six years after the date of discovery” of the breach. 29 U.S.C. §1113. The plaintiffs read the exception to mean that the six-year limitation applies in cases of either fraud or concealment, meaning that the six-year limitation would apply to fiduciary fraud claims even absent allegations of concealment. The defendants argued that the exception applies only in situations where a fiduciary has attempted to hide its breach from the injured party. The Court rejected each side’s claims that Sixth Circuit precedent supported its position, declaring it an open question in the circuit—which it then declined to answer. Although the Court did not officially answer this question, it did state that it assumes a six-year limitation period would apply under those circumstances.
At the end of the day, the Court decided that the plaintiffs “have not pleaded the fraud with even the slightest amount of particularity” as required by Rule 9(b). Because the plaintiffs’ complaint failed to allege, for example, the time and place of fraudulent statements or even the identity of the speaker (despite no less than sixteen named defendants in the complaint), it fell short of Rule 9’s minimum pleading requirements. As a result, the Court held that the plaintiffs’ claims against U.S. Steel and the pension plan for breach of ERISA fiduciary duty were time-barred and properly dismissed. The Court went on to affirm the district court’s dismissal of the plaintiffs’ remaining claims.