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Davis v. Bowman Apple Products Co. Inc.

United States District Court, W.D. Virginia, Harrisonburg Division
Mar 29, 2002
Civil Action No. 5:00CV00033 (W.D. Va. Mar. 29, 2002)

Opinion

Civil Action No. 5:00CV00033

March 29, 2002


MEMORANDUM OPINION


Before the court are the parties' cross motions for summary judgment. This matter was referred to United States Magistrate Judge B. Waugh Crigler for proposed findings of fact, conclusions of law, and a recommended disposition. See 28 U.S.C. § 636(b)(1)(B). On May 31, 2001, the Magistrate Judge issued a Report and Recommendation wherein he recommended that the court grant the defendants' motion for summary judgment on the ground that the action is barred by the statute of limitations. Both parties filed timely objections. This court has reviewed de novo those portions of the Report and Recommendation as to which objections were made. See 28 U.S.C. § 636(b)(1) (West 1993 Supp. 2000); Fed.R.Civ.P. 72(b). Having thoroughly considered the entire case and all relevant law, the court shall grant the defendants' motion for summary judgment.

I.

The following facts are undisputed, unless otherwise noted. The plaintiff, Michael Davis, began working for the defendant, Bowman Apple Products, Co., Inc., in 1982 or 1983, as an assistant plant manager and then as an assistant director of purchasing.

Bowman Apple offered its employees a profit sharing plan as part of its retirement package. Until the 1990 fiscal year, an employee became one hundred percent vested in the plan only after working for the company fifteen years. At the start of the 1990 fiscal year, however, the defendants adopted a new plan which allowed for an employee to become completely vested after only five years with the company. An employee receives credit for an entire year of service if the employee works at least one hour in that fiscal year. A fiscal year begins on the first of September and ends on August 31st.

In this case, the plaintiff would have needed to work for one hour on September 1, 1989, in order to be eligible to receive one hundred percent of his vested profits. If the plaintiff's last day of work was August 31, 1989, then the old plan would be in effect, and the plaintiff would be eligible to receive only thirty percent of his vested profits.

The parties agree that the plaintiff tendered his resignation to Gordon D. Bowman on August 31, 1989, although they disagree as to the amount of notice given by plaintiff. The plaintiff claims he gave two weeks notice. The defendants maintain that he gave five days' notice. Both parties state that the next morning Bowman contacted the plaintiff's supervisor, John Brown and instructed him to terminate Davis immediately.

The plaintiff shared an office with Brown as well as Kinter McClelland, another employee. McClelland states that when he arrived in the office at 7:45 a.m. on September 1, 1989, the plaintiff was not there. At about 8:15 a.m., McClelland returned to the office to find the plaintiff and Brown. Brown told McClelland to "make [himself] scarce" because "he had something unpleasant to do." (McClelland Dep. at 8, lines 2-4.) McClelland left and returned between 8:45 a.m. and 9:15 a.m. The plaintiff was there but left the office shortly thereafter.

The plaintiff objects to the Magistrate Judge's recitation of the facts concerning McClelland's deposition testimony. The court finds the Magistrate Judge accurately presented the facts as they appear in the record, and therefore overrules the objection.

The plaintiff says he arrived at work between 7:15 a.m. and 7:30 a.m. at which time he went to Tom Proctor's office to tell him of his resignation and offer to assist in inventory. Proctor gave him some inventory sheets to photocopy and review. The plaintiff and Proctor reviewed them together over the next hour with the plaintiff moving between his office and Proctor's office. At around 10:00 a.m., the plaintiff came back to Proctor's office to say he had been told to clean up his desk and go home. The plaintiff went to see two other Bowman Apple employees, Tim Proctor and Merle Orebaugh. Afterwards he left the premises. A time sheet for the period during which the plaintiff was present on September 1, 1989 was never filled out.

In October 1989, the plaintiff called Tom Proctor to ask why he had not received a pay check for the time he worked on September 1, 1989. Proctor informed him that no time sheet had been done for him. In December 1989, Proctor says he was again contacted by the plaintiff who asked why his plan certificate showed him vested at only thirty percent. Proctor informed the plaintiff that the new vesting arrangements would show up on the certificate for next year. The plaintiff does not recall this conversation. Proctor eventually realized that because the plaintiff had no time sheet filed for September 1, 1989, he would not be eligible for one hundred percent vesting. He discussed this with his supervisor, Richard Cullen, who asked Bowman for advice. Bowman indicated that he considered the plaintiff's last day of work to be August 31, 1989. (Thomas Proctor Dep., at 37, lines 1-19.)

