AGI Consulting v. American National Insurance ( 2020 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT January 9, 2020
_________________________________
Christopher M. Wolpert
Clerk of Court
AGI CONSULTING L.L.C., an Oklahoma
limited liability company, by Assaf Al-
Assaf as Trustee/Owner/Plan Administrator
of an Alleged Non-Integrated Defined
Benefit Plan,
Plaintiff - Appellant,
v. No. 19-6060
(D.C. No. 5:18-CV-00252-G)
AMERICAN NATIONAL INSURANCE (W.D. Okla.)
COMPANY, a Texas insurance company,
Defendant - Appellee.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before MATHESON, McKAY, and BACHARACH, Circuit Judges.**
_________________________________
Appellant AGI Consulting L.L.C. appeals the district court’s denial of its
post-judgment request to amend its complaint in order to include claims under the
Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001–1461.
*
This order and judgment is not binding precedent, except under the doctrines
of law of the case, res judicata, and collateral estoppel. It may be cited, however, for
its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
**
After examining the briefs and appellate record, this panel has determined
unanimously to honor the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
submitted without oral argument.
AGI commenced this action by filing a complaint on March 21, 2018.
According to the complaint, in June 2011, AGI entered into a contract with
Defendant American National Insurance Company (“ANICO”) to purchase a defined
benefit plan for AGI’s employees that ANICO would administer in accordance with
terms handwritten by AGI’s representatives on a form furnished by ANICO. AGI
alleged that, without AGI’s knowledge, ANICO replaced the handwritten plan with a
typewritten one and in the process altered the agreed-upon terms. AGI claims it did
not discover the existence of the typewritten plan, with its altered terms, until
August 10, 2016. Based on these allegations, AGI asserted a claim for common-law
fraud.
ANICO moved to dismiss the complaint. Pointing to a summary plan
description AGI filed as an exhibit in a related action, ANICO argued that AGI,
exercising reasonable diligence, should have discovered the basis for the alleged
fraud by September 12, 2013, and that the claim was thus time-barred under
Oklahoma’s statute of limitations. In response, AGI conceded its fraud claim was
time-barred. AGI explained that it had discovered in its archived digital files a copy
of the typewritten plan that one of its employees had received from ANICO on
March 14, 2012. However, AGI requested leave to amend its complaint to include
common-law claims for breach of contract, rescission, and reformation.
The district court denied AGI’s request to amend its complaint. The court
concluded the proposed amendment would be futile because all the claims AGI
sought to include would also be time-barred under Oklahoma’s statute of limitations.
2
And, as the parties agreed the fraud claim was time-barred, the court granted
ANICO’s motion to dismiss and entered judgment for ANICO.
AGI then filed a timely Fed. R. Civ. P. 59(e) motion to alter or amend the
judgment.1 In its motion, AGI again requested leave to amend its complaint, this
time to include claims that ANICO breached its fiduciary duties to AGI in violation
of ERISA.2 In response, ANICO argued that AGI’s request to amend should again be
denied as futile because the claims AGI proposed would be time-barred under the
applicable ERISA statute of repose. See 29 U.S.C. § 1113.
The district court agreed with ANICO. The court perceived two breaches of a
fiduciary duty that AGI proposed to assert in its amended complaint and concluded
both would be time-barred. First, AGI claimed ANICO breached its fiduciary duty
by replacing the agreed-upon terms from the handwritten plan with different terms in
the typewritten plan, which ANICO then used to administer the plan. The court
determined AGI had notice of the typewritten plan and its different terms—and thus
of the basis for its breach claim—no later than March 14, 2012, when its employee
received a copy of the typewritten plan from ANICO, rendering AGI’s proposed
claim on this basis time-barred under the periods outlined in § 1113. Second, AGI
1
AGI sought relief under section (a) of Rule 59, which relates to requests for a
new trial. See Fed. R. Civ. P 59(a). Noting there had been no trial in the proceeding,
the district court characterized AGI’s motion as brought under section (e), and AGI
accepts this characterization on appeal.
