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Kosloff v. Smith

United States District Court, D. Kansas

July 20, 2015

DAVID KOSLOFF and MICHAEL MCMAUDE as trustees of the PREMIER HOSPICE PROFIT SHARING 401(k) PLAN, Plaintiffs,
v.
JEFFREY LEE SMITH, et al., Defendants.

MEMORANDUM AND ORDER

J. THOMAS MARTEN, District Judge.

Before the court are plaintiffs David Kosloff and Michael McMaude's Motion for Leave to File and concurrently filed Motion to Reconsider (Dkt. 60) the court's orders of September 17, 2014, and February 11, 2015 (Dkts. 37, 54). This action is brought by current fiduciaries of the Premier Hospice profit sharing 401(k) plan ("the Premier plan") against its former fiduciaries. Plaintiffs allege breach of contract, state-law embezzlement, and ERISA violations stemming from defendants' alleged mismanagement of the Premier plan. Plaintiffs move the court to reconsider its dismissal of ERISA breach of fiduciary duty claims arising before December 20, 2007, citing an intervening change in controlling law. As discussed below, the motion is denied.

I. Background

According to plaintiffs, the Premier plan is an ERISA-governed defined contribution pension plan established in October 2004 by Premier Hospice, LLC. Plaintiffs Kosloff and McMaude are the current fiduciaries of the Premier plan and have served in that capacity since February 14, 2013. Defendant Jeffrey Lee Smith, the founder and former owner of Premier Hospice, was named a fiduciary of the Premier plan from its inception through January 1, 2013. Defendant Lucke & Associates served as the plan administrator from September 20, 2004, through September 11, 2013, under a third party administrator ("TPA") contract between Premier Hospice and Lucke & Associates. Defendant Jeffrey Lucke is the principal owner of Lucke & Associates. Defendants allegedly transferred 100% of the Premier plan's funds into a separate ERISA-governed plan ("the SP plan") in 2006.

Plaintiffs allege that defendants committed multiple violations of their fiduciary and/or co-fiduciary duties under ERISA while serving as the Premier plan's fiduciaries from October 2004 to September 2013. Plaintiffs also allege that the 2006 transfer of assets from the Premier plan to the SP plan is embezzlement under Kansas law. Plaintiffs further allege that Lucke & Associates breached the TPA contract and denied the Premier plan its expected contractual benefits.

On March 28, 2014, defendants filed a joint motion to dismiss all claims. (Dkt. 17). The court granted the motion in part, dismissing: (1) all ERISA breach of fiduciary duty claims arising before December 20, 2007, because of plaintiffs' failure to sufficiently plead the fraud or concealment exception to the ERISA statute of repose; (2) plaintiffs' claims under ERISA § 101(f) for lack of legal foundation; and (3) plaintiffs' state-law embezzlement claims because they are preempted by ERISA. (Dkt. 37, at 4-9). Plaintiffs sought leave to amend the complaint in an attempt to salvage the dismissed ERISA breach of fiduciary duty claims. (Dkt. 40). They sought to amend the complaint in a manner that would qualify the time-barred claims under the "fraud or concealment" exception of the ERISA fiduciary duty statute of repose by pleading affirmative acts of concealment. The court denied leave to amend on the ground of futility because the proposed amended complaint also failed to plead affirmative acts of concealment. (Dkt. 54).

Plaintiffs now seek reconsideration of the court's order (Dkt. 37) dismissing ERISA breach of fiduciary duty claims arising before December 20, 2007, and of the court's order (Dkt. 54) denying leave to amend the complaint on grounds of futility.

II. Leave to File is Granted

A party may move for reconsideration of a non-dispositive motion "within 14 days after the order is filed unless the court extends the time." D. KAN. R. 7.3(b). Plaintiffs moved for reconsideration 36 days after the court filed the second motion of the two motions at issue here. The motion is thus filed out-of-time. However, the motion was filed within one month of the publication of the Tenth Circuit decision on which the motion relies - a reasonable time to discover the change in law and submit a motion thereon - and is unopposed. Therefore, the court exercises its discretion to extend the time to file; leave to file the Rule 7.3(b)(1) motion is GRANTED.

III. Legal Standard

The purpose of a motion to reconsider "is to correct manifest errors of law or to present newly discovered evidence." Monge v. FG Petro-Machinery (Group) Co. Ltd., 701 F.3d 598, 611 (10th Cir. 2012) (brackets and internal quotation and citation omitted). "Grounds warranting a motion to reconsider include (1) an intervening change in the controlling law, (2) new evidence previously unavailable, and (3) the need to correct clear error or prevent manifest injustice." Servants of the Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000); accord D. KAN. R. 7.3(b). However, "[a] motion to reconsider should not be used to revisit issues already addressed or advance arguments that could have been raised earlier." United States v. Christy, 739 F.3d 534, 539 (10th Cir. 2014) (quoting Servants of Paraclete, 204 F.3d at 1012).

IV. Analysis

ERISA breach of fiduciary duty claims may not commence later than six years after either the last act of the breach or the last opportunity to cure a breach by omission, "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. Plaintiffs argue that the Tenth Circuit's recent decision in Fulghum v. Embarq Corp., 785 F.3d 395 (2015), clarifies that the "fraud or concealment" exception applies to their breach of fiduciary duty claims arising before December 20, 2007.

Under Fulghum, the § 1113 "fraud or concealment" exception applies either when the "alleged breach of fiduciary duty is based on a fraud theory" or "when the defendant conceals the alleged breach of fiduciary duty." 785 F.3d at 415-16. Thus, rather than a singular "fraud or concealment" theory, the exception recognizes fraud ...


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