Class Action Complaint Alleging Breach of Contract Against MetLife Properly Dismissed because Four-Year Statute of Limitations Expired Long Before Plaintiffs Filed Class Action Fifth Circuit Holds
Plaintiffs filed a class action against their life insurer, Metropolitan Life, for breach of contract. Beavers v. Metropolitan Life Ins. Co., 566 F.3d 436, 2009 WL 1067035, *1 (5th Cir. 2009). According to the allegations underlying the class action, the insurance policies issued to plaintiffs, and managed by MetLife’s “Personal Insurance line of business” were investment vehicles as well as insurance policies, and called for MetLife’s policyholders “to receive dividends paid by Personal Insurance from the surplus accruing on their policies.” Id. The class action complaint alleged that MetLife “impermissibly allocate[ed] surplus profits from Personal Insurance to other lines of business.” Id. The class action thus alleged that MetLife “breached their investment contracts and deprived them of dividend income to which they were entitled.” Id. Plaintiffs filed the class action in 1998, and the district court certified the litigation as a class action in 2004. Id. Defense attorneys moved to dismiss the class action on the grounds that the claims were time-barred as they allegedly arose in the 1980s; the district court held that the discovery rule did not toll the statute of limitations and dismissed the class action complaint. Id. The Fifth Circuit affirmed.
Apply de novo review and the substantive law of Texas, see Beavers, at *2, the Fifth Circuit began by noting that a four-year limitations period applies to breach of contract claims in Texas, id. As the statute of limitations plainly ran long before plaintiffs filed the class action complaint, the question was whether the discovery rule or American Pipe doctrine tolled the limitations period. Id. With respect to the discovery rule, the Circuit Court noted that Texas permits only a “very limited exception to statutes of limitations.” Id. (citation omitted). A preliminary inquiry is whether the injury is “inherently undiscoverable.” Id. The Fifth Circuit further noted that “no Texas court has found a breach of contract to qualify as inherently undiscoverable, yet the Texas Supreme Court has not foreclosed the possibility.” Id., at *3 (citation omitted). In rejecting plaintiffs’ effort to bring their case within the scope of the discovery rule, the Circuit Court held that it was insufficient for plaintiffs – who conceded that MetLife did not have a fiduciary relationship with them – to claim to be in a “special relationship of confidence and trust” with MetLife. Id. Under Texas law, in the absence of a fiduciary relationship “contracting parties must verify each other’s performance.” Id. As a factual matter, the Court also held that plaintiffs could have discovered their alleged injury within the four-year limitations period, see id., at *3-*5.
The Fifth Circuit also rejected plaintiffs’ claim that the statute of limitations was tolled under American Pipe, which held that “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action.” American Pipe & Const. Co. v. Utah, 414 U.S. 538, 554 (1974). The Circuit Court readily concluded that American Pipe was inapplicable because the limitations period had expired before plaintiffs filed the class action complaint. Beavers, at *5. Put simply, American Pipe “does not resurrect expired claims,” id. Accordingly, the district court did not err in dismissing the class action complaint as time-barred. Id.