PEREZ v. BELANGER et al

Filing 15

MEMORANDUM AND ORDER THAT DEFENDANT'S PARTIAL MOTION TO DISMISS IS DENIED; ETC.. SIGNED BY HONORABLE J. CURTIS JOYNER ON 5/9/17. 5/10/17 ENTERED AND E-MAILED.(jl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

THOMAS E. PEREZ, SECRETARY OF
LABOR, UNITED STATES
DEPARTMENT OF LABOR,

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Plaintiff,
v.
A. KENNETH BELANGER, ET AL.,
Defendants.

CIVIL ACTION
NO. 16-CV-4427

MEMORANDUM
Joyner, J.

May 9, 2017

Before the Court are Defendants’ Partial Motion to Dismiss
(Doc. No. 7), Plaintiff’s Response in Opposition thereto (Doc.
No. 11), and Defendants’ Reply in Further Support thereof (Doc.
No. 12).
I.

For the reasons below, Defendants’ Motion is DENIED.

Facts1
Plaintiff brings this ERISA2 action against Belanger and

Company, Inc. (“the Company”), as well as the Company’s president
A. Kenneth Belanger (“K. Belanger”) and vice president Jo-Ann I.
Belanger (together with the Company and K. Belanger,

1

The facts are taken from Plaintiff’s Complaint. (Doc. No. 1).
In line with the standards governing Fed. R. Civ. P. 12(b)(6), all
factual allegations are viewed in the light most favorable to the
non-moving party. Phillips v. Cty. of Allegheny, 515 F.3d 224, 233
(3d Cir. 2008).
2

The Employee Retirement Income Security Act, 29 U.S.C. § 1001.

1

“Defendants”), in connection with alleged violations of fiduciary
duties in administering and managing eight employee benefit plans
over which the Defendants exercised control and authority
regarding the management and disposition of their assets.

For

purposes of this partial motion to dismiss, the only relevant
plans are (1) the Edward P. Shamy, Jr. 401(k) Plan (“Shamy
Plan”); (2) the Bleach and Associates Plan (“Bleach Plan”); (3)
the Advanced Telecommunications 401(k) Plan (“ATI Plan”); and (4)
the Fabricated Alloy, Inc. 401(k) Profit Sharing Plan (“Faballoy
Plan”).
In 2009, the employer that sponsored the Shamy Plan decided
to cease having the company perform most administrative services
for the Shamy Plan and directed the Company to transfer its plan
assets to a new service provider.

The Company and K. Belanger

did not transfer all of the Shamy Plan assets and instead left
approximately $30,000 in the Shamy Plan account that it managed.
In 2011, the Company and K. Belanger transferred the remaining
money in the Shamy Plan account to the Company’s corporate bank
account.
The Bleach Plan was apparently terminated sometime in 2005.
Years later, however, some Bleach Plan assets remained in the
Bleach Plan account controlled by the Company.

In November 2010,

all remaining assets in the Bleach Plan’s account were also
transferred to the Company’s corporate bank account.

2

Finally, Plaintiff also alleges that K. Belanger prepared
the Internal Revenue Service (“IRS”) Form 5500 for the ATI Plan,
the Shamy Plan, and the Faballoy Plan, which the Company was
required to do in order to comply with annual reporting
requirements under ERISA.

During the time alleged in the

complaint (January 1, 2010 to the date of filing), however, the
Company and K. Belanger allegedly did not disclose the full fees
that it charged on the IRS Form 5500.
By its complaint, Plaintiff seeks equitable relief in the
form of a court order which, inter alia, requires the Defendants
to restore the losses caused by their fiduciary breaches, removes
them as fiduciaries of any employee benefit plans, and
permanently enjoins them from acting in any fiduciary capacity
with respect to employee benefit plans subject to ERISA.
For purposes of the present Motion, the Defendants do not
dispute that the alleged facts, if proven, would amount to
violations of their fiduciary duties.

Instead, Defendants argue

that certain allegations on the face of Plaintiff’s complaint
reveal that several of Plaintiff’s claims are barred by ERISA’s
six-year statute of limitations, ERISA § 413(1), 29 U.S.C. §
1113(1).
II.

