July 30, 2019

Heather Abrigo Speaks with SHRM about Upcoming SCOTUS Case Involving ERISA Lawsuit

SHRM, a leading professional human resources association, spoke with Drinker Biddle partner Heather B. Abrigo on the upcoming U.S. Supreme Court case involving an employee wanting to sue a former employer’s retirement plan committee for allegedly breaching fiduciary duties by making poor investments. The employer’s retirement committee is challenging this argument, claiming that the employee waited too long to file the lawsuit. Courts had sided with the employer until the 9th U.S. Circuit Court of Appeals reversed the decision and ruled in favor of the employee. Following petition, the Supreme Court granted a writ of certiorari in February 2019.

In the article, “Can an Employee Who Didn’t Read Benefits Disclosures Proceed with a Lawsuit?,” the publication outlines the case Intel Corp. Investment Policy Committee v. Sulyma, which the Supreme Court will hear arguments about how to measure the Employee Retirement Income Security Act's (ERISA's) three-year limit to file such claims.

SHRM reports that many insiders believe the key issue is what actions constitute "actual" knowledge and trigger the three-year limit.
"It was clear that the employee in this case … received the disclosures about the investments in the plan, including information about the alternative investments that are at issue in the case," noted Abrigo in the article.

The 9th Circuit challenged this issue and sided with the employee, arguing that the retirement committee couldn't show that the employee had actually read the disclosures. "The phrase 'actual knowledge' means the plaintiff is actually aware of the facts constituting the breach, not merely that those facts were available to the plaintiff," the 9th Circuit held.

"For employers, this is problematic," Abrigo said. "The 9th Circuit has opened the door for actions whereas despite a plan sponsor's best efforts and attempts to satisfy their fiduciary duties, a participant could claim they didn't read the disclosures … and thus did not have actual knowledge."

Abrigo noted that some other courts have disagreed with the 9th Circuit, adding that the 9th Circuit's standard is a departure from 6th Circuit rulings that do not require defendants to prove that participants actually read the information disclosed. Many district courts also have held that employers can assume participants read the disclosures and therefore have knowledge of their contents.

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