Deciding an issue of first impression, the U.S. Court of Appeals for the Second Circuit recently held that a plaintiff’s claim under ERISA § 502(c)(1) was barred by Connecticut’s one-year statute of limitations for an action seeking to collect a statutorily-imposed civil penalty. Brown v. Rawlings Fin. Servs. LLC, (2d. Cir., 8/22/17) (Jacobs, Leval, Raggi, Js.).
Plaintiff, a plan participant, had filed suit against Rawlings, Aetna, and the William W. Backus Hospital claiming that they had failed to timely respond to her request for documents concerning her healthcare benefit plan. The defendants moved to dismiss her complaint on the ground that the suit was not timely filed, and the District Court granted the motion. Plaintiff thereafter appealed to the Second Circuit, arguing that the District Court had applied the incorrect limitations period.
Section 502(c)(1) imposes liability on ERISA plan administrators for failing or refusing to comply with a request for plan documents, allowing a fine of up to $110 per day in the discretion of the court. The statute, however, does not itself prescribe a limitations period for an action brought to enforce its terms. Federal courts must instead apply “the most nearly analogous” state limitations statute. Burke v. PriceWaterhouseCoopers LLP Long Term Disability Plan, 572 F.3d 76, 78 (2d Cir. 2009).
The defendants had argued, and the District Court (Bolden, J.) had agreed, that Connecticut General Statutes § 52-585, which provides a one-year limitations period in actions for a “forfeiture on any penal statute,” was the most analogous provision. Plaintiff asked the Second Circuit to reverse that conclusion and hold that Connecticut’s six-year contract limitations period applied or, in the alternative, the three-year period in which a plaintiff can file a claim under the state’s Unfair Trade Practices Act. The Second Circuit rejected these arguments and held that the District Court had ruled correctly.
Acknowledging that it was being asked to consider, for the first time, whether section 502(c)(1) was punitive in nature (as opposed to remedial), the Second Circuit held that this section of ERISA was punitive because the amount of the fine imposed by the District Court was both discretionary and meant to punish the ERISA administrator for its failings, rather than compensate the plaintiff for any loss. The Court noted that this conclusion was consistent with the approaches adopted by the Department of Labor, as well as six of the seven other Circuit Courts of Appeal that had considered the issue.
Finally, in light of its conclusions that section 502(c)(1)’s monetary penalty was punitive and the right to receive ERISA documents was not a contractual right or a common law right, but a statutorily-imposed obligation, the Second Circuit disagreed with Plaintiff that other Connecticut limitations period were a better fit for a section 502(c)(1) action. Analyzing Connecticut’s limitations periods for breach of contract and unfair trade practices, the Second Circuit held that General Statutes § 52-585 was the most analogous to a section 502(c)(1) claim and upheld the District Court’s decision dismissing Plaintiff’s suit for failing to meet its one-year limitations period.