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Fulghum v. Embarq Corp., No. 13-3230 (10th Cir. Feb. 24, 2015)

While ERISA does not provide a limitations period for most claims, it does impose a three-year limitations period after discovery of a breach of fiduciary duty, plus a six-year period of repose. Yet the statute also provides that "in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation." The Tenth Circuit examined this quoted language today, and remanded parts of a class action to be reconsidered under this provision.

Fulghum v. Embarq Corp., No. 13-3230 (10th Cir. Feb. 24, 2015): ERISA provides the following limitations period for breach of fiduciary duty, 29 U.S.C. § 1113 -

"No action may be commenced under this subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of- (1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation, or (2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation; except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation. "

Thus there may be situations where claims may be brought more than six years after a violation, provided that the participant can establish "fraud or concealment." The circuits have not fully agreed what this language means.

In today's case, the plaintiff retirees alleged under a variety of theories that their former employers, Sprint-Nextel Corp. ("Sprint") and Embarq Corp., wrongfully denied them lifetime health and life-insurance benefits under their ERISA plans.

While ERISA welfare-benefit plans have no statutory vesting requirements, and can generally be modified or even cancelled by employers, the retirees argued that enforceable lifetime promises were made either by the terms of the plan or because of misleading communications by plan administrators. plaintiffs also argued that the cancellation of benefits violated the ADEA and state-law age discrimination statutes.

In addition to the plan instruments, there were various summary plan descriptions (SPDs) disseminated to the participants that explained the benefits. "In their motions for summary judgment, Defendants organized thirty-two SPDs into five groups based on language and coverage similarities, ... asserting the relevant named plaintiffs and class members retired under an identified SPD or an SPD identical in all material respects to one of the identified SPDs."

First, the Tenth Circuit affirms summary judgment on the principal claim that the plans and SPDs expressly promised lifetime benefits. For each of the five groups, the panel holds either that the plans contained express "reservations of rights" (RORs) that enabled the employer to amend or terminate the plans (e.g., "[i]n the future, the company may change or terminate any of the coverages described in this Section") , or otherwise  unambiguously contemplated future termination of the plans.

Notwithstanding, the panel remands for reconsideration claims by class members under SPDs and collective bargaining agreements (CBAs) other than those actually reviewed by the district court.

"Defendants sought summary judgment only on the specific claims of identified class members and only to the extent those claims arose from the thirty SPDs identified and discussed in Defendants' motion. Thus, Defendants were only entitled to summary judgment as to claims premised on the thirty SPDs, not as to all health or life insurance benefit claims asserted by each identified class member."

Second, on the claims for breach of fiduciary duty "by withholding benefits due them, misrepresenting and concealing material benefits information, and misleading them into believing their health and life insurance benefits could not be amended or terminated," the panel reverses in part the district court's holding that the claims were time-barred. The panel finds that certain claims - brought under 29 U.S.C. § 1132(a)(3) - were not covered by  § 1113.

Regarding fiduciary-duty claims arising pursuant to 29 U.S.C. § 1104(a)(1), the panel holds that there is a dispute of fact whether the six-year repose period was extended by defendants' "fraud or concealment."

The panel recognized that it had "never addressed the issue and the other circuit courts of appeals are split on it," with the First, Third, Seventh, Eighth, Ninth, and D.C. Circuits holding that the "fraud or concealment" standard "does not apply to breach of fiduciary duty claims based on a fraud theory but applies only when a fiduciary conceals the alleged breach." The Second Circuit, meanwhile, holds that a six year period of discovery applies only when "when the plaintiff's breach of fiduciary duty claim is based on a fraud theory and when the defendant acts to conceal its breach from the plaintiff."

The panel holds that proof of either fraud or concealment by the fiduciary is enough to invoke this exception.  "plaintiffs' responsive brief ... contains a comprehensive list of the factual allegations relating to the fraud claims," and the record was otherwise "fully developed on the fraud claim." Thus, because the district court did not consider these claims, the judgments are vacated and remanded.

Third, the panel rejects ADEA disparate impact protection, affirming summary judgment on employer's affirmative defense that it had "reasonable factors other than age", i.e., to "reduce costs and bring life insurance benefits in line with those provided by other companies," and that the alternation in health benefits was authorized by EEOC regulation 29 C.F.R. § 1625.32(b).

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