2
The district court understood AGI to be arguing that the court should have
construed AGI’s first request to amend the complaint to include a request to bring an
ERISA breach-of-fiduciary-duty claim.
3
claimed ANICO breached its fiduciary duty by failing to resolve its disputes with
AGI regarding ANICO’s calculation of the census (the list of eligible employees).
AGI asserted that ANICO included ineligible employees in the census, increasing
AGI’s costs, and that ANICO could have resolved the census disputes but failed to do
so. The court determined AGI’s own filings showed it had actual knowledge of the
basis for this claim no later than September 12, 2013, rendering it time-barred under
§ 1113(2). Accordingly, the court denied AGI’s Rule 59(e) motion.
On appeal, AGI challenges the district court’s denial of the request raised in its
Rule 59(e) motion to amend its complaint in order to include ERISA breach-of-
fiduciary-duty claims. “Rule 59(e) relief is available in limited circumstances,
including (1) an intervening change in the controlling law, (2) new evidence
previously unavailable, and (3) the need to correct clear error or prevent manifest
injustice.” Hayes Family Tr. v. State Farm Fire & Cas. Co., 845 F.3d 997, 1004
(10th Cir. 2017) (alterations and internal quotation marks omitted). “Generally, leave
to amend should be freely granted when justice requires, but amendment may be
denied when it would be futile.” Moya v. Garcia, 895 F.3d 1229, 1239 (10th Cir.
2018). We typically review for abuse of discretion the court’s denial of both
Rule 59(e) motions and requests to amend a complaint. See id. (request to amend);
Hayes Family Tr., 845 F.3d at 1004 (Rule 59(e) motion). However, we review the
legal basis for a finding of futility, as well as questions involving the applicability of
statutes of limitations and repose, de novo. See Moya, 895 F.3d at 1239; Fulghum v.
Embarq Corp., 785 F.3d 395, 413 (10th Cir. 2015).
4
“[Section] 1113 governs the time for filing a breach of fiduciary duty claim
arising from an alleged violation of the duties imposed on ERISA plan fiduciaries.”
Fulghum, 785 F.3d at 413. Section 1113 states in its entirety:
No action may be commenced under this subchapter 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.
As for its first claim for breach—based on allegations that ANICO replaced
the handwritten plan with a materially different typewritten plan causing it to
administer the plan under the latter’s terms—AGI argues that it would not be time-
barred under § 1113(2)’s three-year limitations period because AGI lacked actual
knowledge of the typewritten plan’s existence until August 2016. However, AGI
does not challenge the district court’s conclusion that the claim would be time-barred
by the six-year repose period in § 1113(1), which begins to run at the time the breach
occurred regardless of when a plaintiff discovers or should have discovered it. See
Fulghum, 785 F.3d at 413. Here, the record is clear that the alleged breach occurred
no later than March 14, 2012, as there is no dispute that, by then, ANICO had begun
5
administering the plan under the typewritten plan’s terms. The six-year repose
period had begun running at least by that date, and, because the period expired earlier
than the three-year limitations period proposed by AGI and before AGI commenced
the action, § 1113(1) would bar this claim in the absence of an applicable exception.
See Kurz v. Phila. Elec. Co., 96 F.3d 1544, 1551 (3d Cir. 1996) (“[S]ection [1113]
creates a general six[-]year statute of [repose], shortened to three years in cases
where the plaintiff has actual knowledge, and potentially extended to six years from
the date of discovery in cases involving fraud or concealment.”).
