Congress did not provide an express statute of limitations for a
participant's action “to recover benefits due to him under the terms of
his plan" under ERISA § 502(a)(1)(B), 29 U.S.C. §
1132(a)(1)(B). The Sixth Circuit, applying the generally-accepted rule
that "in the absence of a federally-mandated statute of
limitations, the court should apply the most analogous state law statute of
limitations," has long held that Ohio's 15-year statute of limitations for
breach of a written contract applies to a § 502(a)(1)(B) claim. Meade
v. Pension Appeals & Review Committee, 966 F.2d 190, 195 (6th Cir.
1992), citing Ohio Rev. Code § 2305.06.
But a recent Sixth Circuit decision augurs ill for the continued
viability of the Ohio 15-year statute of limitations in such ERISA claims. In Redmon v. Sud-Chemie Inc.
Retirement Plan for Union Employees, No. 08-5121, 2008 U.S. App. LEXIS
23713 (6th Cir. Nov. 18, 2008), the Court was presented "an issue of first
impression" – which is the most analogous state law statute of limitations
for a § 502(a)(1)(B) claim under Kentucky law? In rejecting
Kentucky's 15-year statute of limitations for breach of written contract and
choosing instead Kentucky's 5-year statute of limitations for an action
upon liability created by a state statute, the Court may have sounded the
death knell for applying the Ohio 15-year prescriptive period to
ERISA claims. I base this prediction on
the following four factors:
1. The Court emphasized inRedmon– not once, but twice – that the Sixth Circuit's earlier decisions adopting a state's breach-of-written-contract statute of limitations were rendered "[w]here no provision comparable to [the Kentucky statute] was before the court" (2008 U.S. App. Lexis 23713 at *9), and that "no provision comparable to [the Kentucky statute] was before the court in those cases” (id. at *14). Indeed, the distance the panel decision appears to place between its analysis and conclusion and that of Meade may be telling:
In Meade, we applied the Ohio statute of limitations for breach of written contract to an ERISA benefits claim. At oral argument, counsel for Redmon contended that Meade controls because in that case we applied the breach of contract provision despite a provision of the Ohio Revised Code ("ORC") analogous to the Kentucky provision for statute liability at issue here. See ORC § 2305.07 ("[A]n action . . . upon a liability created by statute . . . shall [*10] be brought within six years after the cause thereof accrued."). After a careful reading of Meade, however, we are not persuaded. The question presented in Meade was whether the most analogous Ohio statute of limitations was that for breach of written contract or that for injury not clearly founded on written contract. Meade thus did not present, and we did not decide, the question of whether Ohio's provision for statute liability should apply. This case presents a different question, and the answer depends on Kentucky law, not Ohio law. Accordingly, Meade does not compel the result here.
Id.
at *9 n.4.
2. The Court appears to
have placed its decision in the apparent mainstream of ERISA jurisprudence –
"[w]here a more closely analogous statute of limitations is available,
however, our sister circuits have declined to apply the statute of limitations
for breach of contract in favor of the more specific provision." Id.
at *11-*12.
3. The Sixth Circuit
pointedly asked whether a "claim [is] more properly characterized as
arising under ERISA than under the plan contract" and whether "the
benefits claim depend[s] on the alleged violations of ERISA's statutory
protections" in deciding whether "statute liability, rather than
breach of contract, provide[s] the more analogous cause of action to an ERISA
claim for benefits." Id. at *15-*16. As the Court stated:
Here, Redmon does not dispute that she signed the DFBP waiver. Rather, she argues that the plan administrator obtained her signature in violation of ERISA. She alleges that her waiver of survivor benefits was therefore invalid under ERISA and that she is entitled to the benefits she would have received if she had not signed the waiver. Redmon's claim for benefits therefore depends on a finding that her signature was invalidly obtained in violation of ERISA. Thus, her claim for benefits can be said to arise more specifically from ERISA's statutory protections than from an independent contract between the Redmons and Sud-Chemie. The result might be different if, for example, Redmon contested the authenticity of the signature on the DFBP. Such a claim might present an issue of contract law. Here, Redmon's claim for benefits is entirely derivative of her claim that Sud-Chemie failed to comply with ERISA. Accordingly, the most analogous Kentucky statute of limitations is five years under KRS § 413.120(2).
Id.
at *16-*17.
