Bishop v. Lucent Tech Inc

Opinion

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION File Name: 08a0164n.06 Filed: March 25, 2008

No. 07-3435

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

VIRGINIA J. BISHOP, et al., ) ) ON APPEAL FROM THE Plaintiffs-Appellants, ) UNITED STATES DISTRICT ) COURT FOR THE v. ) SOUTHERN DISTRICT OF ) OHIO LUCENT TECHNOLOGIES, INC., and ) THE LUCENT RETIREMENT INCOME PLAN, ) MEMORANDUM ) OPINION Defendants-Appellees. )

BEFORE: SILER, MOORE and McKEAGUE, Circuit Judges.

PER CURIAM. This is an appeal from an order dismissing retirees’ claims for breach of

fiduciary duty against their former employer and its employment benefit plan. Plaintiff retirees

allege they were misled into prematurely accepting early retirement. The district court dismissed the

claims as time-barred. On appeal, plaintiffs contend the district court failed to construe the

complaint liberally in their favor and misapplied the governing statute of limitations. For the reasons

that follow, we affirm the judgment of the district court.

I

Plaintiffs Virginia Bishop, Gerald Deckard, Charles Himmelspach, Jr., James Kastet, Janet

Koch, George Policello, Karen Staff, and Sharon Stratton were employees of defendant Lucent

Technologies, Inc. in Ohio and Illinois. All eight plaintiffs retired from their employment with No. 07-3435 Bishop v. Lucent Technologies

Lucent in late 2000 or early 2001. They allegedly retired in reliance on representations by Lucent

officials that “there was no point in delaying their retirement in the hope that the company would

offer special retirement incentives like those offered by Lucent in the past, because Lucent had

decided not to offer packages again in the near future, a prospect the officials guaranteed the

company had specifically ruled out.” Amended complaint ¶ 1. Yet, on June 11, 2001, within

approximately six months after their retirements, Lucent publicly announced the offering of a

lucrative severance package known as the 2001 Voluntary Retirement Program (“VRP”). Had they

remained employed for several more months, plaintiffs allege, they would have been eligible for

enhanced benefits. Feeling duped, they commenced this action under the Employee Retirement

Income Security Act (“ERISA”), alleging under 29 U.S.C. § 1132(e)(1) that defendants Lucent

Technologies and The Lucent Retirement Income Plan breached fiduciary duties owed them.

Plaintiffs claim that defendants breached fiduciary duties “by actively misleading them into choosing

to retire when they did with false information about the company’s policy and intentions with respect

to severance incentives.” Amended complaint ¶ 1.

Plaintiffs filed their complaint in the District Court for the Southern District of Ohio on

January 3, 2005. Defendants responded by moving to dismiss under Rule 12(b)(6) of the Federal

Rules of Civil Procedure, contending the complaint fails to state a claim upon which relief can be

granted because the claims are barred by the governing statute of limitations. In their motion to

dismiss, defendants contended that plaintiffs had actual knowledge of the alleged breach of fiduciary

duty on the date of the VRP announcement and that the three-year limitation period therefore expired

on June 10, 2004, almost seven months before the complaint was filed.

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Plaintiffs opposed the motion by contending that the VRP announcement itself did not

necessarily disclose to plaintiffs that misleading representations earlier made by Lucent officials

were untrue. They further insisted that the complaint does not allege when plaintiffs learned that

they had been misled. Because the complaint does not reveal when plaintiffs acquired this actual

knowledge, plaintiffs maintained that it could not be ascertained whether the complaint was untimely

filed.

The district court rejected plaintiffs’ argument, concluding they had actual knowledge of the

facts or transactions that made out the alleged violation on June 11, 2001, even if they didn’t then

know all material facts necessary to understand that a breach of fiduciary duty occurred. This was

held to be sufficient “actual knowledge” to trigger the running of the three-year period and the

complaint was held to be time-barred.

II

Whether the district court properly dismissed the complaint pursuant to Rule 12(b)(6) is a

question of law subject to de novo review. Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir. 2005). The

reviewing court must construe the complaint in a light most favorable to plaintiffs, accept all well-

pled factual allegations as true, and determine whether plaintiffs undoubtedly can prove no set of

facts in support of those allegations that would entitle them to relief. Harbin-Bey v. Rutter, 420 F.3d

571, 575 (6th Cir. 2005). Yet, to survive a motion to dismiss, the “complaint must contain either

direct or inferential allegations respecting all material elements to sustain a recovery under some

viable legal theory.” Mezibov, 411 F.3d at 716. Conclusory allegations or legal conclusions

masquerading as factual allegations will not suffice. Id. Even under Rule 12(b)(6), a complaint

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containing a statement of facts that merely creates a suspicion of a legally cognizable right of action

is insufficient. Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007). The “[f]actual

allegations must be enough to raise a right to relief above the speculative level”; they must “state a

claim to relief that is plausible on its face.” Id. at 1965, 1974; see also Ass’n of Cleveland Fire

Fighters v. City of Cleveland, 502 F.3d 545, 548 (6th Cir. 2007).

