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ML BeneBits

After more than two years without one, three ERISA cases will come before the US Supreme Court in 2019–2020. Exciting times for ERISA attorneys, to be sure, but each case also presents issues of practical consequence for plan sponsors, fiduciaries, and participants in ERISA plans across the country.

Intel Corp. Investment Policy Committee v. Sulyma, No. 18-1116

In a case that may end up being the most impactful, the Court will address how to apply ERISA’s three-year “actual knowledge” statute of limitations. ERISA Section 413 requires that a plaintiff file suit in the six years following an alleged breach or violation. But if a plaintiff has “actual knowledge” of a breach or violation, that period shrinks to three years. In this case, Intel argued that the plaintiff’s claims were time barred because plan disclosures gave the plaintiff “actual knowledge” of all information necessary to challenge the Intel plans’ investments and fees—even though the plaintiff claimed not to have read them or remember whether he had read them. The US Court of Appeals for the Ninth Circuit held that this was enough to create a factual dispute, preventing summary judgment and requiring a trial.

This issue arises often in ERISA litigation of all varieties. A ruling in Intel’s favor could have a widespread impact on the potential exposure of plan sponsors and fiduciaries in similar lawsuits. Holding that plan participants have “actual knowledge” of plan disclosures sent to them in compliance with ERISA’s regulations could extinguish some claims altogether, and halve the defendants’ potential exposure in others.

Retirement Plans Committee of IBM v. Jander, No. 18-1165

For the third time in five years, the Supreme Court will address the pleading standard for “stock drop” claims, which challenge the offering of employer stock in ERISA plans. In Jander, the plaintiffs claim IBM plan fiduciaries were required to issue a “corrective disclosure” of inside information, causing IBM’s stock price to be artificially inflated. In becoming the first circuit court to allow such claims past a motion to dismiss since Fifth Third Bancorp v. Dudenhoeffer (2014) and Amgen v. Harris (2016), the US Court of Appeals for the Second Circuit held that the plaintiffs plausibly alleged that no prudent fiduciary could have concluded that an earlier disclosure would have done “more harm than good” to the plan, where the disclosure allegedly was “inevitable” and a delay would only increase harm to the plan.

Plan sponsors and fiduciaries will watch this case closely, as several new lawsuits have parroted the Second Circuit’s reasoning, hoping to revive claims that have been almost uniformly rejected since Amgen. The Supreme Court also might clarify Dudenhoeffer, particularly whether a plaintiff must plausibly allege that no prudent fiduciary “would have”—as opposed to “could have”—viewed an alternative action as more likely to harm the plan than help it. The difference is more than semantics: “Would” suggests what an average, prudent fiduciary would do, while “could” suggests the realm of possibility, making the latter standard more difficult for plaintiffs.

Thole v. U.S. Bank, 17-1712

Finally, the Supreme Court will hear an issue that has puzzled the circuits: Whether a defined benefit pension plan participant has standing to sue to challenge alleged imprudent investments without suffering an individual loss because the plan is overfunded. In Thole, although the US Bank pension plan at issue was underfunded when the lawsuit began, investment gains and a contribution by US Bank restored the plan to overfunded status. The US Court of Appeals for the Eighth Circuit held that the plaintiffs could not challenge the fiduciaries’ investment decisions because they suffered no injury and thus lacked standing under both Article III and ERISA.

The Eighth Circuit decision created a circuit split on several issues, including whether a plaintiff must suffer monetary loss to seek injunctive relief under ERISA Section 502(a)(3), an issue on which the Eighth Circuit now stands alone. This case could have a broad impact on defined benefit pension plan sponsors, as any holding broadening the universe of potential plaintiffs similarly expands the likelihood of lawsuits challenging investment decisions in pension plans and potential exposure under ERISA.