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David v. Alphin, No. 11-2181

Decided: January 14, 2013

The Fourth Circuit Court of Appeals affirmed the district court’s dismissal of all claims against Bank of America brought by representatives of a putative class of plaintiffs.  The plaintiffs were participants in a Pension Plan and 401(k) plan and brought breach of fiduciary duty claims against the bank under ERISA.

The plans in question were two ERISA benefit plans sponsored by Bank of America: a Pension Plan and a 401(k) Plan.  The Pension plan is a defined benefits plan where a participant’s benefits are based on compensation and investment credits.  The 401(k) Plan is a defined contribution plan where participants contribute pre-tax earnings and the Ban matches the contribution.  Plaintiffs alleged that the Bank and individual members of the Bank’s Corporate Benefits Committee breached their fiduciary duties under ERISA by selecting and maintaining Bank-affiliated mutual funds in the investment menu for the Plans.

Plaintiffs originally made claims regarding breach of fiduciary duties and engaging in prohibited transactions regarding both plans in their Second Amended Complaint.  The district court accepted the magistrate’s recommendation that the claims with regard to the Pension Plan be dismissed due to lack of Article III standing due to the failure by plaintiffs to allege an injury in fact.  In their Third Amended Complaint, plaintiff’s asserted numerous claims on behalf of the 401(k) Plan on the part of two classes: the “Removal Class” (consisting of 401(k) Plan participants who invested in certain mutual funds between August 7, 2000, and December 31, 2007) and the “Selection Class” (consisting of 401(k) Plan participants who invested in certain mutual funds between July 1, 2000 and December 31, 2007).  The claims dealt with standards for removing and including Bank sponsored mutual funds.  The Bank moved for summary judgment on the issue of limitations and the district court agreed, stating that the only transaction that caused injury occurred more than 6 years before the case was filed, thus time-barring the claim under ERISA.  The court refused to allow the plaintiffs to file a Fourth Amended Complaint and dismissed the claims with prejudice.  The plaintiffs’’ appeal followed.

The Fourth Circuit agreed  that the plaintiffs did not have Article II standing with regards to the Pension plan because even though ERISA requires claims to be filed on behalf of the plan as a whole, plaintiffs have to show a direct injury and not just the risk that a plan will be underfunded.  Furthermore, the plaintiffs do not have standing as assignees, since no contractual assignment was involved, under trust law, or due to a deprivation of statutory rights.  In regards to the limitations issue, ERISA requires all claims to be brought within 6 years, or 3 years if the plaintiff had actual knowledge of the breach.  This period begins immediately upon the last action which constituted a part of the breach or violation.  Here, the section of the Bank sponsored funds was the last action which constituted a part of the breach.  The failure of the Bank or the CBC to remove the funds does not qualify as a transaction under ERISA.  Therefore, the omission or failure to act by the bank cannot be an action to start or re-start the limitations period. With regards to the selection class, who were not able to participate in the bank sponsored funds until August of 2000, the original selection of the funds in 1999 constituted the breach.  Finally, the Court held that the district court did not abuse its discretion by dismissing the case with prejudice because it was apparent that the district court dismissed with prejudice because plaintiffs did not move to amend the Third Amended Complain, and because plaintiffs had already filed four complaints in this matter.

Full Opinion

–Jonathan M. Riddle