After more than two years since the U.S. Supreme Court issued its last decision* in a case involving the Employee Retirement Income Security Act (ERISA), the court’s next term looks to be flush with ERISA issues. On June 10, 2019, the Supreme Court granted certiorari in a Ninth Circuit case addressing the “actual knowledge” standard in the statute of limitations for fiduciary breaches. Intel Corp. Investment Policy Committee, v. Sulyma, No. 18-1116. The Supreme Court has granted certiorari in two ERISA cases in as many weeks, and it seems likely the court may grant review in at least one other case. Below is a summary of the cases that are or may be in front of the Supreme Court in the coming term.
Sulyma filed a putative class action alleging that the fiduciaries of Intel’s 401(k) plans breached their fiduciary duties by making imprudent investments and charging excessive fees. On summary judgment, Intel argued that the plaintiff’s claims were barred by ERISA’s three-year statute of limitations for breach of fiduciary duty claims, ERISA § 413(2), because the plans’ disclosures gave the participants “actual knowledge” of the breach. The U.S. District Court for the Northern District of California agreed, but the Ninth Circuit reversed. The Ninth Circuit found that a plaintiff must be actually aware of the nature of the alleged breach. In doing so, the court disagreed with the Sixth Circuit’s opinion in Brown v. Owens Corning Investment Review Committee, 622 F.3d 564 (6th Cir. 2010). The Supreme Court will resolve the issue of what it means to have “actual knowledge” of an ERISA fiduciary breach.
Retirement Plans Committee of IBM v. Jander, No. 18-1165:
On June 4, the Supreme Court granted certiorari in this Second Circuit case regarding the “more harm than good” pleading standard enunciated in Fifth Third Bancorp v. Dudenhoeffer, 134 S.Ct. 2459 (2014) for when a fiduciary must disclose information related to employer stock. Since Dudenhoeffer and the Supreme Court’s reaffirmation of Dudenhoeffer in Amgen v. Harris, 136 S.Ct. 758, 759-760 (2016), most courts have found that plaintiffs have not met the high pleading standard in employer stock drop cases. The Second Circuit, in Jander, however, reversed dismissal of the complaint. This arguably created a circuit split with the Fifth and Sixth circuits. The Supreme Court will address the issue of whether generalized allegations that the harm of an inevitable disclosure of an alleged fraud generally increase over time satisfies the “more harm than good” pleading standard.
Thole v. U.S. Bank, 17-1712:
In this case from the Eighth Circuit addressing standing, the Supreme Court called for the view of the solicitor general, a move seen as showing the court’s interest in the case. The solicitor general recommended the Supreme Court grant certiorari to address the issue of whether a pension plan participant has standing to bring a claim for breach of fiduciary duty when he or she has not suffered a loss because the plan is overfunded. The district court found that once the plan became overfunded, there was no longer a live controversy. The Eighth Circuit upheld the dismissal but reasoned that if a participant was not injured, then the participant was not a member of the class of plaintiffs that Congress intended to be able to sue, i.e., the plaintiff did not have statutory standing. The solicitor general recommended the Supreme Court also address the issue of whether the plaintiffs have Article III standing in such an instance.
Putnam Investments, LLC v. Brotherston, 18-926:
In April, the Supreme Court also called for the view of the solicitor general in a case from the First Circuit. The case addresses the issue of which party bears the burden of showing loss causation in ERISA fiduciary breach cases. The First Circuit held that the defendant bears the burden, joining the Fourth, Fifth, and Eighth circuits. There is a true circuit split on the issue, as the Second, Sixth, Seventh, Ninth, Tenth, and Eleventh circuits have held that the plaintiff bears the burden of proving the losses to the plan resulted from the fiduciary breach. Given the depth of the circuit split and the request for the solicitor general’s views, it is likely the Supreme Court will decide to resolve this issue.
* Advocate Health Care Network v. Stapleton, 137 S. Ct. 1652, (2017)