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 in Redmon – 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 in Redmon 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.