4. The panel provided a
significantly broader, albeit analytically barren, rationale for its choice of
the 5-year limitations period over the 15-year prescriptive period: "ERISA
is more akin to a statutory scheme such as Workers' Compensation than to any
common law cause of action. Therefore, under Kentucky law, the statutory
liability provision is the most analogous statute of limitations." Id.
at *18 (citations omitted).
When presented with a § 502(a)(1)(B) claim arising in Ohio, will
the Sixth Circuit continue applying Ohio's 15-year breach-of-contract
limitations period, or will it apply the 6-year statute of limitations
applicable to "an action … upon a liability created by statute" set
forth in Ohio Rev. Code § 2305.07? Those favoring adherence to
the 15-year rule will take heart from the panel’s conclusion in Redmon
that "the most analogous statute may vary as a matter of state law even
within a single circuit." This
fairly oblique comment might be read to mean that the Ohio 15-year
breach-of-contract limitations period can co-exist alongside the rejection of
the identical statute of limitations for Kentucky. But the better
reading, I believe, is that the Sixth Circuit merely reached its result inRedmon without expressly overruling Meade, rather than as
signaling any continuing viability for the holding in Meade.
After Redmon, I cannot see the Sixth Circuit continuing to apply
Ohio's 15-year statute for breaches of contract to § 502(a)(1)(B) claims.
I do not believe the Sixth Circuit reached the correct result in Redmon. ERISA
does not create liability (except, for example, penalties for failure to
provide plan documents when requested) – the plan does – because it is the plan
sponsor who determines the benefit offered by the plan. Alessi v.
Raybestos, 451 U.S. 504 (1981). It is also well-settled, at least in
other circuits, that the pension contract includes terms implied-by-law. May
Dept. Stores v. FDIC, 305 F.3d 597, 600-01 (7th Cir. 2002)
(Posner, J.); Esden v. Bank of Boston, 229 F.3d 154, 173 (2d
Cir. 2000). Such implied terms determine how to compute benefits but do not
create liabilities. For instance, in Redmon the waiver violated
ERISA but did not create a liability beyond the benefits provided by the plan. Just
as ERISA enforces plan terms, so it enforces implied contractual provisions,
such as the regulation of waivers. No liability is created because ERISA
does not provide for extra-contractual damages, such as consequential or
punitive damages. In other jurisdictions outside the Sixth Circuit, the"liability created by statute" limitations period is applied to
statutory penalties (e.g., the late provision of plan documents), while
claims for benefits based on plan terms implied by law are governed by the
statute of limitations for breach of contract claims. Unhappily, the Sixth Circuit has failed
to embrace the Seventh Circuit’s perspective of incorporating the law into
the plan as in Leister v. Dovetail, Inc., __ F.3d __ (7th Cir. 2008), where Judge Posner recently wrote that "the benefits to
which [plaintiff] was entitled were the assets that would have been in her
401(k) account had the defendants complied with their fiduciary duties."
This clearly supports the proposition that the fiduciary obligations imposed
by 29 U.S.C. § 1104(a)(1)(D) are to be read into a plan participant's scope of
recovery under 29 U.S.C. § 1132(a)(1)(B). One cannot help but wish that the Sixth Circuit’s understanding of ERISA
paralleled the Seventh Circuit’s.
Two closing observations. First, the panel in Redmon
found the statute-triggering "clear and unequivocal repudiation of
benefits" to have occurred when benefit payments ceased, and not when the
plan denied the participant's claim for benefits. Second, Senior District
Judge Karl Forester, who was on the panel in Redmon, is the author of Drutis
v. Quebecor World (USA), Inc., 459 F. Supp.2d 580 (E.D. Ky. 2006), aff'd,
499 F.3d 608 (2007), cert. denied, 129 S. Ct. 68 (2008), which (in the
course of deciding that a cash balance plan was not illegally
age-discriminatory) unsettlingly relied on Crosby v. Bowater Inc.
Retirement Plan for Salaried Employees of Great Northern Paper, Inc., 382
F.3d 587 (6th Cir. 2004), cert. denied, 544 U.S. 976 (2005), for the
broad holding that "ERISA does not authorize a civil action for monetary
damages." 459 F. Supp.2d at 591. I respectfully submit that Crosby cannot properly be read so
broadly.
The credit for this post is owed to Tom Theado for his insightful comments. Many thanks to Tom for bringing this case to my attention.