AGI argues that § 1113’s “fraud or concealment” exception applies because it
did not have actual knowledge of the typewritten plan until much later. We are not
persuaded. Even assuming the exception might otherwise apply, its six-year period
begins to run when a plaintiff “discover[s]” the breach. 29 U.S.C. § 1113. Unlike
the three-year limitations period in § 1113(2), the fraud-or-concealment exception
does not require a plaintiff to have “actual knowledge” of the breach; instead,
constructive knowledge will suffice, and the period will begin to run when the
plaintiff, by exercising diligence, should have discovered the breach.3 Here, AGI
3
Every circuit to consider the issue has ruled that the fraud-or-concealment
exception does not require a plaintiff to have actual knowledge of the alleged breach;
instead, constructive knowledge will suffice, and the period begins to run when the
plaintiff should have discovered the alleged breach by exercising diligence. See J.
Geils Band Emp. Benefit Plan v. Smith Barney Shearson, Inc., 76 F.3d 1245, 1252–55
(1st Cir. 1996); Janese v. Fay, 692 F.3d 221, 228 (2d Cir. 2012); Montrose Med. Grp.
Participating Sav. Plan v. Bulger, 243 F.3d 773, 788 (3d Cir. 2001); Browning v. Tiger’s
Eye Benefits Consulting, 313 F. App’x 656, 663 (4th Cir. 2009); Brown v. Owens
Corning Inv. Review Comm., 622 F.3d 564, 573 (6th Cir. 2010); Martin v. Consultants
& Adm’rs, Inc., 966 F.2d 1078, 1093–96 (7th Cir. 1992); Schaefer v. Ark. Med. Soc’y,
6
concedes it had constructive knowledge of the typewritten plan by March 14, 2012,
more than six years before it commenced this action. The exception would not apply.
With respect to its second breach claim—based on allegations that ANICO
failed to resolve disputes with AGI regarding ANICO’s incorrect inclusion of
ineligible employees in the census in violation of the handwritten plan’s terms—AGI
argues again the claim would not be time-barred under § 1113(2) because AGI lacked
actual knowledge that ANICO was operating under the terms of the typewritten plan.4
The district court, however, after defining the nature of the alleged breach, did not
view the existence of the typewritten plan as a material fact underlying this claim.5
See Sulyma v. Intel Corp. Inv. Policy Comm., 909 F.3d 1069, 1072–73 (9th Cir. 2018)
(explaining that the first step of the § 1113(2) analysis is to “isolate and define the
underlying violation upon which the plaintiff’s claim is founded” (internal quotation
marks and brackets omitted));6 Russell v. Chase Inv. Servs., Corp., 384 F. App’x 753,
853 F.2d 1487, 1491–92 (8th Cir. 1988); Larson v. Northrop Corp., 21 F.3d 1164, 1172
(D.C. Cir. 1994). We find their analyses persuasive.
4
It appears § 1113(1)’s six-year repose period would not apply to this claim,
as the alleged breach—failure to resolve the census dispute after AGI raised the issue
on September 12, 2013—occurred less than six years before the action commenced.
5
In a footnote, the district court concluded that AGI had actual knowledge that
ANICO was administering the plan under different terms no later than September 12,
2013, when an AGI employee received a summary plan description of the typewritten
plan’s terms. However, this conclusion did not factor into the court’s separate
determination that AGI had actual knowledge of the material facts underlying the
census-dispute claim.
6
In addition to the Ninth Circuit, at least two other circuit courts have
expressly stated that the § 1113(2) analysis begins with defining the nature of the
7
754 (10th Cir. 2010) (affirming dismissal under § 1113(2) where plaintiff filed
ERISA claim “more than three years after she had actual knowledge of the facts on
which she based her complaint”).7 Instead, based on AGI’s pleadings, the court
determined it was clear that, by September 12, 2013, AGI had actual knowledge that
ANICO had included employees in the census who were allegedly ineligible under
the handwritten plan’s terms and that this had resulted in increased costs for AGI. In
the court’s view, AGI’s actual knowledge of these facts was sufficient to trigger
§ 1113(2)’s three-year limitations period.
On appeal, AGI does not dispute that it had actual knowledge of the facts the
district court determined are material to the census-dispute claim. Instead, AGI’s
arguments focus on when it had actual knowledge of the typewritten plan. We,
however, agree with the district court that the typewritten plan’s existence is
alleged breach. See Gluck v. Unisys Corp., 960 F.2d 1168, 1178 (3d Cir. 1992);
Rogers v. Millan, 902 F.2d 34 (table), 1990 WL 61120, at *3 (6th Cir. 1990).
