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Perez v. PBI Bank, Inc.

United States District Court, N.D. Indiana, South Bend Division

November 20, 2014

THOMAS E. PEREZ, Secretary of the United States Department of Labor, Plaintiff,
v.
PBI BANK, INC., and THE MILLER'S HEALTH SYSTEMS, INC. EMPLOYEE STOCK OWNERSHIP PLAN, Defendant. PBI BANK, INC., Third-Party Plaintiff,
v.
THE MILLER'S HEALTH SYSTEMS, INC.,
v.
RICHARD MILLER, R. JAMES MILLER, BEVERLY MILLER, BARBARA MILLER, LORI HAUG and PATRICK BOYLE, Third-Party Defendant

Page 907

For Secretary of the United States Department of Labor, Thomas E Perez, Plaintiff: Bruce C Canetti, LEAD ATTORNEY, U.S. Department of Labor - Chi/IL, Office of the Solicitor, Chicago, IL; Glenn M Loos, LEAD ATTORNEY, U.S. Department of Labor - Was/DC/PO Box, Washington, DC; Michael Ross Hartman, U.S. Department of Labor - Was/DC/OffSol, Office of the Solicitor - Plan Benefits Security Division, Washington, DC; Michael Schloss, U.S. Department of Labor - Was/DC/PO Box 1914, Washington, DC.

For PBI Bank Inc, Defendant, ThirdParty Plaintiff: Bryan Steven Strawbridge, Nelson D Alexander, LEAD ATTORNEYS, Frost Brown Todd LLC - Ind/IN, Indianapolis, IN.

For The Miller's Health Systems Inc Employee Stock Ownership Plan, Defendant, ThirdParty Defendant: Douglas Andrew Rubel PHV, LEAD ATTORNEY, PRO HAC VICE, Jackson Lewis PC - Car/NC, Cary, NC.

For V Richard Miller, R James Miller, Beverly Miller, Barbara Miller, Lori Haug, Patrick Boyle, ThirdParties Defendants: David R Johanson, LEAD ATTORNEY, PRO HAC VICE, Jackson Lewis PC - LA/CA, Los Angeles, CA; Nelson D Alexander, LEAD ATTORNEY, Frost Brown Todd LLC - Ind/IN, Indianapolis, IN.

Page 908

OPINION AND ORDER

PHILIP P. SIMON, CHIEF UNITED STATES DISTRICT JUDGE.

The U.S. Department of Labor brings this action against PBI Bank, alleging that the Bank violated the Employee Retirement Income Security Act by its actions as the Trustee of the Employee Stock Ownership Plan of The Miller's Health Systems, Inc. The Plan is also named as a defendant in the complaint, but in essence is the victim of the Bank's alleged wrongdoing and the intended beneficiary of this lawsuit. The complaint alleges that on behalf of the Plan, the Bank overpaid for company stock at a price of $40 million based on an inflated valuation far above the stock's fair market value, and approved financing for the purchase at an excessive interest rate. These and other actions by the Bank as the Plan's Trustee are alleged to have violated the Bank's duties of loyalty and prudence, and its duty not to cause the Plan to engage in transactions prohibited by ERISA.

The Bank has in turn filed a third-party complaint for indemnification and contribution against the company and six individuals " each of whom was either a seller of stock to the ESOP or a recipient of other compensation or consideration in the transactions complained of in the Department of Labor's complaint, while at the same time serving as members of the Board of Directors of Miller's Health." [DE 14 at ¶ 10.] Now before me are motions to dismiss both complaints.

Timeliness of the Complaint

The Bank moves to dismiss the Department of Labor's complaint on the ground that it wasn't filed within ERISA's six year

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statute of repose, found in 29 U.S.C. § 1113 (§ 413 of ERISA). The statute provides that no action can be commenced with respect to an ERISA fiduciary's breach of any duty more than six years after the last action constituting a part of the breach (subsection (1)), or more three years after " the earliest date on which the plaintiff had actual knowledge of the breach or violation" (subsection (2)), whichever is earlier.

At the outset, I note that the Bank characterizes its motion as one under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction. Whether this is the correct designation is at the fulcrum of my decision. Subject matter jurisdiction speaks to the power of the court to act. The Supreme Court has noted that " time prescriptions, however emphatic, are not properly typed jurisdictional." Arbaugh v. Y& H Corp., 546 U.S. 500, 510, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) (internal quotations omitted). Arbaugh acknowledges that even the Supreme Court itself has sometimes used the term " jurisdiction" in a sloppy and careless way. Justice Ginsburg describes the Court as " profligate in its use of the term." Id . See also Scarborough v. Principi, 541 U.S. 401, 413-14, 124 S.Ct. 1856, 158 L.Ed.2d 674 (2004) (discussing confusion caused by calling time limits " jurisdictional" ).

The Seventh Circuit has clearly held that " limitations statutes setting deadlines for bringing suit in federal court are not jurisdictional." Miller v. FDIC., 738 F.3d 836, 843 (7th Cir. 2013); Lawyers Title Ins. Corp. v. Dearborn Title Corp., 118 F.3d 1157, 1166 (7th Cir. 1997). So when a case is dismissed based on a statute of limitations, that is a dismissal on the merits under Rule 12(b)(6). Small v. Chao, 398 F.3d 894, 898 (7th Cir. 2012). But what about dismissals based on a statute of repose? Are they any different than statutes of limitations? From a jurisdictional point of view, the answer is no. Doss v. Clearwater Title Co., 551 F.3d 634, 638 (7th Cir. 2008), holds that a dismissal of a case based on a statute of repose is a not dismissal for want of jurisdiction; instead, it is a dismissal on the merits. Although Doss was a case under the Truth in Lending Act, it is a difficult to see why the analysis under the ERISA repose provision would be any different especially given the similarity between the limitations language in the ERISA and TILA statutes.[1] In holding that TILA's statute of repose does not divest the court of subject matter jurisdiction the Seventh Circuit, quoting Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946), reminded us of some rather basic principles:

[It] is well settled that the failure to state a proper cause of action calls for a judgment on the merits and not for a dismissal for want of jurisdiction. Whether the complaint states a cause of action which relief could be granted is a question of law and just as issues of fact it must be decided ...

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