The Supreme Court on Monday declined to hear a challenge by an ESOP plan trustee on whether a time limit for bringing breach of fiduciary duty claims can be waived.
The Department of Labor had argued for the petition to be denied and to let stand a ruling by the 11th U.S. Circuit Court of Appeals in Atlanta, allowing the DOL to pursue its claims.
In 2009, the Department of Labor began investigating stock purchases and valuations made by Georgia company TPP Holdings Inc. for the TPP Employee Stock Ownership Plan. Before reaching the statutory time limit to file suit, plan officials waived their rights under ERISA's statute of limitations, including a six-year time limit, and in exchange, the DOL promised not to file suit. When settlement negotiations proved unsuccessful, the secretary of labor filed suit, alleging that TPP and owner Robert Preston breached fiduciary duties and committed prohibited transactions under ERISA by causing the plan to purchase TPP stock from Mr. Preston at an inflated price; failed to pay participants proper distributions; and used a bank account with plan assets as a corporate checking account.
Despite the agreements and two express waivers of statute of limitations defenses, the defendants moved to dismiss as untimely all claims arising more than six years before DOL filed suit, arguing that the prior agreements are invalid because ERISA's six-year limitations period is a statute of repose, as opposed to a statute of limitations.
The 11th Circuit "correctly rejected that contention," DOL argued in its Supreme Court brief. "Nothing in the statute's text or the broader statutory scheme suggests that a party cannot knowingly and voluntarily waive its rights under that provision. The court of appeals' decision also does not conflict with any decision of this court or any other court of appeals. Further review is unwarranted."