Martin v. Consultants & Administrators, Inc.

POSNER, Circuit Judge,

concurring.

My reservations concern Judge Cudahy’s analysis of the suit by the Department of Labor for breach of fiduciary obligation under the federal pension law (Employee Retirement Income Security Act — ERISA), and specifically his discussion of laches and fraudulent concealment. I join the rest of his opinion.

1. He appears to be of two minds on whether the doctrine of laches, which bars a plaintiff from • maintaining a suit if he unreasonably delayed in filing it and as a result harmed the defendant, should apply to an ERISA case in which the plaintiff is the government. I think it should apply and I would like us to say it should apply, though I recognize that the case can be decided without resolving, the issue.

Many decisions hold, on the basis of a hint in Occidental Life Ins. Co. v. EEOC, 432 U.S. 355, 373 , 97 S.Ct. 2447, 2458 , 53 L.Ed.2d 402 (1977), that laches is applicable to suits by the Equal Employment Opportunity Commission. They are the same kind of suit as this; they are suits on behalf of private individuals in which any damages collected in the suit are paid over to the individuals rather than retained by the agency. EEOC v. Massey-Ferguson, Inc., 622 F.2d 271, 275 (7th Cir.1980); EEOC v. Dresser Industries, Inc., 668 F.2d 1199 (11th Cir.1982); EEOC v. K-Mart Corp., 694 F.2d 1055 , 1060-61 (6th Cir.1982); EEOC v. Bethlehem Steel Corp., 765 F.2d 427 (4th Cir.1985); see also EEOC v. Vucitech, 842 F.2d 936 , 942-43 (7th Cir.1988); Houghton v. McDonnell Douglas Corp., 716 F.2d 526, 528 (8th Cir.1983); Annot., “Laches or Other Assertion of Untimeliness as Defense to Action Under Title VII ... Brought by Equal Employment Opportunity Commission,” 67 A.L.R.Fed. 381 (1984); Mary Lynn Kelly, “Preventing Trial by Ambush: The Laches Defense in Title VII Suits,” 8 Rev. Litigation 227, 239-40 and n. 90 (1989).

Judge Cudahy points out that there is no statute of limitations on suits by the EEOC, as there is on suits by the Department of Labor to enforce claims under ERISA, and he suggests that courts are and perhaps should be reluctant to invoke laches when a plaintiff is suing within the period specified by the legislature. The point could be used to support the opposite conclusion: a legislature that places no deadline on suits is presumably not worried about the consequences for defendants of having to defend against suits brought long after the alleged wrongdoing. However that may be, there is plenty of authority for applying laches in cases governed by a statute of limitations. Illustrative federal cases are Maksym v. Loesch, 937 F.2d 1237, 1248 (7th Cir.1991); K-Mart Corp. v. Oriental Plaza, Inc., 875 F.2d 907, 911 (1st Cir.1989), and Azalea Fleet, Inc. v. Dreyfus Supply & Machinery Corp., 782 F.2d 1455, 1459 (8th Cir.1986). Although Tandy Cory. v. Malone & Hyde, Inc., 769 F.2d 362, 365 (6th Cir.1985), says that the presumption is against invoking laches in such a case, it adds that the presumption is rebuttable. A few cases, illustrated by United States v. Mack, 295 U.S. 480, 489 , 55 S.Ct. 813, 817 , 79 L.Ed. 1559 (1935), and United States v. RePass, 688 F.2d 154, 158 (2d Cir.1982), hold that laches can never be used to cut down a statute of limitations, but, as will appear, Mack can be distinguished.

Laches is a species of estoppel and can therefore be applied whenever the requirements for estoppel are satisfied, and thus whenever there is delay (1) unwarranted in the circumstances that (2) causes harm to *1101 the defendant. Maksym v. Loesch, supra, 937 F.2d at 1248 . This observation may seem to clinch the case against applying laches here, since ordinarily the federal government cannot be estopped to enforce its rights. It is no surprise, therefore, to read that “laches is not a defense against the sovereign,” Costello v. United States, 365 U.S. 265, 281 , 81 S.Ct. 534, 543 , 5 L.Ed.2d 551 (1961), a declaration that led the Third Circuit in EEOC v. Great Atlantic & Pacific Tea Co., 735 F.2d 69, 80-81 (3d Cir.1984), to question whether laches was a defense to a suit by the EEOC. Judge Cudahy acknowledges, however, that laches will lie against the EEOC, while questioning whether it will lie against the Department of Labor, although the EEOC is no less a part of the federal government than the DOL is.

The familiar language of sovereignty, separation of powers, and important public interests that is used to rebuff claims to estop the government is misplaced in a case in which the government is suing not on its own behalf — as it was doing in Mack , a suit for forfeiture, or in Costello , a denatu-ralization proceeding — but instead as the representative of private interests. In an ERISA suit, just as in a suit by the EEOC, the invoking of laches to bar the government’s suit would not take money out of the U.S. Treasury or interfere with the government’s operations. It would not even deprive the government of a financial expectancy. Any money it won in this case would be paid into the pension plans against which the defendants committed a breach of trust. If any public agency has a stake in this case it is the Pension Benefit Guaranty Corporation, which has not filed an amicus brief or otherwise participated.

