Frank C. Wright, M.d., John P. Goff, M.d. v. Michael A. Heyne, and VESTAX SECURITIES CORPORATION

1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2003 FED App. 0405P (6th Cir.)
File Name: 03a0405p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
FRANK C. WRIGHT, M.D.,
JOHN P. GOFF, M.D., and
CARL A. KRANTZ, M.D., as
Trustees of the Wright, Goff,
Krantz, Harmon, Jones,
M.D.’s Profit Sharing Plan,
Plaintiffs-Appellants,
v.
MICHAEL A. HEYNE, and
VESTAX SECURITIES
CORPORATION,
Defendants-Appellees.
X
-
-
-
->
,
-
-
-
-
-
-
-
-
-
-
-
N
No. 01-4359
Appeal from the United States District Court
for the Southern District of Ohio at Columbus.
No. 98-01102—Norah McCann King, Magistrate Judge.
Argued: May 2, 2003
Decided and Filed: November 14, 2003
2 Wright, et al. v. Heyne, et al. No. 01-4359
*The Honorable Gerald E. Rosen, United States District Judge for the
Eastern District of Michigan, sitting by designation.
Before: NELSON and COLE, Circuit Judges; ROSEN,
District Judge.*
_________________
COUNSEL
ARGUED: Alphonse P. Cincione, BUTLER, CINCIONE,
DiCUCCIO & BARNHART, Columbus, Ohio, for
Appellants. Nancy J. Manougian, ARTER & HADDEN,
Columbus, Ohio, for Appellees. ON BRIEF: Alphonse P.
Cincione, N. Gerald DiCuccio, BUTLER, CINCIONE,
DiCUCCIO & BARNHART, Columbus, Ohio, Roger
Makley, COOLIDGE, WALL, WOMSLEY & LOMBARD,
Dayton, Ohio, for Appellants. Nancy J. Manougian, Danny
L. Cvetanovich, ARTER & HADDEN, Columbus, Ohio, for
Appellees.
_________________
OPINION
_________________
ROSEN, District Judge.
I. INTRODUCTION
Plaintiff-Appellants Frank C. Wright, John P. Goff and Carl
Krantz brought this action as Trustees of the Wright, Goff,
Krantz, Harmon and Jones Profit Sharing Plan (the
“Retirement Plan”) under the Employee Retirement Income
Security Act of 1974, 29 U.S.C. § 1132(a) (“ERISA”), against
Vestax Securities Corporation (“Vestax”) and its owner,
Michael A. Heyne, investment advisors to Plaintiffs’
Retirement Plan, alleging that Vestax and Heyne breached
certain fiduciary duties in making investment decisions and

-- 1 of 10 --

No. 01-4359 Wright, et al. v. Heyne, et al. 3
1The name of the corporation has changed from time to time to
reflect the names of the physicians affiliated with the practice.
engaged in conduct prohibited under ERISA with regard to
the receipt of commissions. The District Court for the
Southern District of Ohio granted Defendants’ Motion for
Summary Judgment on the ground that ERISA’s three-year
statute of limitations barred Plaintiffs’ claims. Plaintiffs
timely appealed the District Court’s decision.
For the reasons set forth below, we affirm the District
Court’s grant of Defendants’ Motion for Summary Judgment.
II. FACTUAL BACKGROUND
Plaintiffs Frank C. Wright, John L. Goff and Carl A. Krantz
are trustees of the Wright, Goff, Krantz, Harmon Jones,
M.D.’s Profit Sharing Plan (“the Retirement Plan”). They are
physicians who practiced together as a professional
corporation known as “Wright, Goff, Krantz, M.D.’s, Inc.”
from the late 1970s until 1995 when Goff retired.1
Shortly after the corporation was formed, it created a
Retirement Plan. Wright and Krantz have been trustees of the
Plan since its inception, and Goff was a trustee of the Plan
from the time the Plan was created until his retirement from
the practice of medicine in 1995.
The Plan included a commonly-managed general account,
as well as individual self-directed accounts for those
participants who wanted them. Plaintiffs were all participants
in the Plan, and each had a self-directed account under the
Plan. While Wright, Goff, and Krantz, as trustees, were
responsible for directing transactions in the Plan’s general
account, Goff played the most active role in directing those
transactions. With respect to the self-directed accounts, each
individual was responsible for the direction of his own self-
directed account.
4 Wright, et al. v. Heyne, et al. No. 01-4359
Prior to late 1987, Plaintiffs utilized the services of
Professional Investment Management to help them invest the
assets of the Plan’s general account. Wright, Goff and Krantz
also each used the services of Professional Investment
Management to help them with investments in their respective
self-directed accounts.
Plaintiffs terminated the services of Professional
Investment Management in late 1987, and shortly thereafter,
hired Defendant Michael Heyne to provide investment advice
and services to the Plan with respect to the general account.
Each individual also retained Heyne to provide investment
advice and services for his self-directed account.
Plaintiffs were also aware that Heyne was affiliated with,
and had an ownership interest in, Vestax. In December 1987,
the Plan and each of the individual Plaintiffs also entered into
a “VesTrak Investment Analysis Service Agreement” with
Vestax, under which Vestax was to provide quarterly
Investment Analysis Reports to the Plan with respect to the
general account, as well as to Plaintiffs with respect to each
of their respective self-directed accounts. These reports
included a list of each investment made, the date and cost of
each investment, the proceeds received from the sale of each
investment, the current market value of each investment and
the earnings of each investment. The VesTrak Agreements
disclosed that Vestax would earn fees for the services it
would provide and the amount of the fees that would be
earned. The Agreements further disclosed that Vestax could
earn commissions on the purchase or sale of certain securities:
Client understands that if he as a purchaser of the
VesTrak Investment Analysis Service uses the services
of Vestax in connection with the sale or purchase of a
security that is the object of the VesTrak Investment
Analysis Service, then Vestax may act as principal for its
own account or as agent for another person in
undertaking such sale or purchase and may be paid a

