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UNITED STATES v. MASON TENDERS DIST. COUNCIL OF GR

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK


August 18, 1995

UNITED STATES OF AMERICA and ROBERT B. REICH, Secretary of the United States Department of Labor, Plaintiffs, against MASON TENDERS DISTRICT COUNCIL OF GREATER NEW YORK, et al., Defendants.

The opinion of the court was delivered by: SWEET

Sweet, J.

 Defendants Joseph Fater ("Fater") and James Lupo ("Lupo") have moved for an order permitting reconsideration of the Court's decision and order, dated May 15, 1995, (the "Opinion"), which (1) granted the motion of plaintiffs United States of America and Robert B. Reich, Secretary of the United States Department of Labor (collectively, the "Government"), for partial summary judgment on its claims for ERISA violations in connection with the Pension and Welfare Funds' purchases of certain real property located in New York, New York and Miami Beach, Florida and (2) denied Fater's cross-motion for partial summary judgment on the same claims.

 For the following reasons, Defendants' motion will be denied.

 Background

 The parties, prior proceedings and facts underlying this action are set forth in the Opinion, familiarity with which is assumed. See United States and Robert B. Reich v. Mason Tenders Dist. Council of Greater N.Y., et al., 94 Civ. 6487 (RWS), 1995 U.S. Dist. LEXIS 6470 (S.D.N.Y. May 15, 1995). On June 7, the Government submitted a proposed Partial Final Judgment Against Defendants Joseph Fater and James Lupo (the "Final Judgment"). Subsequently, at the request of the Defendants, the Government agreed not to seek entry of the Final Judgment until the Court had an opportunity to consider the Defendants' instant motion for reargument.

 Discussion

 Local Rule 3(j) provides in pertinent part:

 

There shall be served with the notice of motion a memorandum setting forth concisely the matters or controlling decisions which counsel believes the court has overlooked.

 Thus, to be entitled to reargument under Local Rule 3(j), the plaintiff must demonstrate that the Court overlooked controlling decisions or factual matters that were put before the Court on the underlying motion. See Ameritrust Co. Nat'l Ass'n v. Dew, 151 F.R.D. 237 (S.D.N.Y. 1993); Fulani v. Brady, 149 F.R.D. 501, 503 (S.D.N.Y. 1993); East Coast Novelty Co. v. City of New York, 141 F.R.D. 245, 245 (S.D.N.Y. 1992); B.N.E. Swedbank, S.A. v. Banker, 791 F. Supp. 1002, 1008 (S.D.N.Y.1992); Novak v. National Broadcasting Co., 760 F. Supp. 47, 48 (S.D.N.Y. 1991); Ashley Meadows Farm Inc. v. American Horse Shows Ass'n, 624 F. Supp. 856, 857 (S.D.N.Y. 1985).

 Local Rule 3(j) is to be narrowly construed and strictly applied so as to avoid repetitive arguments on issues that have been considered fully by the court. See Caleb & Co. v. E.I. Du Pont De Nemours & Co., 624 F. Supp. 747, 748 (S.D.N.Y. 1985). In deciding a Local Rule 3(j) motion, the court must not allow a party to use the motion to reargue as a substitute for appealing from a final judgment. See Morser, 715 F. Supp. at 517; Korwek v. Hunt, 649 F. Supp. 1547, 1548 (S.D.N.Y. 1986). Therefore, a party in its motion for reargument "may not advance new facts, issues or arguments not previously presented to the court." Litton Indus., Inc. v. Lehman Bros. Kuhn Loeb, Inc., No. 86 Civ. 6447, 1989 WL 162315, at * 3 (S.D.N.Y. 1989).

 Defendants have not directed this Court's attention to a controlling case which the Court overlooked in rendering the Opinion. Instead, Defendants contend that the Court overlooked that part of Fater's Declaration in which he states that he did not authorize his attorney, Gerard Cunningham, to act on his behalf at the trustees' meetings at which the purchases of the 18th Street and Florida properties were approved. Defendants argue that the Court would not have found that Fater, through his attorney, had approved the two real estate purchases if the Court had considered the denial contained in Fater's Declaration.

 Defendants' liability does not depend on a definitive finding that they affirmatively acted to approve the real estate purchases but, rather, is based on the conclusion that, through various of their actions and omissions, they failed to discharge their fiduciary obligations under ERISA "with the care, skill, prudence, and diligence . . . that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character." 29 U.S.C. § 1104(a)(1)(B); see also Fink v. National Sav. and Trust Co., 249 U.S. App. D.C. 33, 772 F.2d 951, 955 (D.C.C. 1985); Marshall v. Snyder, 1 Empl. Ben. Cases (BNA) 1878, 1886 (E.D.N.Y. 1979).

