It has been several years since the US Supreme Court issued a decision in a case involving the Employee Retirement Income Security Act of 1974 (ERISA). In the upcoming term, the U.S. Supreme Court has agreed to review three ERISA cases. Below is a summary of the ERISA cases that are in front of the US Supreme Court in its upcoming 2019-2020 term.
Thole v. U.S. Bank
On June 28, 2019, the US Supreme Court granted certiorari in Thole v. U.S. Bank to decide whether ERISA plan participants have standing to sue for breach of fiduciary duty if the pension plan is fully funded. Specifically, the court will determine whether ERISA plan participants may seek restoration of plan losses caused by fiduciary breach under ERISA Section 502(a)(2) or injunctive relief against fiduciary misconduct under ERISA Section 502(a)(3) without demonstrating individual financial loss or the imminent risk thereof, and whether the plan participants must demonstrate Article III constitution standing. The facts of this case are as follows: participants in U.S. Bank’s defined benefit pension plan filed a class action alleging that the plan fiduciaries breached their fiduciary duties and violated ERISA’s prohibited transaction rules by failing to diversify the plan’s investments. At the time the litigation was filed, the plan was underfunded. During the course of the litigation, U.S. Bank voluntarily contributed funds to fully fund the plan and moved to dismiss the participants’ claim. The Eighth Circuit Court of Appeals upheld the lower court dismissal of the case, ruling that in order to bring an action under either ERISA Section 502(a)(2) or 502(a)(3), the participants are required to establish an “injury-in-fact”. Because the defined benefit plan was overfunded, the 8th Circuit held that there was no actual or imminent injury to the plan that caused injury to the participants’ interest in the plan and the participants no longer had standing to sue.
Intel Corp. Investment Policy Committee v. Sulyma
On June 10, 2019, the US Supreme Court agreed to review the Ninth Circuit Court of Appeal’s decision in Sulyma v. Intel Corp. Investment Policy Committee, to determine when a participant has “actual knowledge” of a fiduciary breach in order to trigger ERISA’s three-year statute of limitations period. The Ninth Circuit Court of Appeals held that a participant does not have actual knowledge of a fiduciary breach to start the statute of limitations period if the participant does not actually read, or could not recall having read, the documents disclosing the alleged breach. The Ninth Circuit concluded that the statute of limitations was not triggered when the documents were made available to the participant but begins to run once the participant becomes actually aware of the fiduciary’s actions and that the actions were imprudent.
Retirement Plans Committee of IBM v. Jander
On June 3, 2019, the US Supreme Court agreed to review the Second Circuit Court of Appeal’s decision in Jander v. Retirement Plans Committee of IBM, a “stock drop” case, to determine whether Fifth Third Bancorp v. Dudenhoeffer’s “more harm than good” pleading standard can be satisfied by generalized allegations that the harm of an inevitable disclosure of an alleged fraud generally increases over time. In this case, participants alleged that IBM fiduciaries violated their fiduciary duty of prudence by continuing to invest retirement plan assets in IBM common stock despite knowing that the stock’s market price was artificially inflated due to IBM’s failure to disclose losses incurred by one of its business units, which was eventually sold. The district court dismissed the suit, ruling that the participants did not meet the heightened pleading standards required by the Dudenhoeffer decision because a prudent fiduciary could have concluded that the alternative actions proposed by the participants — public disclosures, stopping the plan from further investing in IBM stock or purchasing a hedging product — would do more harm than good to the plan. The Second Circuit reversed, holding that no prudent fiduciary could have determined that earlier corrective disclosure would have caused “more harm than good” to the plan.