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Secretary, U.S. Department of Labor v. Preston

United States Court of Appeals, Eleventh Circuit

October 12, 2017

SECRETARY, U.S. DEPARTMENT OF LABOR, Plaintiff - Appellant,
v.
ROBERT N. PRESTON, TPP HOLDINGS, INC., d.b.a. The Preston Partnership, LLC, TPP HOLDINGS INC., EMPLOYEE STOCK OWNERSHIP PLAN Defendants - Appellees.

         Appeal from the United States District Court for the Northern District of Georgia D.C. Docket No. 1:14-cv-04122-WBH

          Before WILSON and NEWSOM, Circuit Judges, and MORENO, [*] District Judge.

          NEWSOM, CIRCUIT JUDGE

         It is hornbook law that rights of all kinds-even constitutional ones-can be waived. For instance, a criminal defendant might for one reason or another elect to waive his Fourth Amendment freedom from unreasonable searches, his Fifth Amendment privilege against self-incrimination, or his Sixth Amendment right to the assistance of counsel. In the same way, a civil litigant can waive his Seventh Amendment right to a jury trial or his right, rooted in the Fourteenth Amendment, to be free from overbroad assertions of personal jurisdiction. So too, a sovereign State may choose to waive its Eleventh Amendment immunity from suit.

         This case also concerns waiver-but not of some fundamental constitutional guarantee. Rather, this case is about … the Employee Retirement Income Security Act of 1974, affectionately (and hereinafter) known as "ERISA." In particular, this interlocutory appeal requires us to determine whether a defendant is capable of expressly waiving the six-year statute of repose contained in ERISA Section 413(1), 29 U.S.C. § 1113(1)-or whether instead, the protection provided by Section 1113(1) is so essential, so fundamental, that it (seemingly almost alone among personal rights) is inherently indefeasible and unwaivable.

         We won't bury the lede. In response to the district court's certified question, we answer yes-Section 1113(1)'s statute of repose is subject to express waiver.

         I

         Robert Preston was the owner and CEO of TPP Holdings, Inc., which established the TPP Employee Stock Ownership Plan in 2004 to provide retirement income for TPP's employees. The Secretary of Labor brought this ERISA action alleging that Preston, who also served as the Plan's trustee, breached his fiduciary duties and engaged in prohibited self-dealing when, in 2006 and then again in 2008, he knowingly caused the Plan to purchase his own TPP stock at an inflated price. The Secretary separately alleged that Preston, TPP, and the Plan engaged in assorted other misdeeds (terminating plan participants, failing to pay required distributions, etc.) in 2008.

         Prior to filing suit, the Secretary notified Preston, TPP, and the Plan (together, "the defendants") of his claims, and the parties attempted to negotiate a settlement.[1] While the negotiations were ongoing, the parties entered into a series of "tolling agreements" of the sort that are increasingly common in civil litigation. The first such agreement was executed in August 2011; it was then extended three times over the next few years. The final extension, which was inked in May 2014, extended the Secretary's filing deadline until December 31, 2014.

         In each of the tolling agreements, the Secretary offered to delay filing any action until a specified date in exchange for the defendants' pledge not to raise a timeliness defense in the event the Secretary later sued. In particular, the defendants broadly stipulated that, as to any suit filed by the Secretary during the range of dates specified in the agreements, they would "not assert in any manner the defense of statute of limitations, the doctrine of waiver, laches, or estoppel, or any other matter constituting an avoidance of the Secretary's claims that is based on the time within which the Secretary commenced such action." The defendants have acknowledged that they entered into the tolling agreements knowingly, willingly, and voluntarily. See Oral Arg. Tr. at 14:10.

         The parties ultimately failed to reach a settlement, and the Secretary filed this action on December 30, 2014, one day before the expiration of the agreed-upon tolling period. Despite their agreements not to assert a time bar, the defendants moved to dismiss the Secretary's complaint on the ground that all claims arising from alleged violations that occurred before December 30, 2008- six years prior to the complaint's filing-were foreclosed by ERISA's limitation-of-actions provision. That statute, which is at the heart of this case, provides as follows:

No action may be commenced under this subchapter 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.

29 U.S.C. § 1113.

         In response to the Secretary's contention that they had expressly waived their right to assert a timeliness defense, the defendants asserted that the tolling agreements were invalid and unenforceable. Section 1113(1), they said, "establishes an unyielding statute of repose" that cannot be waived, even by a party's express agreement.

         The district court agreed with the defendants and held that because Section 1113(1) constitutes a statute of repose, rather than an ordinary statute of limitations, it "is not subject to waiver-even express waiver." Accordingly, the court dismissed all of the Secretary's claims arising from events that occurred before December 30, 2008.

         The Secretary moved for reconsideration, arguing (among other things) that the district court's "categorical" rule that statutes of repose cannot be waived contradicts governing precedent, which instead requires a determination whether the applicable time bar is "jurisdictional." The district court denied the motion, and the Secretary sought leave to file an interlocutory appeal pursuant to 28 U.S.C. § 1292(b). The district court granted permission and certified the following question, which this Court ...


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