 In determining whether a defendant has discharged his fiduciary obligations, a court's task is "to inquire whether the individual trustees, at the time they engaged in the challenged transactions, employed appropriate methods to investigate the merits of the investment and to structure the investment." Katsaros v. Cody, 744 F.2d 270 (2d Cir. 1984) quoting Donovan v. Mazzola, 716 F.2d 1226, 1232 (9th Cir. 1983). In light of ERISA's command that trust fund fiduciaries act solely in the interest of a fund's participants, the Court is unable to say which constitutes the greater breach of fiduciary obligations -- actively approving the purchase of a property for over $ 8 million more than its appraised value, or remaining ignorant of a $ 24 million purchase until after it has occurred. In either case, the fiduciary has failed to act as a "prudent fiduciary with experience dealing with a similar enterprise." Marshall v. Snyder, 1 Empl. Ben. Cases (BNA) 1878, 1886 (E.D.N.Y. 1979); see also Whitfield v. Cohen, 682 F. Supp. 188, 195 (S.D.N.Y. 1988) ("The failure to make any independent investigation and evaluation of a potential plan investment is a breach of fiduciary obligations.").

 Defendants contend that "the actions and inquiries that the Court says should have been undertaken prior to the approval of the purchases presuppose that Mr. Fater knew in advance of the contemplated purchases." The Opinion does not so state.

 In addition, Defendants argue for the first time that Plaintiffs' claims for ERISA violations are barred by ERISA's statute of limitations. *fn1" The statute of limitations is an affirmative defense under Federal Rule of Civil Procedure 8(c) *fn2" and, therefore, must be asserted in a party's responsive pleading "at the earliest possible moment," or else it is deemed to be waived. Davis v. Bryan, 810 F.2d 42, 44 (2d Cir. 1987).

 Nevertheless, Defendants argue that they had no reason to assert the statute of limitations defense in their responsive pleading because Plaintiffs' complaint alleged fraud or concealment, thus triggering ERISA's six-year statute of limitations. Defendants now contend that Plaintiffs had actual knowledge of the alleged ERISA violations, thus triggering instead the three-year statute of limitations contained in 29 U.S.C. § 1113(a)(2). Defendants also contend that Plaintiffs, in their motion for partial summary judgment, did not make a showing of fraud or concealment sufficient to trigger the six-year statute of limitations.

 In any event, in order to trigger the three-year limitations period, Defendants must also show that Plaintiffs had "actual knowledge" of ERISA violations. 29 U.S.C. § 1113(2). The only evidence Defendants present in support of such a showing is a July 1991 newspaper article in Newsday which quotes a Labor Department "organized crime investigator" as saying of the New York and Florida real estate transactions: "It certainly looks interesting." The most that can be inferred from the Newsday article is that the United States Department of Labor was alert to the need to conduct an investigation into the transactions. The article does not support an inference that Plaintiffs had actual knowledge of ERISA violations more than three years prior to filing suit.

 Moreover, ERISA's three-year limitations period is not triggered by a showing that a plaintiff had merely constructive knowledge of ERISA violations three years prior to filing suit. See Gluck v. Unisys Corp., 960 F.2d 1168, 1177 (3d Cir. 1992) (holding that 29 U.S.C. § 1113 requires that a plaintiff have actual knowledge of all material facts necessary to understand that some claim exists); see also Brock v. Nellis, 809 F.2d 753, 755 (11th Cir. 1987) ("to charge the Secretary [of Labor] with actual knowledge of an ERISA violation, it is not enough that he had notice that something was awry; he must have had specific knowledge of the actual breach of duty upon which he sues"); Ziegler v. Connecticut General Life Ins. Co., 916 F.2d 548 (9th Cir. 1990). As the Court noted in Gluck, "Congress knew how to require constructive knowledge; it required it in [ERISA] sections 1303 and 1370." 960 F.2d at 1176. Thus, Congress' failure to call for constructive knowledge in section 1113 was not accidental.

 Defendants argue that whether Plaintiffs had "actual knowledge" of ERISA violations more than three years prior to filing this action is a factual question to be determined by the trier of fact. On a motion for reargument, the movant is burdened to demonstrate that the Court overlooked controlling decisions or factual matters that were put before the Court on the underlying motion. Fulani v. Brady, 149 F.R.D. 501, 503 (S.D.N.Y. 1993). Defendants had ample opportunity to raise a statute of limitations defense in their response to Plaintiffs' summary judgment motion. Federal Rule of Civil Procedure 8(c) dictates that their failure to do so constitutes a waiver of the defense.

 Conclusion

 For the reasons stated above, Defendants' motion for an order permitting reconsideration of the Opinion is hereby denied. Because the Opinion did not make a factual finding on the issue of damages, and because the record presently before the Court is insufficient to support such a factual finding, entry of the Final Judgment at this time would be inappropriate. The parties are hereby ordered to submit, within 30 days, evidence bearing on the question whether the Final Judgment accurately assesses the damages against each Defendant.

 It is so ordered.

 New York, N. Y.

 August 18, 1995

 ROBERT W. SWEET

 U.S.D.J.


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