Relying on standards set forth in Harris Tr. & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238 (2000) and Donovan v. Schmoutey, 592 F.Supp. 1361 (D. Nev. 1984), respectively, Plaintiff argues that Nevada Links is liable for breach of trust under two distinct theories of liability: (1) as a knowing transferee of a property interest conveyed by the County in breach of trust and (2) as a knowing participant in the County's breach of trust. (ECF No. 130 at 24-26.)
Waiver, like latches, is not available against the federal government when it undertakes an action to enforce a public right or to protect the public interest. See Donovan v. Schmoutey, 592 F. Supp. 1361, 1403 (D. Nev. 1984). As the court discussed above, this case constitutes a government action to enforce a public right or to protect the public interest. Thus, the Utah entities and the Hanleys may not plead waiver as an affirmative defense.
Affirmative defenses that are insufficient as a matter of law should be stricken. Donovan v. Schmoutey, 592 F. Supp. 1361, 1402 (D. Nev. 1984). However, "[f]ederal courts generally disfavor motions to strike."
Affirmative defenses that are insufficient as a matter of law should be stricken. Donovan v. Schmoutey, 592 F.Supp. 1361, 1402 (D.Nev. 1984). However, "[f]ederal courts generally disfavor motions to strike."
The elements of a knowing participation in a fiduciary breach are the following: 1) an act or omission which furthers or completes the breach, and 2) actual or constructive knowledge at the time that the transaction amounted to a breach, or the legal equivalent of such knowledge. Donovan v. Schmoutey, 592 F. Supp. 1361, 1396 (D.Nev. 1984). There is no element of intent to be proved in connection with a claim of knowing participation in a fiduciary breach.
In contrast, ERISA contains a detailed statute of limitations for actions regarding certain fiduciary breaches and ERISA violations. The Secretary filed her lawsuit within the time permitted by ERISA. The rationale in EEOC suits for departing from the accepted rule is not present here. Given the Supreme Court's mandate that the judiciary not tamper with ERISA's enforcement scheme, Massachusetts Mut. Life Ins. v. Russell, 473 U.S. 134, 147, 105 S.Ct. 3085, 3092-93, 87 L.Ed.2d 96 (1985), and our circuit's recognition of the importance of ERISA's time lines, Brock v. Nellis, 809 F.2d 753, 754 (11th Cir. 1987), the district court erred in extending the laches exception in Title VII to ERISA actions. See Reich v. Valley Nat'l Bank of Arizona, 837 F. Supp. 1259, 1308-09 (S.D.N.Y. 1993); First Bank Sys., Inc. v. Martin, 782 F. Supp. 425, 426-27 (D.Minn. 1991); Donovan v. Schmoutey, 592 F. Supp. 1361, 1403 (D.Nev. 1984). Congress has specified the limitations period for a variety of circumstances, providing that an ERISA plaintiff must sue within six years from the last breach or violation, within three years from the date of actual knowledge of a breach or violation, or, in the case of fraud or concealment, within six years from the date of discovery of the breach or violation. 29 U.S.C. § 1113 (ERISA § 413).
"The knowledge of a director, officer, sole shareholder or controlling person of a corporation is imputable to that corporation." Donovan v. Schmoutey, 592 F. Supp. 1361, 1399 (D. Nev. 1984). See Makofsky v. Ultra Dynamics Corp., 383 F. Supp. 631, 640 (S.D.N.Y. 1974); Matter of Brown, 252 N.Y. 366, 375-78 (1930); Keen v. Keen, 113 A.D.2d 964, 966 (1985) (mem.), appeal denied, 67 N.Y.2d 646 (1986); Texaco, Inc. v. Weinberg, 13 A.D.2d 1002 (1961) (mem.); Richmond Hill Realty Co. v. East Richmond Hill Land Co., 246 A.D. 301, 305 (1936).
As such, the Investment Agreement cannot be characterized as an "intelligible economic transaction in itself." See, e.g., Kellyv. Kosuga, 358 U.S. 516, 79 S.Ct. 429, 3 L.Ed.2d 475 (1959); Cement Masons' Pension Fund v. Dukane Precast, 822 F. Supp. 1316, 1321 (N.D.Ill. 1993); Donovan v. Schmoutey, 592 F. Supp. 1361, 1400 (D.Nev. 1984). The receipt of funds necessarily entered into Thompson's calculus concerning Stuart Park's viability as an investment; therefore, we are not confronted with a truly independent economic decision.
We think constructive knowledge suffices. See Brock, 840 F.2d at 342 (defendant liable where he "knew or clearly should have known" that trustees' conduct amounted to prohibited self-dealing); Donovan v. Schmoutey, 592 F.Supp. 1361, 1396 (D.Nev. 1984) (defendant need only have constructive knowledge that fiduciary's conduct is in breach of duty); Restatement Trusts § 326, comment b (one may be chargeable with notice either as to fiduciary's status as trustee or that trustee is committing a breach of trust). A defendant who is on notice that conduct violates a fiduciary duty is chargeable with constructive knowledge of the breach if a reasonably diligent investigation would have revealed the breach.
Of greater significance, however, is Judge Kozinski's rejection of Frommer's liability under section 409(a) of ERISA. 29 U.S.C. § 1109(a). Every other case that has examined the issue has concluded that liability of non-fiduciaries as well as fiduciaries is reached by section 409. Brock v. Hendershott, 840 F.2d 339, 342 (6th Cir. 1988); Lowen v. Tower Asset Management, Inc., 829 F.2d 1209, 1220-21 (2d Cir. 1987); Fink v. National Sav. Trust Co., 772 F.2d 951, 958 (D.C.Cir. 1985); Thornton v. Evans, 692 F.2d 1064, 1078 (7th Cir. 1982); Brock v. Gerace, 635 F. Supp. 563, 568 (D.N.J. 1986); Donovan v. Schmoutey, 592 F. Supp. 1361, 1398-99 (D.Nev. 1984); Donovan v. Bryans, 566 F. Supp. 1258, 1267 (E.D.Pa. 1983); Donovan v. Daugherty, 550 F. Supp. 390, 410-11 (S.D.Ala. 1982); Freund v. Marshall Ilsley Bank, 485 F. Supp. 629, 642 (W.D.Wis. 1979). These cases hold that if a non-fiduciary knowingly participates with a fiduciary in a breach of fiduciary trust then the non-fiduciary is likewise liable.