Standard
Federal Rule of Civil Procedure 12(b)(6) requires a court to

dismiss a complaint if the plaintiff has failed to “state a claim

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on which relief can be granted.”

In evaluating a motion to

dismiss, the court must take all well-pleaded factual allegations
as true, but it is not required to blindly accept “a legal
conclusion couched as a factual allegation.”
478 U.S. 265, 286 (1986).

Papasan v. Allain,

Although a plaintiff is not required

to plead detailed factual allegations, the complaint must include
enough facts to “raise a right to relief above the speculative
level.”
III.

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

Discussion
Defendants’ sole argument in favor of dismissal is that the

statute of limitations has run on some of Plaintiff’s claims, and
that we should, therefore, dismiss those claims from Plaintiff’s
Complaint.3

Although a statute of limitations is an affirmative

defense, courts have allowed defendants to assert affirmative
defenses such as the statute of limitations by way of a motion to
dismiss.

Davis v. Grusemeyer, 996 F.2d 617, 623 (3d Cir. 1993).

This is generally only permissible when the affirmative defense
appears on the face of the complaint.
29 F.3d 855, 859 (3d Cir. 1994).

ALA, Inc. v. CCAIR, Inc.,

When facts or matters outside

of the complaint are necessary to establish the affirmative

3

The parties disagree about whether ERISA § 413(1) is a statute
of limitations (Plaintiff’s position) or a statute of repose
(Defendants’ position). We agree with Plaintiff that the difference
is irrelevant for purposes of the present Motion. (Doc. No. 11, at 5
n.1). Without deciding the issue, we will refer to ERISA § 413(1) as
a statute of limitations.

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defense, raising it under Rule 12(b)(6) is usually not permitted.
See Worldcom, Inc. v. Graphnet, Inc., 343 F.3d 651, 657 (3d Cir.
2003).
As an initial matter, the relevant dates are all included on
the face of Plaintiff’s Complaint.

The applicability of ERISA’s

statute of limitations is, therefore, appropriately before this
Court on a 12(b)(6) motion.
ERISA § 413, 29 U.S.C. § 1113, limits the time when a breach
of duty claim may be brought against a fiduciary.

It provides as

follows:
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.

“This section thus creates a general six year

statute of limitations, shortened to three years in cases where
the plaintiff has actual knowledge of the breach, and potentially
extended to six years from the date of discovery in cases
involving fraud or concealment.”

Ranke v. Sanofi-Synthelabo

Inc., 436 F.3d 197, 201 (3d Cir. 2006) (citation omitted).
5

Since

the complaint in this case was filed in August 2016, under the
general six-year statute of limitations, August 2010 is the last
date on which a breach could have occurred that could serve as a
basis for the complaint.

See id.

(A) Shamy Plan
Defendants argue that the statute of limitations was
triggered in 2009 when the Company and K. Belanger transferred
some portion of the Shamy Plan’s assets to the new plan
administrator, leaving approximately $30,000 in the Shamy Plan
account, because this is the date on which an alleged breach of
fiduciary duty was complete.

Plaintiff responds that the

Defendants’ 2011 transfer of money from the Shamy Plan’s account
to the Company’s corporate account was a separate act from the
failure to fully transfer the Shamy Plan’s assets to a new plan
administrator.

In its opposition, Plaintiff makes clear that its

claim is for the 2011 transfer only, which it characterizes as a
“subsequent, different breach of ERISA.”

(Doc. No. 11, at 9).

Plaintiff proceeds to explicitly disclaim any request for relief
for any earlier violations with regard to the Shamy Plan.

Id.

The dispute essentially turns then on whether the 2011
transfer is a self-contained breach of a fiduciary duty or
whether it is instead an extension of a fiduciary breach that had
already been completed two years prior.

According to Plaintiff,

the 2011 transfer of leftover Shamy Plan assets to the Company’s

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corporate bank account by itself constitutes a prohibited
transaction under ERISA §§ 406(a)(1)(D), 406(b)(1) and 406(b)(2),
29 U.S.C. §§ 1106(a)(1)(D), 1106(b)(1), and 1106(b)(2).4

(Doc.