7
“We have yet to define the phrase ‘actual knowledge,’” and we have noted a
split among other circuits, with several courts “requir[ing] [plaintiffs to have] some
understanding that the conduct is unlawful under ERISA and [others] . . . merely
requir[ing] knowledge of the conduct itself.” Mid-South Iron Workers Welfare Plan
v. Harmon, 645 F. App’x 661, 665 (10th Cir. 2016). The district court adopted what
it considered the “more prevalent view,” concluding that AGI’s actual “knowledge of
the essential facts constituting the alleged violation or breach . . . trigger[ed]
§ 1113(2)’s three-year limitations period.” (Appellant’s App. at P308.) AGI does
not clearly challenge this construction of § 1113(2) on appeal, and, to the extent AGI
does challenge it, its briefing on the issue is inadequate. See Malouf v. SEC, 933
F.3d 1248, 1256 n.6 (10th Cir. 2019). So, we once again have no need to consider
whether to adopt the district court’s construction. See Mid-South, 645 F. App’x
at 665.
8
immaterial to this breach claim.8 It is clear from AGI’s filings that by September 12,
2013, it had actual knowledge of an unresolved census dispute after ANICO included
allegedly ineligible employees in the census in violation of the handwritten plan’s
terms, substantially increasing AGI’s costs. ANICO’s reason for not following the
handwritten plan’s terms—i.e., the existence of a typewritten plan with different
terms under which ANICO chose to administer the plan—is immaterial to a claim
that ANICO breached its fiduciary duty to resolve a census dispute according to the
handwritten plan’s terms. Because AGI had actual knowledge of the material facts
underlying its proposed breach claim more than three years before it commenced the
action, this claim would be time-barred under § 1113(2).
We are not persuaded by AGI’s arguments that the fraud-or-concealment
exception applies to its census-dispute claim. AGI argues the exception applies
because AGI did not have actual knowledge of the typewritten plan until less than six
years prior to commencing suit. This argument is misguided. We have already
determined that the existence of the typewritten plan is immaterial for purposes of
this claim. Moreover, as previously discussed, AGI’s constructive knowledge of the
typewritten plan more than six years before AGI commenced the action renders this
exception inapplicable.
8
We therefore need not address the thorny issue of whether a corporate
plaintiff’s employee’s receipt of a summary plan description or other document that
neither the plaintiff’s officers nor the employee reads demonstrates actual knowledge
of the document’s terms for purposes of § 1113(2). Compare Sulyma, 909 F.3d
at 1076, with Brown, 622 F.3d at 571, and Enneking v. Schmidt Builders Supply, Inc.,
875 F. Supp. 2d 1274, 1284 & nn.33–34 (D. Kan. 2012).
9
The district court correctly concluded that AGI’s proposed ERISA breach-of-
fiduciary-duty claims would be time-barred under § 1113 and that an amendment to
include these claims would be futile. We thus AFFIRM the district court’s denial of
AGI’s Rule 59(e) motion aimed at amending the complaint to assert these claims.9
Entered for the Court
Monroe G. McKay
Circuit Judge
9
On appeal, AGI asserts that its contract with ANICO required ANICO to
provide documents, such as defined benefit plans and summary plan descriptions, by
mail in hardcopy format and that ANICO’s reliance on documents emailed to AGI
constitutes another breach of a fiduciary duty. However, AGI raised this issue in the
district court only in passing and not as a basis for a breach-of-fiduciary-duty claim.
AGI admits it has had multiple “bites at the apple” (Appellant’s Opening Br. at 13),
and we will not give it another based on an argument it failed to raise in the district
court. See Richison v. Ernest Grp., Inc., 634 F.3d 1123, 1130–31 (10th Cir. 2011).
10