-- 2 of 10 --

No. 01-4359 Wright, et al. v. Heyne, et al. 5
commission on such sale or purchase. Client hereby
consents to the payment of such commission to Vestax.
(See JA 1502, 1551)
Also in December 1987, the Plan and Wright, Goff, and
Krantz, individually with respect to their self-directed
accounts, entered into a Soliciting Agent Agreement with
Heyne. The Soliciting Agent Agreements disclosed that
Heyne solicited clients to enter into VesTrak Agreements
with Vestax, that Heyne was an officer and stockholder of
Vestax, that Heyne could receive a portion of the fees that a
client would pay to Vestax, that Vestax would receive
“commissions or other compensation” if “financial service
products or investments are purchased through Vestax” and
that Heyne would receive “a portion of such commissions if
such sales are arranged through [Heyne] and [he] is a
registered representative of Vestax.” (See JA 1522).
Pursuant to the VesTrak Agreements, quarterly Investment
Analysis Reports were provided to the Plan and to Wright,
Goff and Krantz, individually, for their respective self-
directed accounts. Heyne also usually met with Plaintiffs on
a quarterly basis to discuss the reports as well as to answer
any questions Plaintiffs had about the investments and other
information reflected in the reports.
In 1991 or 1992, approximately three or four years after the
Plan’s relationship with Heyne and Vestax began, Goff began
to feel some “dissatisfaction” with Heyne. The dissatisfaction
stemmed from Goff’s learning that Heyne was an officer of
AFA Financial, Inc., an entity with which the Plan and
Wright, Goff and Krantz on behalf of their own respective
self-directed accounts had placed money for management.
Goff considered Heyne’s affiliation with AFA Financial to be
a conflict of interest and he instructed Heyne to take his
money out of AFA, which Heyne did. Goff was also
concerned that the general account and his own self-directed
account were not meeting his financial objectives and that the
6 Wright, et al. v. Heyne, et al. No. 01-4359
fees and commissions that Heyne was earning was “driving
the choice of investment as opposed to the appropriateness of
the investment.” (JA 86, 97-104).
During 1992 and 1993, Krantz likewise began to become
dissatisfied with Heyne’s services. Like Goff, Krantz was
concerned with Heyne’s affiliation with AFA Financial,
Heyne’s failure to follow investment objectives, and the fees
and commissions paid to Heyne.
Sometime in 1993, Goff asked Philip Shaffer of the
Consulting Group at Smith Barney Shearson to review the
performance of the general account and his own self-directed
account. Shaffer informed Goff that the investments in his
portfolio were “driven by fees and commissions” and were
“not proper.” (JA 105). Shaffer also informed Goff that
Heyne had deviated from the investment plans for the
Plaintiffs’ self-directed accounts. (JA 125).
Later in 1993 or early 1994, Goff also asked Denny Dicky
of Berwanger Overmeyer to review the Plan’s investments
and performance. Dicky informed Goff that after reviewing
the Plan’s investments, he “couldn’t sleep at night.” (JA 108)
Dicky also made statements of “the same tenor as Mr.
Shaffer’s comments.” Id.
In 1994, Wright asked his brother, Tom Wright (who had
experience managing his own investments and later registered
as an investment advisor), to review his self-directed account.
In June 1994, Tom Wright advised his brother to “get away
from” Heyne, Vestax, and AFA Financial. (JA 889) Tom
Wright further advised his brother that he had received “bad
[investment] advice” from Heyne, should “not purchase any
more limited partnerships,” and should not “annuitize any
more of the annuities.” (JA 1773-74). Tom Wright also
concluded that Heyne had been paid “excessive
compensation” for his services . (JA 1804-05).