No. 11, at 9).
ERISA § 406(a)(1)(D) prohibits a fiduciary from causing an
employee benefits plan to engage in a transaction “if he knows or
should know that such transaction constitutes a direct or
indirect . . . transfer to, or use by or for the benefit of a
party in interest, or any assets of the plan . . . .”
§ 1106(a)(1)(D).

29 U.S.C.

Defendants are parties in interest as to the

Shamy Plan, see 29 U.S.C. § 1002(14)(A), and Plaintiff alleges
that in 2011 the Defendants transferred assets of the Shamy Plan
to the Company’s corporate bank account for the Defendants’ use
or benefit.

Plaintiff’s allegations regarding the 2011

transaction thus appear to state a cognizable stand-alone claim
under ERISA § 406(a)(1)(D) that is not time-barred by the sixyear statute of limitations.
ERISA § 406(b)(1) prohibits a fiduciary from dealing with
the assets of the plan in his own interest or for his own
account, 29 U.S.C. § 1106(b)(1), and ERISA § 406(b)(2) prohibits
a fiduciary from acting in any transaction involving the plan on

4

Plaintiff further demonstrates that its allegations limited to
the 2011 transfer also state a claim under ERISA §§ 404(a)(1)(A) and
404(a)(1)(B), 29 U.S.C. §§ 1104(a)(1)(A) and 1104(a)(1)(B). (Doc. No.
11, at 11-12).

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behalf of a party whose interests are adverse to the interests of
the plan or the interests of its participants or beneficiaries,
29 U.S.C. § 1106(b)(2).

Plaintiff argues that the 2011 transfer

of Shamy Plan assets to the Company’s corporate bank account is a
classic example of self-dealing as prohibited by § 406(b)(1).

It

further argues that the same transfer also violates § 406(b)(2)
because the Defendants were on both sides of that transfer.

We

agree that Plaintiff appears to have stated cognizable claims
under ERISA §§ 406(b)(1) and 406(b)(2) on the basis of
Defendants’ alleged conduct occurring within the limitations
period.
Defendants, meanwhile, cannot explain why the 2011 transfer
may not be treated as its own prohibited transaction for purposes
of ERISA.

Relying on Ranke, 436 F.3d at 202-03, Defendants

characterize the 2011 transfer as a “mere continuation[]” of the
prohibited transactions that occurred outside the limitations
period.

(Doc. No. 7-2, at 12).

But Ranke did not involve a

prohibited transaction analogous to the Defendants’ alleged
transfer of Shamy Plan funds to their own corporate account.

In

Ranke, the Third Circuit considered and rejected the appellants’
argument that “the date of the last action,” 29 U.S.C. §
1113(1)(A), is the last date on which a beneficiary makes
important financial and general life choices in reliance upon
representations of the fiduciary that occurred outside the

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limitations period.

Ranke, 436 F.3d at 201.

Because the

complaint in that case alleged no misrepresentations occurring
inside the limitations period that were “independent of and not
mere continuations of the initial misrepresentations,” the claim
was appropriately dismissed as time-barred.

Id. at 203.

In this

case, by contrast, Plaintiff’s claim is tethered to conduct
occurring inside the limitations period only, and indeed
Plaintiff has disclaimed any reliance on any earlier wrongdoing
which might violate other ERISA provisions.
Defendants also cite Williams v. Webb Law Firm, P.C., 628
Fed. Appx. 836, 838 (3d Cir. 2015), but that case too turned on
whether “mere continuations of [an] initial misrepresentation”
extend the date of last action.

Beyond analogizing to continuing

misrepresentations, Defendants offer no support for their
contention—which is, essentially, that “the failure to properly
terminate a plan followed by a subsequent taking of the plan’s
remaining assets is one action subject to one statute of
limitations.”

(Doc. No. 11, at 14).