On November 19, 1990, the plaintiff again called Proctor to inquire why the 1990 plan certificate still showed him vested at thirty percent. Proctor answered that management considered him only thirty percent vested. Proctor further informed the plaintiff that management considered his last day to be August 31, 1989. The plaintiff admits that at the time he "was hopeful that [he] could recover the seventy percent." (Davis Dep., at p. 62, lines 2-4.)

In December 1994, Proctor contacted the plaintiff to tell him that the profit sharing plan had been modified so that employees who had left the company would receive pay outs five years after the date of their departure. The plaintiff received his payout on December 15, 1994. Davis was made aware that he was receiving thirty percent vesting, and he signed a release which stated:

I acknowledge payment in full of my Account in the Plan by check number 814496 in the amount of $12,050.33, issued by the Trustees, dated 12-16-94, and hereby release the Plan Administrator, the Trustees of the Plan and Bowman Apple Products Company, Incorporated from and against any and all claims the undersigned may have or hereafter claim to have against said Administrator, Trustees and Bowman Apple Products Company, Incorporated, with respect to my interest in said Plan.

The plaintiff denies discussing whether he was entitled to one hundred percent at the time he received his payout. In December 1999, the plaintiff happened upon Proctor at a sandwich shop. Proctor told the plaintiff that he always thought the plaintiff should have received one hundred percent vesting. Plaintiff maintains that this was the moment when he realized he had a claim.

The complaint for declaratory judgment was filed on May 4, 2000. Plaintiff seeks, inter alia, that the court issue an order declaring that the plaintiff is entitled to plan proceeds pursuant to the accelerated vesting provisions which took effect September 1, 1989. The defendants moved for summary judgment on the basis of statute of limitations, laches, waiver and standing. The plaintiff also moved for summary judgment based on the lack of a genuine material issue of fact. The Magistrate Judge recommended granting the defendants' motion on statute of limitations grounds and denying their remaining grounds for summary judgment. The plaintiff filed objections to the Magistrate Judge's recommendation to grant the defendants' summary judgment motion. The defendants filed objections to the recommendation to deny their summary judgment on the grounds of laches, waiver or standing.

The defendants raise an objection to the findings of the Magistrate Judge rejecting laches as a bar to the plaintiff's claim in as much as the court declined to accept the Magistrate Judge's recommendation to grant summary judgment on other grounds. As the court shall grant the defendants' motion for summary judgment, it dismisses the defendants' objection related to laches.

II.

As a preliminary issue, the court addresses what exactly the plaintiff pled in his complaint. In his motion for summary judgment, the plaintiff argued that his complaint should be read to contain alternative claims, that is, both a claim for benefits, and in the alternative, a claim of breach of fiduciary duty. The Magistrate Judge found that the plaintiff's complaint only contained a claim of benefits. The plaintiff objects to the Magistrate Judge's finding and seeks leave to amend his complaint in as much as the court agrees with the Magistrate Judge about the absence of a fiduciary duty claim. The defendants argue that allowing an amendment of the complaint would be futile as the plaintiff would lose even on a properly pled claim for breach of fiduciary duty.

In his complaint, the plaintiff states:

An actual and justifiable controversy exists between the Plaintiff and Defendants in that the Plaintiff is claiming entitlement under the accelerated vesting provisions with respect to his Plan benefits and the Defendants have incorrectly made a determination that the accelerated vesting provisions do not apply, thereby denying Plaintiff's claim.

(Compl. ¶ 14.) The plaintiff argues, in his later submissions to the court, that the above-quoted statement is sufficient to state a claim for breach of fiduciary duty and fraudulent concealment and to give the plaintiff the benefit of the ERISA statute of limitations applicable to fraud claims. Federal Rule of Civil Procedure 8(a) requires a party to give "a short and plain statement of the claim showing that the pleader is entitled to relief . . ." However, Federal Rule of Civil Procedure 9(b) requires that in claims of fraud, "the circumstances constituting fraud . . . shall be stated with particularity." In later submissions, the plaintiff alleges that the defendants fraudulently withheld information from him. However, the plaintiff's complaint contains no such particularity. While the Federal Rules provide for a simplified pleadings system, it should not leave parties and the court speculating about what possible claims may exist in a complaint. Accordingly, the court finds that the plaintiff's complaint is insufficient to make out a case for breach of fiduciary duty.