-- 3 of 10 --

No. 01-4359 Wright, et al. v. Heyne, et al. 7
Then, in early 1995, Goff asked William Cseplo of
McDonald & Company to review his self-directed account.
In a letter dated March 18, 1995, Cseplo specifically stated
that he was “terribly disturbed at the failure of this investment
advisor to implement your written desires and the thought that
he would place his interests (commissions) before your
interests. I have never seen such gross neglect of ethics with
regards to this portfolio. . . .” (JA 558-59, 622-23). The letter
went on to state:
If you feel as if you have been wronged by what has
occurred in this portfolio, I would suggest you could
probably seek legal action. I believe you have some
basis. Michael Heyne invested your money in high yield
bonds that you specifically told him not to buy. He
annuitized an annuity and, in my opinion, had no reason
to do so. . . . I would seek full restitution for the
transactions that were not in your specific written
directions and the annuity transactions that make no
sense at all. . . .
Id.
On March 26, 1995, just a few weeks after receiving
Cseplo’s conclusions with respect to his review of Goff’s self-
directed account, Goff terminated his relationship with Heyne
and Vestax and transferred his self-directed account to
Cseplo.
In April 1995, Plaintiff Krantz asked Cseplo to review his
self-directed account. On April 19, 1995, Cseplo informed
Krantz in writing that, although Krantz had instructed Heyne
“not to purchase high yield (junk) bond portfolios[, Heyne]
began the account in 1988 with a purchase of the very thing
you did not want to own. . . .” (JA 598-99, 624). On May 2,
1995, based on Cseplo’s conclusions, Krantz terminated his
relationship with Heyne and Vestax with respect to his self-
directed account and engaged Cseplo to manage the account.
8 Wright, et al. v. Heyne, et al. No. 01-4359
On July 20, 1995, the Plan informed Heyne that it, too, was
terminating its relationship with Heyne and Vestax with
respect to the general account and on August 10, 1995, the
Plan’s general account was transferred to Cseplo.
On September 11, 1995, Wright terminated his relationship
with Heyne and Vestax with respect to his self-directed
account.
On February 27, 1997, Plaintiffs retained the services of an
attorney, Tony Merry. In late 1997, after further analysis by
Cseplo, in which Cseplo advised at least Goff and Krantz that
the Plan had suffered monetary losses at the hands of Heyne
and Vestax, Merry advised Plaintiffs that they had valid
ERISA claims arising out of Heyne’s alleged breach of
fiduciary duties. Merry specifically advised Plaintiffs that
some of Heyne’s investments had created a conflict with
organizations in which Heyne and Vestax had personal
interests, and that Heyne had been paid excessive
compensation.
On October 30, 1998, Plaintiffs filed the instant action. In
their Complaint, Plaintiffs alleged that Heyne and Vestax
acted in breach of their fiduciary duties in violation of
ERISA, 29 U.S.C. §§1109, 1132(a)(2), (3), and engaged in
conduct prohibited by 29 U.S.C. § 1106(a), (b).
Pursuant to 28 U.S.C. § 636(c)(3) and Fed. R. Civ. P. 73(c),
the parties consented to the jurisdiction of a United States
Magistrate Judge and further consented that an appeal from
the Magistrate Judge’s judgment would be directly to the
Court of Appeals for the Sixth Circuit. (JA 22).
III. THE DISTRICT COURT’S DECISION
On July 31, 2001, Defendants filed a Motion for Summary
Judgment arguing that because the action had been
commenced more than three years after the Plaintiffs acquired
actual knowledge of the Defendants’ alleged breach of duty,

