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First Circuit rejects “continuing violation” or “installment contract” accrual theories for ERISA benefits claims

October 14, 2014

By The Global Compensation, Benefits & ERISA Practice Group

On October 6, 2014, the U.S. Supreme Court declined review of Riley v. Metro. Life Ins. Co., 744 F.3d 241 (1st Cir. 2014) (Cert. Denied 10/6/14).  In Riley, the First Circuit considered an ERISA plan participant’s claim that, although he filed his lawsuit seven years after receiving his first benefit payment and his claim was subject to a six-year statute of limitations, his action was still timely because each subsequent benefit payment constituted an accrual event that re-started the running of the statute of limitations. In denying the claim, the First Circuit rejected the participant’s “continuing violation” or “installment contract” accrual theories for ERISA benefits claims.
Statute of limitations analysis in ERISA cases often is complicated.  Depending on the jurisdiction, the period can commence only on a formal claim denial or on a clear repudiation of further entitlement to benefits.   In Riley, Plaintiff claimed entitlement to unpaid disability benefits under ERISA §502(a).  Plaintiff began receiving benefits under the Metlife LTD plan (the “Plan”) in April, 2005 and immediately thereafter contested the calculation of his benefit determination with MetLife.  However, due to a series of legal missteps, Plaintiff did not file a lawsuit claiming benefits under the plan until March, 2012.  The First Circuit, in affirming the district court, held that the initial payment of benefits under the Plan in April, 2005 constituted a “clear repudiation” of Plaintiff’s assertion that he was entitled to greater benefits.  This repudiation was tantamount to a claim denial, according to the court, and put Plaintiff on notice of the alleged underpayment and thus Plaintiff’s unpaid benefits claim accrued at that time.  The Court accordingly affirmed MetLife’s motion for summary judgment on statute of limitations grounds.

The logic of the Riley decision is consistent with past Federal and California employment cases regarding the “continuing violation” accrual doctrine.  In National R.R. Passenger Corp. v. Morgan, 536 U.S. 101, 122 S. Ct. 2061 (2002), the Supreme Court adopted a strict test with respect to the accrual of discrimination and retaliation claims, reasoning that such claims usually involve discrete, identifiable events which put the employee on notice of his claims.  Correspondingly, the Morgan Court adopted a different, more relaxed “continuing violation” accrual theory with respect to hostile work environment harassment claims, which the Court reasoned are generally “based on the cumulative effect of individual acts” rather than discrete events.  Likewise, in Richards v. CH2M Hill, Inc., 26 Cal.4th 798 (2001), the California Supreme Court held that an employer’s series of unlawful actions, in the accommodation or disability discrimination context, should be viewed as a single course of conduct if, among other factors, “they have not acquired a degree of ‘permanence’ so that employees are on notice that further efforts at informal conciliation with the employer to obtain accommodation or end harassment would be futile.”

Unhappy with the Morgan reasoning as applied in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618, 127 S. Ct. 2162 (2006), Congress adopted the Lilly Ledbetter Act of 2009, which legislated a continuing violations doctrine in the field of equal-pay discrimination lawsuits (i.e., the 180-day statute of limitations for filing an equal-pay lawsuit regarding pay discrimination resets with each new paycheck affected by the discriminatory action.)  

The First Circuit in Riley joins the Second, Third and Ninth Circuits in rejecting the theory that each monthly benefit payment received by a participant under an ERISA plan is an accrual event giving rise to a new statute of limitations for benefits claims.  To date, no Circuit court has adopted a continuing violation or installment contract theory with respect to the accrual of a claim for unpaid benefits under ERISA.

 Plan sponsors can breathe a collective sigh of relief that the Supreme Court apparently sees no reason to deviate from its Morgan analysis in the absence of specific legislative directives to the contrary.

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