It is perhaps even more

unclear why, if the transfer to Defendants’ bank account is
indeed a continuation of the prior alleged wrongdoing, that
transfer would not itself be the date of the last action for
ERISA purposes, thus bringing additional possible claims within
the limitations period.
Viewing the facts in Plaintiff’s Complaint in the light most

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favorable to Plaintiff, as we must, we hold that Plaintiff’s
claims with regard to the Shamy Act are not barred by the statute
of limitations.
(B) Bleach Plan
The Bleach Plan was terminated by its sponsor in or around
2005.

As of November 2010, however, there were remaining assets

in the Bleach Plan account.

That month, which is clearly within

the six-year limitations period, the Defendants transferred all
remaining assets to the Company’s corporate bank account.
The parties’ arguments regarding the Bleach Plan mostly
track their arguments regarding the Shamy Plan, which we have
already decided in favor of Plaintiff.

Defendants advance only

one argument peculiar to the Bleach Plan that they do not advance
with respect to the Shamy Plan.

We address that argument here.

Citing Laskin v. Siegel, 728 F.3d 731 (7th Cir. 2013),
Defendants argue that the date of the last action which
constituted a part of the breach or violation is the date that
the employee benefits plan was terminated.
16).

(Doc. No. 7-1, at 15-

Laskin does not support Defendants’ argument.

In that

case, the parties did not dispute that the last act or omission
was the termination of the pension plan, which was indisputably
outside the limitations period.

See Laskin, 728 F.3d at 733-35.

There was, moreover, no allegation of any subsequent independent
ERISA violation that occurred within the limitations period.

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See

id.

At issue instead was whether ERISA’s fraudulent concealment

exception applied.

Holding that it did not, the Seventh Circuit

affirmed the district court’s grant of summary judgment on
statute of limitations grounds.
In this case, Plaintiff does not attempt to avail itself of
the fraudulent concealment exception to rescue its claim from the
statute of limitations.

It argues rather that the alleged ERISA

violation occurred within the limitations period.

For the same

reasons discussed above with regard to the Shamy Plan, we decline
at this time to dismiss Plaintiff’s claims based on the Bleach
Plan.

Viewing the facts alleged in Plaintiff’s complaint in the

light most favorable to Plaintiff, we hold that Plaintiff’s
Bleach Plan claims are not barred by ERISA’s statute of
limitations.
(C) IRS Form 5500 Fee Disclosure Claims
Finally, Defendants argue that allegations regarding their
failure to disclose the full fees charged on the ATI Plan, the
Shamy Plan, and the Fallaboy Plan on the IRS Form 5500 are timebarred because the first set of alleged misrepresentations
occurred in July 2010, outside the limitations period.
7-2, at 16-17).

(Doc. No.

The IRS Form 5500 is a form that was jointly

developed by the IRS, the Department of Labor, and Pension
Benefit Guaranty Corporation to satisfy annual reporting

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requirements under ERISA and the Internal Revenue Code.5
According to Defendants, each subsequent failure to
accurately disclose fees on the IRS Form 5500 is a mere
continuation of the initial 2010 violation.

Plaintiff responds

that the Defendants committed a separate ERISA violation each
year, each offense triggering its own individual ERISA
limitations period.

Plaintiff points out that administrative

expenses can vary from year to year, which belies the notion that
a misrepresentation regarding fees made one year is necessarily
equivalent to misrepresentations made in a subsequent year.
Defendants’ argument that past misrepresentations outside
the limitations period insulates it from liability for later
misrepresentations inside the limitations period makes little
sense, and indeed Defendants seem to have abandoned this argument
in their reply to Plaintiff’s opposition.

(Doc. No. 12).

above, we decline to dismiss these claims at this time.

As
For

purposes of this present Motion, Plaintiff’s claims regarding
misrepresentations on annual reports filed in August 2010 or
later are not barred by ERISA’s statute of limitations.
IV.

Conclusion
For the foregoing reasons, Defendants’ Motion is denied.

appropriate Order follows.

5

See Internal Revenue Service, Form 5500 Corner,
https://www.irs.gov/retirement-plans/form-5500-corner (last visited
May 3, 2017).

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An