Unpublished Disposition, 852 F.2d 572 (9th Cir. 1981)

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U.S. Court of Appeals for the Ninth Circuit - 852 F.2d 572 (9th Cir. 1981)

PHYSICS APPLICATIONS, INC., ATI/LCI/PAI Profit SharingRetirement Plan, Plaintiffs-Counter-Defendants-Appellants,v.Stephen T. GAINES, Roland Franzen, Defendants-Appellees,Coye T. Vincent, Franklin C. Ford, Cameron Ford,Defendants-Counterclaimants- Appellees.

No. 87-6539.

United States Court of Appeals, Ninth Circuit.

Submitted May 2, 1988.Decided June 30, 1988.* 

Before FLETCHER, FARRIS, and PREGERSON, Circuit Judges.


Plaintiffs are a pension plan sponsor, a pension plan, an administrative committee for the pension plan, and the plan's current trustees. The defendants are former employees of Physics Applications, Inc. ("PAI"), a California corporation, the employer that sponsored the plan, and former fiduciaries of the pension and profit-sharing plans. Plaintiffs appeal from the district court's grant of partial summary judgment against them. Plaintiffs asserted a breach of fiduciary duty and fraudulent concealment in violation of 29 U.S.C. § 1109 and sued under 29 U.S.C. § 1132. The district court found the suit barred by the three-year statute of limitation provided in 29 U.S.C. § 1113. We affirm.


PAI's Board of Directors created the PAI money purchase pension plan and profit-sharing plan. The PAI plan was not disclosed to the majority shareholder of PAI, its parent corporation, Applied Theory, Inc., or to two of the three members of PAI's Board of Directors until September 19, 1981 at a shareholders' meeting. At that time, plaintiffs knew that a contribution had been made into the profit-sharing plan for plan year 1980.

More than four years after the plaintiffs learned that a contribution had been made into the profit-sharing plan for plan year 1980, they filed the instant complaint against the defendants alleging that the 1980 contribution was wrongful and constituted a breach of the defendants' fiduciary obligations to the corporation and to the plan. Plaintiffs base their complaint on the discovery in the spring of 1984 that the defendants, former fiduciaries, had created false documentation evidencing Board actions to lead the plan administrator to conclude that the PAI plan had been established by the employer and that PAI had authorized contributions to the plan.


The applicable limitation statute, 29 U.S.C. § 1113, provides:

(a) No action may be commenced under this title 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.

Plaintiffs contend that a concealment occurred because the former fiduciaries failed to secure, and misrepresented that they had secured, the Board's approval of the creation of the PAI plan that the fiduciaries in fact created. Because the fiduciary defendants created the plan without the authorization of the Board as required by the by-laws of PAI, plaintiffs argue that fraud and concealment occurred. Accordingly, they contend that the six-year statute of limitation applies.

Defendants submit that plaintiffs' argument is unsound because the complaint does not allege that the profit-sharing plan was improperly or unlawfully created by the defendants, but rather alleges that the contribution into the profit-sharing plan for 1980 was made without requisite authority and concealed from PAI, the plan and the plaintiffs until September or October 1981. Moreover, defendants contend that plaintiffs considered the plan valid at the time the complaint was filed because the complaint sought to enforce the terms of the profit-sharing plan as it related to distribution of benefits. Accordingly, defendants argue that plaintiff's references relating to formation of the profit-sharing plan, including but not necessarily limited to the impact the alleged false documents may have had on formation, are irrelevant and not pertinent to this appeal. Furthermore, since the complaint does not allege that the plaintiffs, the plans or PAI were in any way harmed as a result of the defendants' conduct during the formation stage of the plans in question, evidence relating to formation of the plans would neither prove nor disprove any disputed issue before this court. As such, defendants argue that any reference to creation of the plans is irrelevant. We agree.

We reject plaintiffs' argument and rule that no fraud or concealment occurred. The purported unauthorized contribution was known to the plaintiffs in September or October of 1981, at the latest. The fact that documents were falsified had no effect upon the contribution or plaintiffs' knowledge of the contribution.

It is clear that plaintiffs had actual knowledge of the contribution in September-October of 1981. Additionally, it appears that there is no causal connection between the contribution and the false documents. Accordingly, no liability can be imposed for breach of fiduciary duties under 29 U.S.C. § 1109. Furthermore, there was no reliance upon the documents. Thus, we hold that no fraud or concealment occurred as to the contribution. Accordingly, the three-year statute of limitation of 29 U.S.C. § 1113 applies. Since plaintiffs filed this complaint beyond the three-year period, this case is time-barred.

Because we find this action to be time-barred we need not address the ratification or punitive damages issues. In addition, we decline to grant defendants' request for attorneys' fees under 29 U.S.C. § 1132(g).

The district court's ruling that the three-year statute of limitation bars this action is



The panel unanimously found this case suitable for decision without oral argument. Fed. R. App. P. 34(a) and Ninth Circuit Rule 34-4


This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir. Rule 36-3