Despite this deficiency in the plaintiff's pleading, the court notes that in the parties' accompanying memorandum to their motions for summary judgment and in their objections to the Magistrate Judge's Report and Recommendation, the plaintiff and defendants brief this subject thoroughly. Finding, therefore, that no prejudice will result to either party and that it will serve the interests of judicial economy if it addresses the issue of breach of fiduciary duty as if it had been properly pled, the court shall take up both plaintiff's claim for benefits and plaintiff's claim for breach of fiduciary duty.

III.

The court shall first address the threshold issue of standing. The plaintiff brings this cause of action pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq. ERISA provides that a civil action may be brought "by a participant or beneficiary . . . to recover benefits due to him under the terms of the plan." § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). A participant is defined as someone "who is or may become eligible to receive a benefit of any type from an employee benefit plan." 29 U.S.C. § 1002(7),(8). The defendants maintain that the plaintiff is a non-participant in the profit sharing plan because he accepted a lump sum payout from the plan, and therefore, that the plaintiff has no standing to bring this action.

The defendants rely exclusively on Mouly v. E.I. Dupont De Nemours and Co., in which this court found that "retired employees who have accepted a lump sum payment of 'everything due them' are excluded from the class of participants." 1998 WL661553 *5 (W.D.Va. Sept. 11, 1998). However, this court also indicated in Mouly that former employees who contest the amount they received in a lump sum could belong to the class of participants for the purpose of bringing an ERISA claim. See id. As the plaintiff in this case is contesting the amount of the payout he received from the defendants, he falls into the latter category of participants discussed by the court, rather than the former one of non-participants.

Furthermore, a former employee has standing to bring a claim for benefits where he has a colorable claim. Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 117 (1988). The standard to determine whether a claim is colorable is not a stringent one. Davis v. Featherstone, 97 F.3d 734, 737 (4th Cir. 1996) (quoting Panaras v. Liquid Carbonic Industries Corp., 74 F.3d 786, 790 (7th Cir. 1996)). Indeed, a plaintiff need only put forth an arguable, non-frivolous claim whether or not it succeeds on the merits. See id. at 738.

The plaintiff argues that he was deprived of participant status due to an alleged breach of fiduciary duty. Such a claim may be considered colorable. See Adamson v. Armco, 44 F.3d 650, 654-55 (8th Cir.), cert. denied, 516 U.S. 823 (1995) (recognizing an exception to the requirement of current participation where it is alleged that but for the employer's conduct, the employee would be a participant). In applying the not very stringent standard applicable in these cases, the court finds that plaintiff's claim is not entirely frivolous and thus sufficient to give the plaintiff standing. See Sedlack v. Braswell Services Group, Inc., 134 F.3d 219, 226 (4th Cir. 1998) (plaintiff's claim was ultimately unsuccessful but not entirely frivolous). The defendants' objections are therefore overruled.

IV.

Before the court are cross-motions for summary judgment. A party is entitled to summary judgment when the pleadings and discovery show that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "[S]ummary judgment or a directed verdict is mandated where the facts and the law will reasonably support only one conclusion." Hawkins v. PepsiCo, Inc., 203 F.3d 274, 279 (4th Cir. 2000) (quoting McDermott Int'l, Inc. v. Wilander, 498 U.S. 337, 356 (1991)). If the evidence is such that a reasonable jury could return a verdict in favor of the non-moving party, then there are genuine issues of material fact. See Anderson, 477 U.S. at 248. All facts and reasonable inferences that can be drawn therefrom must be interpreted in the light most favorable to the non-moving party. See Miller v. Leathers, 913 F.2d 1085, 1087 (4th Cir. 1990). However, the non-movant may not rest upon mere allegations and denials of the pleadings, and must assert more than a "mere scintilla" of evidence in support of her case in order to survive an adverse entry of summary judgment. See 477 U.S. at 248.

V.

As the plaintiff argues that his complaint contains alternative pleadings, one for a claim for benefits and the other for breach of fiduciary duty, the court shall first take up the claim for benefits.

A.