-- 4 of 10 --

No. 01-4359 Wright, et al. v. Heyne, et al. 9
the claims of the Plaintiffs were barred by the three-year
statute of limitations provided in 29 U.S.C. § 1113. (The text
of § 1113 is set forth in footnote 2, infra.) On November 29,
2001, the District Court issued an Opinion and Order and
Judgment agreeing with Defendants that Plaintiffs’ Complaint
was time-barred.
In reaching its conclusion, the District Court relied on
several previous decisions of this Court. While noting that
this Circuit has yet to articulate in any published decision a
broad definition of “actual knowledge” for purposes of
ERISA’s limitations of actions provision, 29 U.S.C. § 1113,
the District Court also noted that the Sixth Circuit has
examined numerous cases involving the question of whether
a plaintiff had “actual knowledge” under § 1113(2).
Specifically, the District Court stated:
[T]o charge an ERISA plaintiff “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 ... [S]ection 1113(a)(2)(A) [sic] means only that
once [the plaintiff] learns of the facts that support his
allegation of illegality, he has no more than three years
in which to bring his ... suit.”
(JA 2011 (quoting Rogers v. Millan, 920 F.2d 34, 1990 WL
61120 at *4 (6th Cir. 1990) (unpublished decision; text
available on WESTLAW) (emphasis added by district court)).
Relying on the information provided to Plaintiffs by
various investment advisors in 1994 and 1995, the District
Court reached the conclusion that Plaintiffs had “actual
knowledge” under § 1113(2) more than three years prior to
filing their claim in October 1998. Specifically, the District
Court concluded that:
The record in this action does not portray investors (or
trustees) who, prior to the Fall of 1997, merely “had
10 Wright, et al. v. Heyne, et al. No. 01-4359
general concerns for [their] investments, which every
investor should have.” Rather, each of the three trustees
had been advised by any number of financial experts, by
mid-1995, that defendants had engaged in inappropriate
and unauthorized investments, under circumstances that
conflicted with the interests of the Plan and its
participants.
(JA 2013 (citation omitted)).
The District Court also rejected Plaintiffs’ argument that it
was not until the fall of 1997, when William Cseplo informed
them that Appellee’s conduct had worked to the financial
detriment of the Plan, that Plaintiffs had the requisite “actual
knowledge.” The District Court determined that “ERISA’s
three-year statute of limitations will apply when the plaintiff
has actual knowledge of the facts that give rise to the claims
upon which it sues; it ‘cannot wait until the consequences of
the act become painful.’” (JA 2013) (citing Ternes v. Tern-
Farm, Inc., 904 F.2d 708, 1990 WL 80915 at *3 (6th Cir.
1990) (unpublished decision; text available on WESTLAW)).
Therefore, the District Court concluded that Plaintiffs had
actual knowledge by at least September 1995 and their claim
was, therefore, barred by § 1113(2) of ERISA.
IV. DISCUSSION
A. STANDARD OF REVIEW
This Court reviews a district court’s grant of summary
judgment de novo. Pinney Dock & Transport Co. v. Penn
Cent. Corp., 838 F.2d 1445, 1472 (6th Cir. 1998), cert.
denied, 488 U.S. 880 (1988). In conducting this review, the
Court determines, in the light most favorable to the non-
moving party, whether any issue of material fact existed in the
record below. Celotex Corp. v. Catrett, 477 U.S. 317, 323-
24(1986).