In their motion to dismiss, defendants point out, with reference to the allegations of the

complaint, that the violation complained of manifestly occurred on June 11, 2001, when the 2001

VRP was publicly announced. Because it appears from the complaint itself that plaintiffs knew they

had been misled at that time, defendants reasonably deduced that the three-year period of limitation

prescribed in 29 U.S.C. § 1113(2) began running at that time. The complaint not having been filed

until January 3, 2005, more than three years after June 11, 2001, defendants contend that the

complaint fails to state a claim upon which can be granted because it is time-barred. Defendants

essentially contend, in the words of Mezibov, 411 F.3d at 716, that the complaint fails to “contain

either direct or inferential allegations respecting all material elements to sustain a recovery under

some viable legal theory.”

Pursuant to 29 U.S.C. § 1113, in relevant part, a claim for breach of fiduciary duty may not

be brought 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.

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The district court correctly determined that “actual knowledge” under 29 U.S.C. § 1113(2) is a term

that has received a particular definition in the Sixth Circuit. “[T]he relevant knowledge required to

trigger the statute of limitations under 29 U.S.C. § 1113(2) is knowledge of the facts or transaction

that constituted the alleged violation; it is not necessary that the plaintiff also have actual knowledge

that the facts establish a cognizable legal claim under ERISA in order to trigger the running of the

statute.” Wright v. Heyne, 349 F.3d 321, 330 (6th Cir. 2003). It follows that the question posed by

the motion to dismiss is whether plaintiffs’ complaint contains sufficient allegations, either direct

or inferential, to facially support the conclusion that they first acquired actual knowledge of “the

facts or transaction that constituted the alleged violation” at some point in time less than three years

prior to the filing of their complaint.

Plaintiffs concede that their complaint does not affirmatively allege when they acquired

actual knowledge of the facts or transaction that comprised the alleged breach of fiduciary duty.

They maintain that the court, viewing the complaint in the light most favorable to them for purposes

of Rule 12(b)(6) review, must resolve this ambiguity in their favor. Yet, the complaint certainly

contains allegations which, on their face, give rise to the reasonable inference that they must have

known, at the time of the public announcement of the 2001 VRP that they had been wronged. That

is, the allegations indicate that plaintiffs: knew what representations had been made to them by

Lucent officials, on which they allegedly relied in deciding to retire early; knew the offering of

enhanced benefits in the 2001 VRP was inconsistent with the representations; and knew, in

retrospect, that they had been misled by these representations into believing that something that did

come to pass would not. It thus appears from the face of the complaint that plaintiffs had actual

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knowledge of the facts or transaction comprising the wrong complained of more than three years

before the complaint was filed. In the words of Wright, 349 F.3d at 331: “Although the actions

complained of in this case may not themselves ‘communicate the existence of an underlying breach,’

the extrinsic facts of which the Plaintiffs had actual knowledge demonstrate that Plaintiffs must have

known that they had been wronged long before they consulted with an attorney.”

Under these circumstances, it is not enough for plaintiffs to argue that the complaint, because

it is silent as to when they first acquired actual knowledge, must be read in the light most favorable

to them and construed as not precluding the possibility that they will be able to prove facts

establishing their entitlement to relief. The obligation to plead facts in avoidance of the statute of

limitations defense is triggered by the fact that “it is apparent from the face of the complaint that the

time limit for bringing the claim[s] has passed.” Hoover v. Langston Equip. Assocs., Inc., 958 F.2d

742, 744 (6th Cir. 1992). “The Sixth Circuit has adopted the view, at least in cases where the face

of the complaint discloses a failure to file within the time allowed, that the plaintiff may come

forward with allegations explaining why the statute of limitations should be tolled.” Id. When it

affirmatively appears from the face of the complaint that the time for bringing the claim has passed,

the plaintiff cannot “escape the statute by saying nothing.” Id. at 745. See also LRL Properties v.

Portage Metro Housing Auth., 55 F.3d 1097, 1107 (6th Cir. 1995).

A complaint containing a statement of facts that merely creates a suspicion of a legally

cognizable right of action is insufficient. Twombly, 127 S.Ct. at 1965. The allegations must be

enough to “raise a right to relief above the speculative level” and state a claim that is “plausible on

its face.” Id. at 1965, 1974. Where, as here, defendants have highlighted the apparent untimeliness

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of the complaint, plaintiffs may not simply rely on the bare assertion that they were unaware of the

facts underlying their cause of action. LRL Properties, 55 F.3d at 1107; Hoover, 958 F.2d at 744.

Plaintiffs insist it was only when they learned that Lucent officials knew what they said was,

or may have been, false that plaintiffs had actual knowledge that defendants had breached their

fiduciary duties. The argument is based in part on Caputo v. Pfizer, Inc., 267 F.3d 181,193 (2d Cir.

2001), an approach the Sixth Circuit expressly declined to adopt in Wright, where the statute was

held to be triggered by knowledge of the facts or transaction that constituted the alleged violation,

irrespective of whether the plaintiff also had knowledge that the facts establish a cognizable legal

claim under ERISA. Wright, 349 F.3d at 330.