ERISA provides that a participant in a benefit plan may bring an action to recover benefits, but it does not provide a statute of limitations for such claims. See § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). The court must then look to the most analogous state statute of limitations. See Cotter v. Eastern Conf. of Teamsters Retirement Plan, 898 F.2d 424, 428 (4th Cir. 1990). In this case, Virginia's five year statute of limitations for contract actions applies. See Dameron v. Sinai Hospital of Baltimore, Inc., 815 F.2d 975, 981 (4th Cir. 1987) (finding that an ERISA § 1132 claim was most analogous to a breach of contract action, and applying the state limitation period for contract actions); VA. CODE ANN. § 8.01-246(2) (Michie 2000). Thus, the statute of limitations for an ERISA claim for benefits brought in Virginia is five years.

Generally, this type of cause of action accrues when a benefits claim has been made and formally denied. See 898 F.2d at 428 (4th Cir. 1990). However, the Fourth Circuit has adapted the test for situations where a formal denial is lacking. A court may "determin[e] the time at which some event other than a denial of a claim should have alerted [plaintiff] to his entitlement to the benefits he did not receive . . .". See id. (citing Dameron, 815 F.2d at 982 n. 7 (statute began to run when defendant notified plaintiff of intent to reduce benefits)). Construing the facts in a light most favorable to the plaintiff, the court finds that the event which should have alerted the plaintiff to his allegedly missing benefits was the time of his payout on December 15, 1994. At that point, it was clear to plaintiff that he was receiving only thirty percent of his vested profits. In applying the five year statute of limitations, the plaintiff's claim for benefits is time-barred as his complaint was filed on May 4, 2000, more than five years after his claim accrued.

B.

The plaintiff's claim survives only if he can invoke the six year statute of limitations provided in ERISA for breach of fiduciary duty and fraud. The relevant ERISA section reads::

No action may be commenced under this title 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.
29 U.S.C. § 1113. The plaintiff maintains that the action accrued at the earliest on December 15, 1994, the date of his payout, and as such, his May 4, 2000 complaint was timely filed under the six year limitation. (Pl.'s Memo. in Resp. to Def.'s Summ. J. Mot., at 3.)

1. Breach of Fiduciary Duty of Loyalty

ERISA requires plan fiduciaries to act "solely in the interest of participants." 29 U.S.C. § 1104(a)(1). This section codifies the traditional fiduciary duty of loyalty. See Griggs v. E.I.Dupont De Nemours Co., 237 F.3d 371, 380 (4th Cir. 2001) ("Congress intended ERISA's fiduciary responsibility provisions to codify the common law of trusts."); Varity Corp v. Howe, 516 U.S. 489, 506 (1996). Under this duty, a fiduciary may not make misleading communications to the plan participant. See Berlin v. Michigan Bell Telephone Co., 858 F.2d 1154, 1163 (6th Cir. 1988) (citing inter alia Peoria Union Stock Yards Co. Ret. Plan v. Penn Mut. Life Ins. Co., 698 F.2d 320, 326 (7th Cir. 1983) ("Lying is inconsistent with the duty of loyalty owed by all fiduciaries and codified in [ 29 U.S.C. § 1104].")). The duty of loyalty also imposes an obligation on ERISA fiduciaries "not to misinform employees through material misrepresentations and incomplete, inconsistent or contradictory disclosures." Griggs, 237 F.3d at 380. (quoting Harte v. Bethlehem Steel Corp., 214 F.3d 446, 452 (3d Cir.) (internal quotation marks omitted), cert. denied, 531 U.S. 1037 (2000)).

The Fourth Circuit in Griggs interpreted this duty to require that:

[A]n ERISA fiduciary that knows or should know that a beneficiary labors under a material misunderstanding of plan benefits that will inure to his detriment cannot remain silent — especially when that misunderstanding was fostered by the fiduciary's own material representations or omissions.
237 F.3d at 381. The Griggs court considered it critical that the plaintiff's misunderstanding of his eligibility for a lump sum rollover election was fostered by the defendant's written explanation of benefits options. See id. at 382.

