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ARAKELIAN v. NATIONAL WESTERN LIFE INS. CO.

October 30, 1987

Robert Arakelian, et al., Plaintiffs,
v.
National Western Life Insurance Company, et al., Defendants


Stanley S. Harris, United States District Judge.


The opinion of the court was delivered by: HARRIS

Stanley S. Harris, United States District Judge

 This matter is before the Court upon the cross-motions for partial summary judgment of plaintiffs (named below) and defendants National Western Life Insurance Company, the Builders, Contractors and Employees Retirement Trust and Pension Plan, Richard Boswell, John R. Howard, and Richard Andrews. Upon consideration of the pleadings and the entire record, the Court concludes that the motions must be granted in part and denied in part.

 Facts

 This is a civil action under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., brought by eight individual participants in pension plans patterned after a master pension plan, Robert Avakelian, Joseph A. Bankins, Ralph I. Butler, Jr., Roy Butler, James R. Chase, Elmer A. Diggs, Ryland Stewart, and Chris C. Wills, and by two labor organizations suing on behalf of participants in those pensions plans, Laborers' International Union of North America, AFL-CIO, and Washington, D.C., and Vicinity Laborers District Council. For purposes of the motions at issue, the relevant defendants in the action are National Western Life Insurance Company (National Western), the sponsor, inter alia, of the master pension plan; the Builders, Contractors and Employees Retirement Trust and Pension Plan, the master plan for the pension plans at issue (the master plan); and Richard Boswell, John R. Howard, and Richard Andrews, trustees of the pension plans.

 In 1977, National Western established the master plan, which was designed as a model pension benefit program for non-union employees working on Davis-Bacon or state prevailing wage projects. Pursuant to statute, contractors on these projects are required to pay to their employees the "prevailing wage" for the locality where the work is located. Without altering the terms of the master plan, employers adopt the master plan, thus creating an instant pension plan for their employees. Employers adopting the master plan contribute a portion of their employees' wages to an employee pension plan, in lieu of paying wages directly to the employee, permitting the employer to reduce payroll taxes. National Western is designated in the master plan (and, therefore, in each employer-created pension plan) as the administrator, sponsor, and named fiduciary. As designated in the master plan, three officers of National Western serve as trustees for each employee pension plan. According to the master plan instrument, employee benefits are provided solely through the purchase of group annuity contracts from National Western. National Western's board of directors retains sole discretion to determine the rate of "excess interest" (i.e., the amount of interest paid in addition to the contractually agreed return) on those annuity contracts. Effective August 1, 1983, National Western amended the master plan to provide that it would deduct for early withdrawal a surrender charge from a beneficiary's accrued benefit. The new surrender charge equals 18% of a participant's first year contributions, with interest, and 3% of a participant's contributions for the next four years.

 DISCUSSION

 Standing

 Defendants again have raised the issue whether plaintiff labor organizations have standing to sue in this action. By Order dated March 18, 1985, the Court held the labor organizations do have standing to remain in this action. Construing defendants' arguments on the issue of standing in the pleadings now before the Court as a motion to reconsider, the Court concludes its initial disposition of the issue was correct and denies the motion to reconsider.

 Creation of the Plan

 Title 29 U.S.C. § 1002(2) provides that an employee pension benefit plan must be established or maintained by an "employer" or by an "employee organization." Accordingly, the master plan created by National Western does not become a pension plan under ERISA until it is adopted by an employer. At issue in this action, therefore, is a collection of structurally identical employee benefit plans, each having different participants and adopting employers. Each participant to a plan has standing to raise claims only as to the separate plan with which that participant is associated. Brink v. DaLesio, 667 F.2d 420, 426-28 (4th Cir. 1982). Because each plan created by employer adoption of the master plan is structurally identical, however, the following discussion applies equally to each plan. For convenience, the Court will refer to this collection of separate employee benefit plans as "the Plan."

 Statute of Limitations

 Title 29 U.S.C. § 1113 provides:

 
(a) 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 (A) on which the plaintiff had actual knowledge of the breach or violation, or (B) on which a report from which he could reasonably be expected to have obtained knowledge of such breach or violation was filed with the Secretary under this title;
 
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.

 In short, the ERISA limitation period of six years runs from the date of the breach or violation, unless the defendant can show the plaintiff had actual or constructive knowledge of the breach or violation, in which case the three year period runs from the time the plaintiff gained such knowledge. Fink v. National Savings & Trust Company, 249 U.S. App. D.C. 33, 772 F.2d 951, 956 (D.C. Cir. 1985). Constructive knowledge is obtained through reports, commonly called "Forms 5500," which periodically are filed with the Secretary. Id. Continuing violations do not toll the statute of limitations. See id. at 956-58 (although plaintiffs alleged more recent breaches of fiduciary duty, claims relating to breach of fiduciary duty that occurred more than six years before plaintiffs filed complaint were time-barred).

 Interested parties had constructive knowledge as early as July 29, 1980, that National Western was violating 29 U.S.C. § 1104(a) and 29 U.S.C. 1106(a) and (b) because the Form 5500 filed on that date indicates that National Western invested all contributions to the Plan in National Western insurance and/or annuity contracts. Therefore, under 29 U.S.C. § 1113(a)(2), the three-year statute of limitations period applies to claims involving self-dealing. In sum, liability on claims concerning violations of 29 U.S.C. § 1104(a) -- except National Western's failure to investigate the merits of the investment and alleged failure to diversify the Plan's assets -- and 29 U.S.C. §§ 1106(a) and (b) arising more than three years before plaintiffs filed their complaint, i.e., before June 26, 1981, is time-barred. In the absence of a showing that any plaintiff had actual notice of National Western's breaches, liability on claims concerning National Western's failure to investigate the merits of the investment and its alleged failure to ensure the Plan's assets were diversified that arose more than six years before plaintiffs filed their complaint, i.e., before June 26, 1978, is time-barred.

 Fiduciary Status of Defendants

 An action for breach of fiduciary duty may be brought only against a fiduciary of the Plan. Title 29 U.S.C. § 1002(21)(A), which defines a fiduciary, provides in pertinent part:

 
[A] person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do ...

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