At present, most employment class actions relate to wage and hour issues, but there are still many (and frequently hugely expensive) ERISA class actions challenging a host of benefits issues. A recent case underscores that the threat of ERISA class action litigation can be exacerbated by a very long statute of limitations.
ERISA does not contain a statute of limitations for claims to recover benefits due under the terms of a plan. Courts apply the most clearly analogous state statute of limitations to these claims. Breach of contract claims typically allow for a relatively longer statute of limitation period than for other causes of action. As a result, plaintiffs often seek to characterize the ERISA cause of action as a contract claim to take advantage of a longer statute of limitation period. See, e.g., Meade v. Pension Appeals and Review Committee, 966 F.2d 190 (6th Cir. 1992) (applying Ohio’s fifteen-year statute of limitations to alleged wrongful denial of permanent disability benefits under terms of ERISA-governed pension plan).
In Clemons v. Norton Health Care Inc. Retirement Plan, No. 08-69-C, 2011 WL 5519823 (W.D. Ky. Nov. 14, 2011), the United States District Court for the Western District of Kentucky held that Kentucky’s fifteen-year statute of limitations for contracts, KRS § 411.090 applied to the plaintiffs’ claim for benefits due under the terms of a plan. The certified class consisted of retirement plan participants who claimed that the Norton Healthcare Retirement Plan (“Plan”) made several errors when calculating their contractual lump sum retirement benefits. For example, the class claimed that the Plan failed to include the value of an annual cost of living adjustment and/or an alternative lump sum benefit when doing so would have yielded the highest value for the participant.
The Clemons court rejected the Plan’s argument to apply Kentucky’s default five-year statute of limitations for actions upon a liability created by statute, KRS § 413.120(2). It held that the cause of action did not arise from ERISA’s statutory protections, but was instead based on an independent promise or contract. The Court found that the plaintiffs’ claim for equitable relief under ERISA § 502(a)(3) based on a violation of the plan is not the same as asserting ERISA-specific statutory grounds for relief. As a result, Kentucky’s fifteen-year limitations period for breach of contract applied. The Court further held that the claims accrued on the dates the individual plaintiffs received their lump sum distributions.
Clemons distinguished two federal cases that applied Kentucky’s five-year statute of limitations to ERISA claims. In Redmon v. Sud-Chemie Inc. Retirement Plan for Union Employees, 547 F.3d 531 (6th Cir. 2008), the allegation centered on a waiver of survivor benefits that allegedly violated ERISA’s statutory protections. In Fallin v. Commonwealth Indus. Inc. Cash Balance Plan, 521 F.Supp.2d 592, 597 (W.D. Ky. 2007), the action was premised on an alleged violation of ERISA § 502 due to changes to an employee retirement plan. Clemons found that, in contrast, the class was not suing on statutory rights provided by ERISA; rather, the state law claims for breach of contract were preempted by ERISA.
The Bottom Line: ERISA cases can have extremely long statutes of limitation. When the plaintiffs seek relief primarily to recover benefits allegedly due under the terms of an ERISA-governed plan and the dispute centers around rights under a contract, the statute of limitations in Kentucky is fifteen years, not five years.