The plaintiff contends that the defendants engaged in a "conscious effort to deceive [him] as to his true rights." (Pl.'s Memo. in Resp. to Def.'s Summ. J. Mot., at 4.) Had the plaintiff filed a time sheet for the period which he alleges to have worked on September 1, 1989, the plaintiff would have been eligible for one hundred percent vesting in the profit sharing plan. Essentially, the plaintiff comes before the court to argue that he did not know this until late 1999; that he was entitled to this information; that the defendants withheld this information from him; and that this withholding of information constituted a breach of fiduciary duty of loyalty under ERISA. The plaintiff phrases this breach as the failure "to tell [him] he was actually due one hundred percent." Id. at 11. The defendants maintain that the plaintiff was not due one hundred percent vesting because Bowman considered the plaintiff's last day of work to be August 31, 1989. Thus, the defendants assert that they made no material misrepresentations as the plaintiff was due thirty percent vesting; he was told this, and he received it.

The issue in this case is whether the fact that the defendants told the plaintiff that he was entitled to thirty percent vesting, but did not tell him why, constitutes a material misrepresentation sufficient to make out a case for breach of their duty of loyalty under ERISA. The court finds that were a jury to believe that the plaintiff worked more than one hour on September 1, 1989, and that the defendants intentionally disregarded this information, their representation to the plaintiff that he was eligible for thirty percent vesting could be categorized as a material misrepresentation, or at the least, an incomplete representation to the plaintiff concerning his vesting rights. As this Circuit has previously stated, "the recognition of a limited fiduciary duty to inform a beneficiary of material facts in the absence of a specific request for information from the beneficiary is not a ground-breaking proposition." Griggs, 237 F.3d at 381. The defendants contend that the decision of whether to pay the defendant on September 1, 1989, was a decision made by Bowman as an employer, not a fiduciary. While ERISA does not "prohibit an employer from acting in accordance with its interests as employer when not administering the plan or investing its assets," Dzinglski v. Weirton Steel Corp., 875 F.2d 1075, 1079 (4th Cir. 1989), the decision to consider the plaintiff's last day as August 31, 1989 and not to disclose the significance of this to the plaintiff was directly linked to the administration of the plan as it concerns the plaintiff and thus triggers ERISA's duty of loyalty provisions. Therefore, on the issue of whether the defendants' actions constituted a breach of fiduciary duty, the court finds a genuine issue of material fact exists.

2. Plaintiff's Knowledge of the Alleged Breach

While the plaintiff's allegations of breach of fiduciary duty entail genuine issues of material fact, the plaintiff's claim is nonetheless time-barred. The plaintiff argues that the ERISA six year statute of limitations should apply. For this to be so, the plaintiff either has to make out a claim for fraud, or the plaintiff must argue that he had no actual knowledge of the breach of fiduciary duty. However, based on the facts of this case, the court finds that the plaintiff had knowledge of a possible breach by defendants, thus precluding any claim of fraudulent concealment, and bringing the plaintiff's claim within Section 1113's three year statute of limitations which applies when the plaintiff has actual knowledge of the breach. The statute of limitations ran three years after December 15, 1994, thus barring the plaintiff's claim.

A claim of fraudulent concealment only succeeds where a plaintiff, despite reasonable diligence, has no notice of a fiduciary's wrong-doing. J. Geils Band Employee Ben. Plan v. Smith Barney Shearson, Inc., 76 F.3d 1245, 1255 (1st Cir.), cert. denied, 519 U.S. 823 (1996) (requiring in claims of fraudulent concealment that the plaintiff demonstrate that "(1) defendants engaged in a course of conduct designed to conceal evidence of their alleged wrong-doing and that (2) [the plaintiffs] were not on actual or constructive notice of that evidence, despite (3) their exercise of reasonable diligence" (internal citations omitted)).

In late 1989, the plaintiff called the defendants to inquire as to his participation in the profit sharing plan. In late 1990, the plaintiff spoke with Proctor who told him that the company counted his last day as August 31, 1989, and that he was vested at thirty percent. At his deposition, the plaintiff indicated that his inquiries to the defendants in 1989 and 1990 were made because he "was hopeful that — that [he] could recover the seventy percent." (Davis Dep., at 62, lines 2-4.) The plaintiff was aware that there was to be a change in the vesting arrangements, and he believed that he could benefit from them. Yet in 1994, the plaintiff received thirty percent of his vested profits, and he avers that he never asked why he was not getting one hundred percent. These facts, taken together, provide what some courts have described as "'sufficient storm warnings to alert a reasonable person to the possibility that there were either misleading statements or significant omissions. . . .'" Kennedy v. Josephthal Co., Inc., 814 F.2d 798, 802 (1st Cir. 1987) (quoting Cook v. Avien, Inc., 573 F.2d 685, 697 (1st Cir. 1978)).