-- 5 of 10 --

No. 01-4359 Wright, et al. v. Heyne, et al. 11
2Section 413 of ERISA, 29 U .S. C. §11 13, states:
No action may be commenced under this subchapter with respect
to a fiduciary’s breach of any resp onsibility, duty, or obligation
under this part, or with respect to a violation of this part, after
the earlier of –
(1) six years after (A) the date of the last action which
constituted a part of the breach or violation, or (B) in
the case of an omission, the latest date on which the
fiduciary could have cured the breach or violation, or
(2) three years after the earliest date of which the
plaintiff had actual knowledge of the breach or
violation;
except that in the case of fraud or concealment, such action may
be commenced not later than six years after the date of discovery
of such breach or violation.
29 U.S.C. § 1113.
B. ERISA’S THREE-Y EAR STATUTE OF
LIMITATIONS
Under ERISA, when a fiduciary breaches an obligation or
duty, the victim of the breach normally has six years in which
to file suit. 29 U.S.C. § 1113(1). However, this period may
be shortened to three years where the victim had “actual
knowledge of the breach or violation.” 29 U.S.C. § 1113(2).2
The District Court found that Plaintiffs had “actual
knowledge of the breach or violation” by at least September
1995. It is clear from the record below that if Plaintiffs did
not have “actual knowledge,” their claim was filed within the
requisite six-year period provided in § 1113(1). Therefore,
the ultimate question presented here is whether Plaintiffs had
“actual knowledge of the breach or violation” more than three
years prior to the initiation of this action on October 30, 1998.
12 Wright, et al. v. Heyne, et al. No. 01-4359
1. THE “ACTUAL KNOWLEDGE” REQUIREMENT
The basic ERISA limitation period of six years begins on
the date of the breach or violation. However, a “plaintiff with
actual knowledge of a non-fraudulent breach of ERISA
fiduciary duties must file suit within three years.” Tassinare
v. American Nat’l Ins. Co., 32 F.3d 220, 223 (6th Cir. 1994).
As the District Court observed, the Sixth Circuit has yet to
articulate a broad definition of “actual knowledge” under 29
U.S.C. § 1113(2). However, other circuits have examined the
issue of what constitutes “actual knowledge” under §1113(2),
and differing views of the definition have emerged.
Plaintiffs urge the Court to apply the standard articulated by
the Third Circuit in Gluck v. Unisys Corp., 960 F.2d 1168
(3rd Cir. 1992), which was subsequently adopted and applied
by the Fifth Circuit in Reich v. Lancaster, 55 F.3d 1034, 1057
(5th Cir. 1995) and Maher v. Strachan Shipping Co., 68 F.3d
951, 954-55 (5th Cir. 1995).
In Gluck, the Third Circuit held that “‘[a]ctual knowledge
of a breach or violation’ requires that a plaintiff have actual
knowledge of all material facts necessary to understand that
some claim exists, which facts could include necessary
opinions of experts, knowledge of a transaction’s harmful
consequences, or even actual harm.” Id. at 1177. The Third
Circuit elaborated upon its formula in International Union v.
Murata Erie North America, Inc., 980 F.2d 889 (3rd Cir.
1992), stating that “‘actual knowledge’ requires a showing
that plaintiffs actually knew not only of the events that
occurred which constitute the breach or violation but also that
those events supported a claim for breach of fiduciary duty or
violation under ERISA.” Id. at 900.
However, as indicated above, courts are divided on the
issue of what constitutes “actual knowledge” under § 1113(2).
The Third Circuit’s position represents one view. Other
circuits which have examined Section 1113(2)’s “actual

-- 6 of 10 --

No. 01-4359 Wright, et al. v. Heyne, et al. 13
knowledge” requirement -- specifically, the Seventh, Ninth
and Eleventh Circuits -- have held that “actual knowledge”
requires only knowledge of all the relevant facts, not that the
facts establish a cognizable legal claim under ERISA. See
Martin v. Consultants & Administrators, Inc., 966 F.2d 1078,
1086 (7th Cir. 1992) (“[T]he relevant knowledge for
triggering the statute of limitations is knowledge of the facts
or transaction that constituted the alleged violation.
Consequently, it is not necessary for a potential plaintiff to
have knowledge of every last detail of a transaction, or
knowledge of its illegality.” (Emphasis in original)); Rush v.
Martin Peterson Co., 83 F.3d 894, 896 (7th Cir. 1996) (“We
have defined ‘actual knowledge’. . . as knowledge of the
‘essential facts of the transaction or conduct constituting the
violation,’ and have explained that this means it is ‘not
necessary for a potential plaintiff to have knowledge of every
last detail of a transaction, or knowledge of its illegality.’”
(internal citations omitted)); Blanton v. Anzalone, 760 F.2d
989, 992 (9th Cir. 1985) (holding that a claim for breach of
ERISA fiduciary duties is not tolled until an attorney advises
the plaintiff that the transaction was prohibited and stating:
“The statute of limitations is triggered by. . . knowledge of the
transaction that constituted the alleged violation, not by . . .
knowledge of the law.”) Brock v. Nellis, 809 F.2d 753, 755
(11th Cir. 1987) (“To us, section 1113(a)(2)(A) means only
that once the Secretary learns of the facts that support his
allegation of illegality, he has no more than three years in
which to bring his suit.”); Scott v. Evins, 802 F. Supp. 411,
416 (N.D. Ala. 1992), aff’d, 998 F.2d 1022 (11th Cir. 1993)
(section 1113(2) “bars an action for violation of [ERISA
fiduciary duties] three years after the plaintiff has actual
knowledge of the facts, not knowledge of the violation of the
law.”)
Citing both of the foregoing distinct lines of cases, in
Caputo v. Pfizer, Inc., 267 F.3d 181 (2nd Cir. 2001), the
Second Circuit appears to have adopted a “hybrid” view of
the actual knowledge requirement, extrapolating parts of both
the Third and Fifth Circuits’ view, and of the view espoused
14 Wright, et al. v. Heyne, et al. No. 01-4359
by the Seventh, Ninth and Eleventh Circuits. The Caputo
court held as follows:
Although this Court has not previously defined the
term, we now hold that a plaintiff has “actual knowledge
of the breach or violation” within the meaning of ERISA
§ 413(2), 29 U.S.C. § 1113(2), when he has knowledge
of all material facts necessary to understand that an
ERISA fiduciary has breached his or her duty or
otherwise violated the Act. Accord Maher v. Strachan
Shipping Co., 68 F.3d 951, 954 (5th Cir. 1995); Gluck v.
Unisys Corp., 960 F.2d 1168, 1177 (3d Cir. 1992).
While a plaintiff need not have knowledge of the relevant
law, Blanton v. Anzalone, 760 F.2d 989, 992 (9th Cir.
1985), he must have knowledge of all facts necessary to
constitute a claim. Such material facts “could include
necessary opinions of experts, knowledge of a
transaction’s harmful consequences, or even actual
harm.” Gluck, 960 F.2d at 1177. . . .
267 F.3d at 193.
Some courts, in an attempt to resolve the “actual
knowledge” inquiry also look to whether the defendant’s
actions giving rise to the plaintiff’s breach of fiduciary claims
were “inherently suspect,” or “inherently” a statutory
violation. For example, in Fink v. National Savings and
Trust Co., 772 F.2d 951 (D.D.C. 1985), the plaintiff’s breach
of fiduciary claim was predicated upon the ERISA Plan
trustee’s alleged failure to independently evaluate the Plan’s
investments, not upon the investment itself. The defendant
argued that the plaintiff’s claim was time-barred because he
had knowledge as of the date of the Plan’s filing of forms
filed with the Department of Labor which disclosed the
investment transaction. The court held that the Department
of Labor forms alone were insufficient to constitute
knowledge to the Plan beneficiaries of the breach of the
fiduciary duty of independent evaluation. “The disclosure of
a transaction that is not inherently a statutory breach of