As the Great Atlantic & Pacific Tea Co. case illustrates, there is a tension in the lower-court cases, and the Supreme Court has not spoken with a single voice either. Compare United States v. Beebe, 127 U.S. 338 , 8 S.Ct. 1083 , 32 L.Ed. 121 (1888), and Occidental Life Ins. Co. v. EEOC, supra, with NLRB v. International Association of Ironworkers, 466 U.S. 720, 724-25 , 104 S.Ct. 2081, 2083-84 , 80 L.Ed.2d 715 (1984), and McAllister v. Magnolia Petroleum Co., 357 U.S. 221 , 226 n. 7, 78 S.Ct. 1201 , 1204 n. 7, 2 L.Ed.2d 1272 (1958). But it seems to me that either we accept the principle of the cases that allow laches to be asserted against the EEOC and apply it to the Department of Labor, or we reject it in both contexts. They cannot be distinguished. As should be apparent, I would accept it. I agree, however, with the government’s alternative ground, that the elements of laches were not shown here.

2. The statute allows six years to bring suit from the date on which the violation is discovered, provided it is a “case of fraud or concealment.” 29 U.S.C. § 1113 . We have interpreted this to mean not that a fraud plaintiff has six years in which to sue but that any ERISA plaintiff can avail himself of the doctrine of fraudulent concealment. Radiology Center, S.C. v. Stifel, Nicolaus & Co., 919 F.2d 1216, 1220 (7th Cir.1990). I do not think it promotes clear thinking about fraudulent concealment to distinguish between “self-concealing wrongs” and “active concealment.”

As another panel of this court explained in Cada v. Baxter Healthcare Corp., 920 F.2d 446, 450-53 (7th Cir.1990), federal statutes of limitations begin to run from the date on which the plaintiff discovered that he was injured (not when he discovers that he has a claim against the injurer— that would be contrary to United States v. Kubrick, 444 U.S. 111, 122 , 100 S.Ct. 352, 359 , 62 L.Ed.2d 259 (1979)). There are two grounds on which the plaintiff can, after discovering that he has been injured, delay the running of the period of limitations. The first is equitable tolling: even if the plaintiff knows that he has been injured, if despite all due diligence he is not able to file his complaint within the statutory period he can take such additional time to file as he needs. Equitable tolling, in other words, allows the plaintiff additional time (if necessary) to discover his claim after he discovers his injury — the latter being the date that triggers the running of the statute of limitations. Discovery of the injury starts the running of the statute; equitable tolling allows the plaintiff to arrest the *1102 running of the statute to give him time to discover that he has a claim.

The second ground for arresting the statute of limitations, equitable estoppel, of which fraudulent concealment is one type, means that the defendant has done something to prevent the plaintiff from filing his claim — for example, has promised not to plead the statute of limitations if the plaintiff will delay suing while the parties attempt to work out a settlement. The something does not have to be done after the plaintiff discovers he has a claim, although in the example I just gave it was. Suppose the plaintiff invested money with the defendant, and suffers a huge loss, and when he goes to the defendant and complains the defendant fobs him off with some elaborate, and elaborately fraudulent tale, as a result of which the plaintiff loses months in discovering that the defendant’s wrongdoing was responsible for his financial disaster. If he had lost this time without fault on either his part or that of the defendant, the case would be governed by the doctrine of equitable tolling. The plaintiff would have to have exercised diligence and he would get no more time than he needed to bring his suit after learning the facts necessary to formulate his complaint. But since (in my example) the defendant concealed his wrong, the doctrine of equitable estoppel, not equitable tolling, is in play and the plaintiff does not have to demonstrate diligence (though as in other cases of estoppel he will have to show reasonable reliance) and he gets the full statutory period in which to sue.

Concretely, then, if the statute of limitations is five years, and the plaintiff discovers the facts he needs in order to file his complaint after four and a half years from when he learned that he had sustained an injury, if the defendant is guilty of fraudulent concealment .the plaintiff will have a full five- years from the date on which he discovered the facts he needed, while if the defendant was not guilty of fraudulent concealment or some other form of equitable estoppel (such as my first example, of a promise not to plead the statute of limitations) the plaintiff will have to file his suit as soon as he can. If fraudulent concealment had begun after the plaintiff discovered all the facts he needed in order to file his suit, the period of concealment would have to be added on to the statute of limitations. So if the statute of limitations began to run at the end of year 1 and fraudulent concealment began in year 3 and lasted until the same day in year 5, the plaintiff must (assuming a five-year statute of limitations), sue by the end of year 8 (1 + 5 + (5 - 3)).