While the plaintiff is correct to state that between 1989 and 1994, "no mention of [plaintiff's] eligibility for one hundred percent (100%) vestment ever came from an employee of Bowman Apple," (Pl.'s Memo. Supp. Summ. J. Motion, at 12), nothing in the record suggests that the plaintiff was denied an opportunity to discover why he was not receiving the remaining seventy percent. See 814 F.2d at 803 (holding that "the exercise of reasonable diligence is determined 'by examining the nature of the misleading statements alleged, the opportunity to discover the misleading statements, and the subsequent actions of the parties.'"(internal citations omitted)). Accordingly, the court finds that the plaintiff's claim of fraudulent concealment fails, and thus, the plaintiff cannot take advantage of its corresponding six year statute of limitations.

Where a breach of fiduciary duty is alleged without fraud, actual knowledge on the part of the plaintiff of the defendant's breach brings his claim under the three year statute of limitations of Section 1113. Actual knowledge is defined as "actual knowledge of all material facts necessary to understand that some claim exists." Brown v. American Life Holdings, Inc., 190 F.3d 856, 859 (8th Cir. 1999) (quoting Gluck v. Unisys Corp., 960 F.2d 1168, 1177 (3d Cir. 1992)). Thus, "somewhere between 'every last detail' and 'something was awry' lies the requisite knowledge of an ERISA violation." See Meyer v. Berkshire Life Ins. Co., 128 F. Supp. 831, 839 (D.Md. 2001) (quoting Martin v. Consultants Administrators, Inc., 966 F.2d 1078, 1086 (7th Cir. 1992) (internal quotations omitted)); see also Ziegler v. Connecticut General Life Ins., Co., 916 F.2d 548, 552 (9th Cir. 1990) (holding that plaintiff had actual knowledge of breach even if he could not accurately quantify injury).

Viewing the facts in a light most favorable to the plaintiff, it is undisputed that the plaintiff had inquired about his vesting percentage because he believed he was eligible for one hundred percent vesting. The plaintiff was told definitively in 1990 and again in 1994, that the defendants considered him only thirty percent vested. In the 1990 conversation with Proctor, in the context of vesting percentages, the plaintiff was also told the defendants considered his last day to be August 31, 1989. The plaintiff subsequently accepted a thirty percent payout. A plan participant who had some reason to believe he would be eligible for one hundred percent vesting, and is then told that he will receive only thirty percent, has knowledge of the material facts necessary to understand that some claim exists. Rush v. Martin Petersen Co., Inc., 83 F.3d 894, 896 (7th Cir. 1997) ("We have defined 'actual knowledge' in this context as knowledge of the 'essential facts of the transaction or conduct constituting the violation,' and have explained that this means it is 'not necessary for a potential plaintiff to have knowledge of every last detail of a transaction, or knowledge of its illegality.'" (internal citations omitted)). The court finds that the plaintiff had the essential facts of a possible breach even though he represents that he did not know of the connection between filing a time sheet for September 1, 1989 and one hundred percent vesting.

As such, the court holds that the three year statute of limitations for breach of fiduciary duty under ERISA applies, and the plaintiff's claim is barred.

VI.

The defendants argue that the plaintiff voluntarily waived his known benefits when he executed a release upon receipt of his payout on December 15, 1994. The Magistrate Judge recommended a denial of summary judgment on waiver grounds because he found that a question existed as to whether plaintiff fully appreciated his rights. Both parties in their objections describe as contradictory the Magistrate Judge's findings that the plaintiff could have knowledge of a claim for statute of limitations purposes, but that the plaintiff did not knowingly waive the claim when he signed the release.

An employee can waive his rights to pension benefits under ERISA if such a waiver is made knowingly and voluntarily. See Finz v. Schlesinger, 957 F.2d 78, 82 (2d Cir. 1992) and Dist. 29, United Mine Workers v. New River Co., 842 F.2d 734, 737 (4th Cir. 1988). The validity of a waiver of pension benefits under ERISA is subject to closer scrutiny than a waiver of general contract claims. 957 F.2d at 81; Laniok v. Advisory Committee of Brainerd Mfg. Co. Pension Plan, 935 F.2d 1360, 1367 (2d Cir. 1991). "The inquiry into waiver consists of two questions: whether a party actually knew [he] was relinquishing a benefit, and whether [he] acted voluntarily in doing so. Answering these companion questions is a fact-intensive exercise. . . ." Smart v. Gillette Co. Long-Term Disability Plan, 70 F.3d 173, 182 (1st Cir. 1995).