-- 7 of 10 --

No. 01-4359 Wright, et al. v. Heyne, et al. 15
fiduciary duty cannot communicate the existence of the
underlying breach.” Id. at 957. See also, Waller v. Blue
Cross of California, 32 F.3d 1337, 1338 (9th Cir. 1994)
(plaintiffs’ knowledge of Retirement Plan’s purchase of
annuities to provide retirement benefits to Plan participants
held not to constitute actual knowledge that defendants
breached their fiduciary duties by using an infirm bidding
process in selecting the annuity providers); Caputo v. Pfizer,
Inc., supra (plaintiffs’ knowledge of defendant’s offering of
a second voluntary separation offer (VSO) did not constitute
actual knowledge of a breach of fiduciary duty claim charging
defendants with misrepresentation of future pension benefits
for purposes of the § 4113 three-year statute of limitations
where the plaintiffs admitted that, when the second VSO was
formally announced, although they “suspected” that
management had been “fudging it” when it denied that such
a package would be offered, they had no knowledge that any
individual had knowingly lied to them. 267 F.3d at 186,
193.)
As correctly noted by the Seventh Circuit, “[A]ctual
knowledge must be distinguished from constructive
knowledge.” Martin, 966 F.2d at 1086. The line between
actual and constructive knowledge is not a bright and readily
distinguishable one. “We know that somewhere between
‘every last detail’ and ‘something was awry’ lies the requisite
knowledge of an ERISA violation . . . . [J]udges, faced with
particular contexts and relying on their ‘situation sense,’ must
make the determination.” Id. at 1086.
Although in this Circuit, we have yet to firmly establish a
rule of law broadly defining “actual knowledge of the breach
or violation” under Section 413(2) of ERISA, we have had
occasion to examine numerous ERISA claims dealing with
the determination of when litigants had “actual knowledge.”
For example, in Tassinare v. American Nat’l Ins. Co., 32 F.3d
220, 222-224 (6th Cir. 1994), we held that a plaintiff’s claim
for breach of ERISA fiduciary duties was time-barred because
the plaintiff did not file suit within three years after he sent a
16 Wright, et al. v. Heyne, et al. No. 01-4359
“protest letter” to the Internal Revenue Service in which he
complained about the defendant’s conduct with regard to the
underpayment of his pension benefits. See also Farrell v.
Automobile Club, 870 F.2d 1129, 1131 (6th Cir. 1989)
(holding that but for an unrelated tolling of the statute of
limitations, the plaintiffs’ claim for breach of ERISA
fiduciary duties would have been time-barred because the
plaintiffs had not filed suit within three years after “meeting
with one another. . . to review documents which allegedly
prove their claim,” and rejecting the plaintiffs’ contention that
they did not have the requisite “actual knowledge” until “their
attorney gave his opinion on the strength of their claim.”)
In Ternes v. Tern-Fam, Inc., 904 F.2d 708, 1990 WL
80915 (6th Cir. 1990) the plaintiff sued his family
corporation to recover payment of ERISA and other benefits
due to him under the corporation’s profit-sharing plan. 1990
WL 80915 at *3. The district court found that the plaintiff
was aware that he was entitled to the funds in March of 1983.
The district court further held that a December 1984 letter
from Ternes to the members of the profit-sharing plan showed
his actual knowledge that he had not received the plan
benefits to which he claimed to be entitled. On appeal, the
plaintiff argued that the three-year statute of limitations did
not commence until his application for the benefits was
denied. This Court disagreed, holding that to trigger the
ERISA statute of limitations, the plaintiff “need only have
knowledge of the act and cannot wait until the consequences
of the act become painful.” Id. at *11-*12 (citing Turner v.
Retirement Plan of Marathon Oil Co., 659 F. Supp. 534 (N.D.
Ohio), aff’d, 845 F.2d 327 (6th Cir. 1988)). See also, Rogers
v. Millan, 920 F.2d 34, 1990 WL 61120 (6th Cir. 1990)
(“The three-year limitation period began to run only when
[the plaintiff] learned of the facts that support his allegation
that the [defendants] breached their [ERISA] fiduciary
duties.”)
Based on the foregoing discussion of Sixth Circuit law as
well as the analysis reflected in the decisions of the Seventh,