Furthermore, even apart from the merits of plaintiffs’ argument that they needed to know

more than that the VRP had been announced to know that they had been wrongfully misled, the fact

remains that plaintiffs have, to this date, steadfastly refused to identify when they did acquire the

needed actual knowledge. Ordinarily, when the omission of a critical allegation in a complaint is

highlighted by a defendant’s motion to dismiss, the appropriate method for adding new factual

allegations is to request leave to amend the complaint in conjunction with responding to the motion

to dismiss. See Harvey v. Great Seneca Fin. Corp., 453 F.3d 324, 328 (6th Cir. 2006). Yet, in this

case, plaintiffs did not move the district court for leave to amend. Whereas plaintiffs might

reasonably have been expected to respond to the motion to dismiss by assuring the district court that

the apparent untimeliness of their claims was due to a pleading oversight, and by requesting leave

to amend so as to affirmatively allege the date when each plaintiff acquired the relevant knowledge,

no request for leave to amend was ever forthcoming. Instead, plaintiffs opposed the motion to

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dismiss on other grounds. On this critical issue of timeliness, they argued to the district court simply

as follows:

Because, regardless of which event starts the clock running, it isn’t apparent from the face of the complaint that the time limit for bringing the claim has passed, Lucent’s motion must be denied. There is another, more appropriate time, for the plaintiffs to prove—as they will—when they acquired actual knowledge and that they brought their suit within three years of that date. For now, any inquiry into this issue is premature.

Memorandum in opposition to motion to dismiss p. 6, JA 43. That is, in the face of a direct

challenge to the viability of their complaint, plaintiffs inexplicably concluded that the time was not

“appropriate” to demonstrate that, contrary to appearances, their complaint was in fact timely.

On appeal, plaintiffs argue—no less inexplicably—that they did not identify when they

acquired the requisite actual knowledge because the district court did not give them a chance: “The

employees could have explained what they learned and when, but neither Lucent nor the district

court has given them a chance.” Appellants’ reply brief p. 2. The motion to dismiss was filed on

March 14, 2005. Plaintiffs obtained an extension of time within which to respond and then filed

their response on April 28, 2005. Plaintiffs then assented to a stay of discovery while the motion

remained under advisement. Subsequently, plaintiffs obtained permission to file a supplemental

brief in opposition to the motion to dismiss and filed it on October 12, 2006. Again, they did not

seek leave to amend to substantiate the timeliness of the complaint. The district court issued its

ruling on March 15, 2007, granting defendants’ motion and dismissing the complaint. Even then,

plaintiffs did not move for reconsideration and seek leave to amend. Only now, on the last two pages

of their appellate reply brief, do plaintiffs finally acknowledge that amendment of the complaint is

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appropriate: “And, if by any chance, this Court finds the complaint deficient in any curable way, the

case should be remanded with instructions to allow the retirees to plead over.” Id. at 10-11.

Considering this procedural history, the motion to dismiss having remained pending for a full

two years, the notion that plaintiffs were denied a fair opportunity to augment their complaint with

factual allegations, concerning information within their possession, is simply preposterous. Just as

unpersuasive is plaintiffs’ insistence that the complaint, under Rule 12(b)(6), must be read liberally

and ambiguities resolved in their favor. The court should not assume facts that could and should

have been pled, but were not. Harvey, 453 F.3d at 328. “Although reasonable inferences drawn

from the allegations must be accepted, . . . we need not accept ‘unwarranted factual inferences.’” Id.

(citations omitted).1

Plaintiffs have offered no good reason why, in the face of the motion to dismiss, they have

steadfastly refused to identify when they acquired the requisite actual knowledge of defendants’

violation. Nor have they asserted any theory pursuant to which we can hold that the district court

erred by failing to excuse the incompleteness of their allegations. Under these circumstances, the

incomplete allegations of the complaint do not justify any reasonable inference that their complaint

was timely filed. To the contrary, we concur in the assessment of the district court that the

incompleteness of the allegations, combined with plaintiffs’ resolute and continued silence in the

1 That the factual inferences plaintiffs would have us draw are unwarranted is underscored by the general rule that, where relevant information “is in the possession of one party and not provided, then an adverse inference may be drawn that such information would be harmful to the party who fails to provide it.” Clay v. United Parcel Serv., Inc., 501 F.3d 695, 712 (6th Cir. 2007) (quoting McMahan & Co. v. Po Folks, Inc., 206 F.3d 627, 632-33 (6th Cir. 2000)).

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face of the motion to dismiss, justifies the opposite inference. Viewed in procedural context, the

allegations of plaintiffs’ complaint merely create a suspicion of a legally cognizable right of action,

which is insufficient to forestall dismissal under Rule 12(b)(6). Twombly, 127 S.Ct. at 1965.

III

Accordingly, we AFFIRM the judgment of the district court dismissing the complaint for

failure to state a claim upon which relief can be granted.

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