Mid-South Iron Workers Welfare Plan, et al. v. Harmon

Summarized by Lars Fuller , BakerHostetler
9 years 10 months ago

Citation:

No. 15-6064 (10th Cir. Apr. 13, 2016)

Tag(s):

Ruling:

The Tenth Circuit affirmed the decision of the U.S. District Court (W.D. Okla.), dismissing complaint under Rule 12(b)(6) based on the expiration of the statute of limitations. The Tenth Circuit agreed that under Rule 12(b)(6) the trial court could take judicial notice of matters outside the pleadings, i.e., plaintiff's filings in a bankruptcy proceeding, to determine plaintiff's actual knowledge of its claim in evaluating statute of limitations. The Tenth Circuit agreed that based on plaintiff's motion to dismiss bankruptcy several years prior, plaintiff had actual knowledge of its breach of fiduciary duty claim at least as of that date, and based on that date, the statute of limitations expired before plaintiff commenced current suit.

Procedural context:

Plaintiff sued defendant for breach of fiduciary duty in U.S. District Court (W.D. Okla.), and defendant moved to dismiss under Rule 12(b)(6) based on expiration of statute of limitations. District court granted motion to dismiss, and plaintiff appealed to Tenth Circuit.

Facts:

Plaintiffs, a group of ERISA funds (the “Funds”) established by a union of iron workers in Oklahoma sued husband and wife principals of Angel Erectors LLC, an Oklahoma limited liability company, for failure to conduct wage audits under collective bargaining agreement with Iron Workers union. Under collective bargaining agreement, Angel Erectors was obligated to provide monthly reports to the Funds detailing hours worked by union members and to timely pay the requisite contributions. Angel Erectors complied with these requirements for a time, but eventually stopped. In August 2010, the Funds filed suit in federal court to compel an audit of Angel Erector’s books, alleging failures under the CBA. Shortly after service of the complaint, Angel Erector's husband and wife principals formed another Oklahoma limited liability company called Harmon Steel Constructors LLC. Angel Erectors transferred all of its assets and liabilities to Harmon Steel in February 2011 and filed a petition for bankruptcy in March. The Funds moved to dismiss the bankruptcy in June 2011, alleging the Harmons' bad faith in filing the bankruptcy based on failures under the CBA. The bankruptcy court denied the motion and closed the bankruptcy in August 2011. In February 2012, the Funds amended their complaint to add Harmon Steel as a defendant. In August 2012, the audit was ordered and, upon completion in September, it showed that substantial contributions were owed to the Funds. The district court entered judgment against both Angel Erectors and Harmon Steel, jointly and severally, in the amount of $263,142.59, which included the unpaid contributions, attorneys’ fees, and audit costs. Presumably unable to execute on its judgment against Harmon Steel, the Funds filed suit against the Harmons individually in state court in December 2014. In their petition, the Funds averred that post-judgment discovery revealed that corporate formalities were not observed by either of the Harmons’ companies. In this suit, the Funds alleged two causes of action: (1) to pierce the corporate veil of Harmon Steel on an alter ego theory; and (2) to recover for breach of fiduciary duty owed the Funds under ERISA. The Funds alleged that the particular breach of fiduciary duty in this case was the Harmons’ failure “to pay monthly employer contributions resulting in a cognizable loss to the plans managed” by the Funds. Aplt. App. at 15. The Harmons moved to dismiss the second claim, arguing in relevant part that the Funds’ breach-of-fiduciary-duty claim was barred by the three-year statute of limitations provided for by ERISA (29 U.S.C. § 1113(2)) (barring actions three years after a party has “actual knowledge” of a breach). Specifically, the Harmons contended that the Funds had actual knowledge of the breach in August 2010 when they filed the first action. Shortly thereafter, the Harmons removed the case to federal court. Addressing the Harmons’ motion to dismiss filed in state court, the district court found the Funds “knew long ago about the duty and the alleged breach, because it was on that basis that they sued Angel Erectors” in the first place. The court also stated that, as the Harmons noted in their motion, the Funds “were also aware of Harmon Steel’s relationship to Angel Erectors and any wrongdoing . . . at least by June 6, 2011, when they filed a Motion to Dismiss in Angel Erectors’ bankruptcy case.” On those bases, the court concluded that the Funds had “actual knowledge of all the material facts necessary to pursue a breach of fiduciary claim against the [Harmons] at least as early as June of 2011.” Accordingly, the court dismissed the breach-of-fiduciary-duty claim under Federal Rule of Civil Procedure 12(b)(6) as untimely and remanded the alter-ego claim to state court, declining to exercise supplemental jurisdiction.

Judge(s):

Gorsuch, McKay, Bacharach

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