-- 8 of 10 --

No. 01-4359 Wright, et al. v. Heyne, et al. 17
Ninth and Eleventh Circuits discussed above, we find that
view reflected in these decisions is the better view.
Accordingly, we join those Circuits in concluding that the
relevant knowledge required to trigger the statute of
limitations under 29 U.S.C. § 1113(2) is knowledge of the
facts or transaction that constituted the alleged violation; it is
not necessary that the plaintiff also have actual knowledge
that the facts establish a cognizable legal claim under ERISA
in order to trigger the running of the statute. This view is not
only in accord with our previous ERISA “actual knowledge”
decisions but it also furthers the policies underlying statutes
of limitations. Among the basic policies served by statutes of
limitations is preventing plaintiffs from sleeping on their
rights and prohibiting the prosecution of stale claims. See
e.g., Board of Regents of University of State of N. Y. v.
Tomanio, 446 U.S. 478, 487-88, 100 S.Ct. 1790, 1796-97
(1980); Johnson v. Railway Exp. Agency, Inc., 421 U.S. 454,
463-64, 95 S.Ct. 1716, 1722 (1975). As the Supreme Court
explained in Tomanio, supra,
Statutes of limitations are not simply technicalities. On
the contrary, they have long been respected as
fundamental to a well-ordered judicial system. Making
out the substantive elements of a claim for relief involves
a process of pleading, discovery, and trial. The process of
discovery and trial which results in the finding of
ultimate facts for or against the plaintiff by the judge or
jury is obviously more reliable if the witness or
testimony in question is relatively fresh. Thus in the
judgment of most legislatures and courts, there comes a
point at which the delay of a plaintiff in asserting a claim
is sufficiently likely either to impair the accuracy of the
fact-finding process or to upset settled expectations that
a substantive claim will be barred without respect to
whether it is meritorious.
446 U.S. at 487-88, 100 S.Ct. at 1796-97 (emphasis added).
See also, Johnson, supra, (“Although any statute of
limitations is necessarily arbitrary, the length of the period
18 Wright, et al. v. Heyne, et al. No. 01-4359
allowed for instituting suit inevitably reflects a value
judgment concerning the point at which the interests in favor
of protecting valid claims are outweighed by the interests in
prohibiting the prosecution of stale ones.” 421 U.S. at 463-64,
95 S.Ct. at 1722). If the requisite “actual knowledge of the
breach or violation” could only be obtained, as the Plaintiffs
suggest, when they learned that they had a claim for violation
of ERISA after consulting with an attorney even though they
had actual knowledge years earlier of all of the facts and
alleged misdeeds constituting their claim, these policies
would be frustrated. If the statute were tolled until an attorney
informs the plaintiff that he or she has an ERISA claim, a
plaintiff could delay accrual of a claim simply by waiting
before consulting an attorney. This would nullify the three-
year limitation period of Section 1113(2), something
Congress surely did not intend to result when it enacted the
statute.
Although the actions complained of in this case may not
themselves “communicate the existence of an underlying
breach,” the extrinsic facts of which the Plaintiffs had actual
knowledge demonstrate that Plaintiffs must have known that
they had been wronged long before they consulted with an
attorney. Neither Fink nor any of its progeny suggest that
Plaintiffs were entitled to sit on such knowledge for more
than three years.
For the foregoing reasons, we hold that to trigger the
running of the statute of limitations under Section 413(2) of
ERISA, 29 U.S.C. § 1113(2), it is only the plaintiff’s actual
knowledge of the underlying conduct giving rise to the
alleged violation that is required, rather than the knowledge
that the underlying conduct violates ERISA. We reject
Plaintiffs’ argument that the three-year limitation period is
tolled until the plaintiff consults with an attorney and learns
from the attorney that he has a claim for breach of ERISA
fiduciary duties. In fact, even the Third Circuit has made
clear that the running of the three-year statute of limitations
is not tolled until an attorney tells the plaintiff that he has a