Among the factors courts may take into consideration are: (1) plaintiff's education and business sophistication; (2) the respective roles of employer and employee in determining the provisions of the waiver; (3) the clarity of the agreement; (4) the time plaintiff had to study the agreement; (5) whether plaintiff had independent advice, such as that of counsel; and (6) the consideration for the waiver. Morais v. Central Beverage Corp. Union Employees' Supplemental Retirement Plan, 167 F.3d 709, 713 (1st Cir. 1999).

It is undisputed that the release was drafted by the defendants and that the plaintiff did not have independent advice of counsel. The plaintiff was also presented with the release form to sign on the day he received his payout. This payout consisted of money to which the plaintiff was already entitled. Moreover, the fact that plaintiff failed to pursue more actively his eligibility for one hundred percent vesting speaks to a certain lack of sophistication with regard to business. On the other hand, the language of the agreement, quoted in Section I of this Opinion, supra, is clear that the plaintiff releases the defendants from "any and all claims the undersigned may have or hereafter claim to have. . . ."

The court notes that for purposes of the statute of limitations analysis in this case, the plaintiff must be found to have actual knowledge of a potential claim, while in the waiver context, the plaintiff must be found to have actual knowledge that he is relinquishing his right to ever bring that claim. The court cannot say that the plaintiff had this knowledge. The defendants gambled that the plaintiff would not pursue a potential claim for the seventy percent vested profits to which the plaintiff believed he was entitled. The defendants win that bet where as here the plaintiff failed to bring a claim within the corresponding statute of limitations. With their waiver argument, the defendants want the court to improve the odds in their favor. Namely, the defendants ask the court to hold that even had the plaintiff been able to bring a properly pled and timely filed claim for breach of fiduciary duty, that he waived his right to bring it by signing this release. Given the totality of the circumstances in this case, the court considers such an outcome to be contrary to the purpose of ERISA which was passed by Congress "in part to protect the rights of employees" who are participants in ERISA plans. 70 F.3d at 181. Therefore, keeping in mind the closer scrutiny given a waiver of pension benefits, the court does not find as a matter of law that the plaintiff waived his claims by signing the release. Accordingly, the defendants' motion for summary judgment on the grounds of waiver is denied.

VII.

In conclusion, the court shall grant the defendants' motion for summary judgment on statute of limitations grounds. Having found that the plaintiff's claims are time barred, the plaintiff's motion for summary judgment is denied. The parties' objections to the Report and Recommendation are dismissed or overruled, and the court accepts the Report and Recommendation.

ORDER

For the reasons stated in the accompanying Memorandum Opinion, it is accordingly ADJUDGED ORDERED AND DECREED as follows:

(1) The May 31, 2001 Report and Recommendation of the Magistrate Judge shall be, and it hereby is, ACCEPTED.

(2) The defendants' April 16, 2001 Motion for Summary Judgment shall be, and it hereby is, GRANTED.

(3) The plaintiff's April 16, 2001 Motion for Summary Judgment shall be, and it hereby is, DENIED.

(4) The defendants' and plaintiff's objections to the Report and Recommendation shall be, and they hereby are OVERRULED;

(5) The Clerk of the Court is instructed to STRIKE this case from the docket of the court.

The Clerk of the Court is also directed to send a certified copy of this Order and the accompanying Memorandum Opinion to all counsel of record and to Magistrate Judge Crigler.


Summaries of

Davis v. Bowman Apple Products Co. Inc.

United States District Court, W.D. Virginia, Harrisonburg Division
Mar 29, 2002
Civil Action No. 5:00CV00033 (W.D. Va. Mar. 29, 2002)
Case details for

Davis v. Bowman Apple Products Co. Inc.

Case Details

Full title:MICHAEL W. DAVIS, Plaintiff, BOWMAN APPLE PRODUCTS CO., INC., BOWMAN APPLE…

Court:United States District Court, W.D. Virginia, Harrisonburg Division

Date published: Mar 29, 2002

Citations

Civil Action No. 5:00CV00033 (W.D. Va. Mar. 29, 2002)