The now conservative majority U.S. Supreme Court will hear three ERISA cases this term and decide issues involving the right to sue under ERISA. The Intel case deals with the statute of limitations for bringing a breach of fiduciary duty claim under ERISA. The Thole case involves whether participants in a fully funded defined benefit plan can sue for breach of fiduciary duty when there was no apparent effect on their benefits. And the Jander case will expand upon the Dudenhoeffer ruling as to what plaintiffs need to plead in a stock drop case to avoid the case being dismissed.
Intel Corp. v. Sulyma. This case involves the one statute of limitations set forth in the ERISA statute which is for breach of fiduciary duty. Section 413 of ERISA provides that the deadline for filing a lawsuit is generally six years after the breach occurred. However, if the plaintiff had “actual knowledge” of the breach the limitations period is only three years from obtaining such knowledge. In this case, Intel Corp. argued that the shorter period applies because the breach of duty conduct complained of was contained in disclosure documents sent to participants and posted on its Web site. Therefore, the plaintiffs should be considered to have actual knowledge. Late last year, the Ninth Circuit disagreed with Intel and held that to a plaintiff who received the disclosure but did not read it or cannot remember reading it, does not have actual knowledge and the longer statute applied. In a 2010 decision, Brown v. Owens Corning Investment Review Committee, the Sixth Circuit had held that failing to read the disclosure will not shield the plaintiff from having actual knowledge. The Supreme Court will resolve the conflict among these circuits. Oral arguments in the case will be heard on December 4, 2019.
Thole v. U.S. Bank. In this case a purported class of participants sued for mismanagement of the assets of a defined benefit plan that caused the plan to be underfunded. However, the employer, who bears the investment risk in a defined benefit plan, subsequently contributed more to the plan, to make it fully funded, and then moved to dismiss the suit claiming the participants had no damages. The Eighth Circuit agreed with the employer in a decision that disagrees with decisions of other Circuit Courts. Therefore, the Supreme Court will resolve this conflict among the Circuits, as well. Oral arguments have not yet been scheduled.
IBM v. Jander. This case involves what plaintiffs must plead in their complaint for breach of the fiduciary duty of prudence when a plan is invested in employer stock. In its 2014 Dudenhoeffer decision the Supreme Court held that plan fiduciaries need not disclose inside information to plan participants about employer stock if the disclosure is likely to do more harm than good. Earlier this year, the Second Circuit held that Jander plaintiffs properly alleged that no fiduciary could have concluded that an earlier disclosure that IBM’s microchip division was losing $700 million per year would have done more harm than good. Therefore, IBM’s motion to dismiss was denied.
Oral argument in this case is set for November 6, 2019. It is hoped that the Supreme Court’s decision will provide clearer standards on what must be pled in these cases. The plaintiff’s bar hopes the decision will make it harder for such cases to be dismissed. However, with the conservative makeup of the current Court the decision may make it easier for employers to defend these suits.
ERISA litigation continues to grow. The high Court’s decisions in these three cases could have a chilling effect on such litigation by shortening the time for bringing cases, deciding when defined benefit plan participants may bring an action; and making the pleading standards in stock drop cases even more difficult to meet. These cases will also be a good litmus test on just how conservative the new Court will be.