-- 9 of 10 --

No. 01-4359 Wright, et al. v. Heyne, et al. 19
claim. See, Gluck v. Unisys, supra (“We emphasize,
however, that our holding does not mean that the statute of
limitations can never begin to run until a plaintiff first
consults with a lawyer.” 960 F.2d at 1177.)
Applying this rule to the facts of the instant case, resolution
of the issue presented becomes rather straightforward, as it is
beyond serious question that Plaintiffs had “actual
knowledge” of the material facts upon which their claims for
breach of ERISA fiduciary duties are based more than three
years before they filed this action on October 30, 1998.
Wright, Goff and Krantz obtained actual knowledge that
Vestax and Heyne allegedly “invested the assets” of the Plan
“in high-risk investments” such as “junk bonds”; that Vestax
and Heyne allegedly made “investment decisions that were
imprudent” including “annuitizing an annuity, investing in
certain limited partnerships, and purchasing both “A” and “B”
shares of the same investment fund”; that Vestax and Heyne
allegedly “caused” the Plan “to invest in and through
companies in which the Defendants had a direct financial
interest [AFA Financial]”; that Vestax and Heyne allegedly
“caused” the Plan to purchase or sell assets principally for the
purpose of earning transaction commissions” for themselves;
and that Vestax and Heyne allegedly “paid themselves
commissions on certain securities transactions in which they
engaged on behalf of the [Plan].” [See Complaint, ¶¶ 10-13;
16]. Further, Plaintiffs were, in several instances, specifically
told that Heyne had invested their funds in a manner they had
specifically instructed against.
Plaintiffs obtained actual knowledge of all of those alleged
facts from their own dealings with Vestax and Heyne during
the period from 1992 through 1995 and from their
consultations in 1993, 1994 and 1995 with four investment
professionals -- Phillip Shaffer, Denny Dicky, William
Cseplo and Tom Wright -- well outside the three-year
limitations period established by § 1113(2). Further each of
these consultants specifically and unequivocally informed
20 Wright, et al. v. Heyne, et al. No. 01-4359
3Go ff terminated his relationship with Defendants on March 25,
1995. Krantz terminated his relationship with them on May 2, 1995.
Defendants’ relationship with the Plan’s general account was terminated
on July 20, 1995, and on September 11, 1995, Plaintiff Wright terminated
his relationship with Defendants, as well.
Plaintiffs of the “harmful consequences” of Vestax’s and
Heyne’s allegedly improper acts and at least one of them
(Cseplo) advised that they should “seek legal action” in early
1995. Indeed, it was based upon their actual knowledge of
the foregoing material facts that all of the Plaintiffs fully
terminated all of their relationships with Defendants by
September 11, 1995.3 Notwithstanding this, Plaintiffs did not
file their Complaint in this case until October 30, 1998.
Because they did not file their action within three years after
obtaining actual knowledge of the alleged facts upon which
their claims for breach of ERISA fiduciary duties are based,
their claims are time-barred by 29 U.S.C. § 1113(2).
V. CONCLUSION
For the foregoing reasons, the District Court’s grant of
Defendants’ Motion for Summary Judgment is AFFIRMED.

-- 10 of 10 --