New cases before the U.S. Supreme Court for the next year include two involving the Employee Retirement Income Security Act (ERISA). There is a possibility that more ERISA-related cases will also be reviewed by the court in the coming term. The outcome of these cases could have significant impacts on benefit plans and providers. Benefits professionals are studying the cases closely to be prepared for the court’s decisions.
Intel Corp. Investment Policy Committee, v. Sulyma, No. 18-1116:
The Supreme Court has granted certiorari to review what is meant by “actual knowledge” and when actual knowledge of a fiduciary breach occurs. The case in question involves an action alleging that Intel’s 401(k) plan administrators breached their fiduciary duty by making imprudent investments and paying excessive fees. Intel argued that the plaintiff’s case was barred due to ERISA’s three-year statute of limitations on fiduciary breach claims. They argued that the plan’s disclosure documents were sufficient to give “actual knowledge” of the breach and those documents were given to the plaintiff more than three years before a claim was filed.
On appeal from federal district court, the Ninth Circuit did not agree with Intel’s argument, finding that the plaintiff must be
aware
of the alleged breach, not just provided with the information. This ruling is different from other circuit court cases, which have found that being provided with plan information is sufficient to form actual knowledge. Supreme Court review will clarify whether actual knowledge means when documentation was provided sufficient to notify a plan participant or whether knowledge does not occur (and thus the statute of limitations does not start running) until they purportedly actually review such documentation. This case is scheduled for argument before the Supreme Court during the Court's October 2019-2020 term.
Retirement Plans Committee of IBM v. Jander, No. 18-1165:
The second case that was recently granted certiorari focuses on the “more harm than good” pleading standard. This standard was set in the 2014 case
Fifth Third Bancorp v. Dudenhoeffer
and is used to determine when a plan fiduciary must disclose information related to the employer’s stock. Since this standard was articulated, few plaintiffs have met this high pleading standard. In the case at hand, the Second Circuit reversed the district court’s dismissal of the case.
As the issue appears before the Supreme Court, the case will address whether the “more harm than good” pleading standard is met. In the case at hand, the plaintiff made a claim that the harm stemming from the failure to disclose an alleged fraud increases with time in stock drop lawsuits. This standard requires plaintiffs to
proactively
show that a reasonable fiduciary would cause “more harm than good” when taking actions that reduce the plan participant’s holdings in their own company’s stock in order to bring the action.
The following provides two other cases with ERISA implications:
Thole v. U.S. Bank, 17-1712:
One case that may come before the Supreme Court this year comes from the Eighth Circuit regarding standing to bring a fiduciary breach claim. The Court asked the solicitor general to review the case and, at his recommendation, is likely to take the case up for review. The issue in this case focuses on a pension plan participant and whether the participant has standing to bring a fiduciary breach claim in a case where there was no loss suffered because the plan was
over
funded. Specifically, the court will address whether the plan participant has standing even though, while there may have been wrongdoing, there was no injury.
Putnam Investments, LLC v. Brotherston, 18-926:
Similar to the issues set forth in
Thole
, the Supreme Court has asked the solicitor general to review a case from the First Circuit regarding which party is responsible for the burden of showing the cause of loss due to a fiduciary breach. The lower court held that the defendant bears the burden of proof, a decision that aligns with the holding from several other circuits, while several others hold that the plaintiff bears the burden of proof.
The team at Hall Benefits Law will continue to follow each of these cases as they progress. Our team will want to understand the arguments made in the briefs from both sides as well as any amicus curiae briefs filed on behalf of interested parties and policy groups. These amicus briefs often provide useful insight on how, depending on the outcome of these cases, the rules will affect companies, benefit plans, administrators, and plan fiduciaries.
We will continue to advise clients of case status and potential impacts. The Hall Benefits Law team will work with any interested clients to change documentation and procedures necessary to avoid future problems. To learn more about our expertise and the services we offer, call 678-439-6236 or visit the Hall Benefits Law website.
