Retiree Meets Three-year ERISA Fiduciary Breach Limitation

October 9, 2006 ( - The US District Court for the District of Connecticut ruled that fiduciary breach limitations set by the Employee Retirement Income Security Act (ERISA) began when a former Northeast Utilities employee read in a newspaper - 13 years after her retirement - that her employer had withheld information about a more favorable retirement package.

The case hinged on the question of when Jean Stavola, an employee of Northeast Utilities’ (NU) operating company the Connecticut Light and Power Company (CL&P), actually knew about the breach of fiduciary duty. CL&P said her claim is barred by the fact that Stavola had actual knowledge of the alleged breach more than three years before she initiated the action in June 2005, when she read a 1996 newspaper article entitled “Suit says NU hid retirement incentives,” which discussed a lawsuit brought by NU retirees for benefits under an early retirement plan introduced by the company in 1991. The article said the company purposefully withheld information about early retirement incentives from employees nearing retirement age. 

The court ruled the 1996 article gave Stavola “reason to suspect that something was awry,” however, the advice of outside counsel who told her she had no claim and the trust she built with the company over four decades of employment delayed her claim until 2005, after she read a decision on one of the claims.

In its opinion, the court ruled that CL&P’s evidence “is insufficient to establish the statute of limitations defense because defendants cannot prove that plaintiff had ‘actual knowledge of the breach or violation,’ more than three years prior to the suit, and that her inquiry to Turner in October 1990 was “sufficient to trigger a fiduciary duty under ERISA.”

Stavola retired in February 1991. Eight months later, the company announced an early retirement plan, which Stavola could have participated in had she postponed her retirement date. Stavola, who retired at 60, claimed that the company breached its ERISA duties by not informing her of that it was seriously thinking of implementing an early retirement plan when she sought details from human resources manager Gerard Turner about her retirement benefits.

In the fall of 1990, Stavola asked Turner for retirement figures for February 1, 1991 and for February 1, 1993 in order to decide on which year it would be most beneficial for her to retire. Turner said that her retirement benefits would not see much of a change if she waited until 1993 to retire.

However, CL&P implemented an early retirement plan in October 1991, a move that Stavola heard about. She then read in a Londonnewspaper in September 1996 about the lawsuit filed against the company regarding the early retirement incentives. Having been advised that she had no claim, Stavola said she did not have actual knowledge of a fiduciary breach until she read an April 2004 report saying the company had been found guilty of a breach. Stavola contended she would have delayed her retirement if she had known the plan was coming.

The company held that the decision to offer the early retirement plan was not made until much later in the year that Stavola decided to retire. According to the court’s opinion, CL&P argued, “As is our established practice, we provided the extra benefits to any employee in an eligible position who happened to retire immediately after the decision to offer a program was made.” The court rejected its argument, ruling that Stavola could move on with her claim.

The case is Stavola v. Northeast Utilities, D. Conn., October 3, 2006.