Judge Cudahy is thus correct in footnote 17 that I “classify] fraudulent concealment as a species of estoppel (rather than equitable tolling) and would thereby dispense with the requirement of diligence on the part of the plaintiff.” But I do not think he is correct in suggesting that in the petty interest of “tidy classification” I, along with the panel in Cada , have departed from the “scheme” of previous cases, a scheme to which Judge Cudahy, employing the royal “we” (for it is unclear whether Judge Ripple joins this part of his opinion), declares his adherence. For at the end of this footnote and in the following one Judge Cudahy makes clear his own view that a plaintiff need not prove diligence in a ease of fraudulent concealment as I define it, which is equivalent to what he calls “active concealment that is separate from the underlying wrong.” So there is no substantive disagreement. The confusion arises from Judge Cudahy’s use of the term “fraudulent concealment” to embrace both what I mean by the term and what he calls “self-concealing fraud” and I would call simply “fraud.” A plea to extend the statute of limitations in a simple fraud case in which there has been no effort to conceal the fraud beyond what was implicit in committing fraud in the first place is an appeal to the doctrine of equitable tolling. The plaintiff must act with due diligence to discover that the defendant’s fraud was responsible for his injury, but if despite due diligence he can’t discover this in time to sue within the statutory period he can take such additional time as is necessary. If he didn’t even know he had been injured, the case would be covered by the discovery rule.

*1103 I don’t know why Judge Cudahy insists on using the term “fraudulent concealment” to cover two categories of conduct with different legal consequences. It is not under the compulsion of the cases cited in his note 17. The reference to diligence in Bailey v. Glover, 88 U.S. (21 Wall.) 342, 348 , 22 L.Ed. 636, 638 (1875), is to the plaintiffs discovering that he has a fraud claim (equitable tolling). Likewise Teamsters Local 282 Pension Trust Fund v. Angelos, 815 F.2d 452, 456 (7th Cir.1987). Suslick v. Rothschild Securities Corp., 741 F.2d 1000, 1004 (7th Cir.1984), confusingly uses the term “equitable tolling” to cover equitable estoppel as well, but makes clear that diligence is required of the plaintiff only if the defendant has not interfered with the plaintiff’s ability to bring a timely suit. Tomera v. Galt, 511 F.2d 504, 510 (7th Cir.1975), is the same. Sperry v. Barggren, 523 F.2d 708, 711 (7th Cir.1975), states clearly that only if there is no concealment is there a duty of diligence. Nothing in these cases is inconsistent with either Cada or this concurrence. ’

Except the terminology of some of the cases. Cada tried to make the terminology in this difficult area consistent. Clarification is not disagreement and should not create “tension.” It is the distinction between “self-concealing acts” and “active concealment” that is unhelpful. “Active concealment” is redundant; •concealment is not a passive state. “Self-concealing” sounds good, but what does it mean? The important distinction, in a ease in which the plaintiff’s claim is itself for fraud, is between the fraud that constitutes the claim and the fraud designed to conceal the knowledge of the original fraud from the victim or other potential enforcer. The distinction is straight-forward enough in this case. The original fraud was the paying of kickbacks to the welfare plan’s trustees by the provider of dental services to the beneficiaries of the plan. The acts of concealment were the acts by which the parties to the kickbacks sought through the use of dummy corporations and the like to make it difficult for anyone to discover that kickbacks were being paid. Of course people who commit frauds often try to conceal them, as distinct from merely hoping that no one will notice so long as they don’t advertise the fraud. But there is no reason why such persons should benefit from compounding their frauds, as they would if their efforts at concealment, to the extent successful, shortened the period of limitations. We should bear in mind the distinction between the discovery of the loss or other injury and the discovery of the facts necessary to formulate a complaint, the discovery in other words of the claim. The statute of limitations begins to run from the former date, not the latter, unless tolled. Fraudulent concealment is one ground for tolling, and in a fraud case it requires proof that the defendant did something (beyond merely praying) to prevent the world in general or the plaintiff in particular from discovering the fraud.

There is an added wrinkle in an ERISA case because the statute specifies a six-year period of limitations for a case of fraudulent concealment, rather than just tolling the period for so long as the concealment lasts. This seems to be the substitution of a mechanical rule for an elastic common law doctrine: however long or short the concealment lasts, concealment extends the statute of limitations from three years to six. Whether a plaintiff can use equitable tolling to extend the six years we fortunately need not decide in this case. (I can find no cases on the point.) Thus the statement in the Radiology Center opinion that section 1113 applies fraudulent concealment to ERISA cases requires careful qualification. Were it not for the statute, the doctrine would apply in the way that I have been describing. With the statute, it appears that the statute of limitations is automatically extended by three years— but just three years — regardless of the length of time that the defendant fraudulently conceals his wrong, although we can leave open the question whether if the fraudulent concealment persisted throughout the entire six-year period the plaintiff might be able to invoke the common law doctrine to extend the period further. Another question we can leave open for now is whether the statute permits a plaintiff to *1104 plead forms of equitable tolling that do not involve concealment, such as a promise not to plead the statute of limitations.

I regret the failure to use this case as a vehicle for clarifying issues that have been a recurrent source of uncertainty and confusion.