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What is “actual knowledge” in ERISA breach of fiduciary duty cases?

Posted by Corey F. Schechter | Jan 18, 2019 | 0 Comments

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Claims for an ERISA breach of fiduciary duty must be filed within six years, or within three years if the plaintiff has actual knowledge of the breach or violation. In a recent 9th Circuit Court of Appeals decision, the court found that access to the documents disclosing the breach does not constitute actual knowledge.

Actual Knowledge of ERISA Investment Violations

The court in Sulyma v. Intel Corporation Investment Policy Committee held that actual knowledge, “must therefore mean something between bare knowledge of the underlying transaction, which would trigger the limitations period before a plaintiff was aware he or she had reason to sue, and actual legal knowledge, which only a lawyer would normally possess.”

A former Intel employee, Christopher Sulyma, worked for the company for two years and participated in two of Intel's retirement plans. When Intel's retirement funds were initially established, they did not include many “alternative investments.” To increase diversification, the funds increased alternative investments, such as hedge funds. However, the increase in alternative investments also increased fees and reduced performance.

The decisions to invest in these alternative investments were disclosed online and accessible to Sulyma. Sulyma did access some of this information. However, Sulyma claimed he was not aware that the funds were invested in alternative investments while working for the company. It was only after Sulyma learned about the poor performance of the funds that he filed a claim against Intel, for breach of fiduciary duties.

Statute of Limitations in ERISA Breach of Fiduciary Duty Claims

Under ERISA (29 U.S.C Section 1113), a claim for breach of fiduciary responsibility, duty, or obligation is barred if it is filed after:

  1. Six (6) 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 (3) years after the earliest date on which the plaintiff had actual knowledge of the breach or violation.

Intel claimed the suit was outside of the statute of limitations because the plaintiff had actual knowledge of the claimed breach because the information about these funds was available on their websites. A district court agreed with Intel and Sulyma appealed.

The 9th Circuit court found that because the plaintiff alleged he was unaware of the investments, he did not have actual knowledge that those investments occurred and that they were imprudent. The plaintiff may have had constructive knowledge based on the information available on the website, but he cannot have actual knowledge if he never looked at the documents.

The 9th Circuit's decision rejected a 6th Circuit finding in Brown v. Owens Corning Investment Review Committee that “when a plan participant is given specific instructions on how to access plan documents, their failure to read the documents will not shield them from having actual knowledge of the documents.”

Breach of Duty Statute of Limitations After 9th Circuit Decision

The decision may make it easier for plaintiffs to withstand a statute of limitations defense when they file an ERISA breach of fiduciary duty claim after three

years if the plaintiff can claim they did not have actual knowledge of specific facts constituting the alleged breach. Having access to plan documents is not the same as having actual knowledge of what is in those documents.

If you have any questions about ERISA breach of fiduciary duty claims, Butterfield Schechter LLP is here to help. We are San Diego County's largest law firm with a focus on employee benefits law. Contact our office today with any questions on how we can help you and your business succeed.

About the Author

Corey F. Schechter

Corey Schechter practices in the areas of Employee Benefits, Employee Stock Ownership Plans, Pension and Profit Sharing Plans, ERISA, ERISA Litigation, Business Law, Qualified Domestic Relations Orders (QDROs), and Employment and Labor Law.

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