BROWN v. AMERICAN LIFE HOLDINGS, INC., 1999 U.S. App. LEXIS 21047 (8th Cir. September 3, 1999)- A participant in an Employee Stock Ownership Plan (ESOP) brought suit against administrative committee members of the ESOP, American Life (who appointed them), and Bank One (the trustee of the Plan assets). He claimed that they (i) breached their ERISA fiduciary duties by investing the ESOP's assets in overly conservative investments while unreasonably delaying its rollover into American Life's Group Savings Plan, and (ii) failed to provide requested Plan documents as required by ERISA. This court affirmed the district court's dismissal of the fiduciary duty claims as time-barred and its granting of only partial relief on the Plan documents claim.
ERISA contains an express statute of limitations that bars breach of fiduciary duty claims after the earlier of six years from the breach or three years from the date that plaintiff acquires actual knowledge of the breach. Plaintiff asserted that his suit was not time-barred because although he knew of defendant’s investment transactions, he did not have "actual knowledge" of the breach of duty until later. Actual knowledge of a breach requires "knowledge of all material facts necessary to understand that some claim exists" i.e. that a breach occurred, not simply knowledge that the transactions occurred. Although plaintiff’s legal point was well taken, the court found that he did have knowledge of the breach on the earlier date.
Furthermore, even if his claims were not time-barred, the court found that the investment decisions in question did not constitute a breach. Congress intended to afford ESOPs the flexibility associated with corporate finance, and therefore intended ESOPs to be exempt from the ERISA duty to diversify and from ERISA’s strict prohibitions against self-dealing and conflicts of interest.
