Supreme Court Rejects Shorter Statute of Limitations in ERISA Case

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The Supreme Court in Intel Corporation Investment Policy Committee et al. v. Sulyma, case No. 18–1116, significantly narrowed the circumstances in which a three-year statute of limitations would apply to a claim for breach of fiduciary duty under Section 413(2) of the Employee Retirement Income Security Act of 1974 (ERISA). As a result, the statute of limitations will be six years in most cases.

Under ERISA, a claim for breach of fiduciary duty can be brought within six years after the date of the fiduciary breach or, if shorter, within three years after the date that the plaintiff “had actual knowledge of the breach.” ERISA does not, however, define “actual knowledge.”

Christopher Sulyma, a participant in Intel Corporation’s retirement plans, claimed that the plans’ fiduciaries had breached their fiduciary duties by investing in “alternate investments.” Intel asserted that the claim was barred by the statute of limitations because it was filed more than three years after Sulyma had received notice of the plans’ purportedly improper investments, even though the suit was filed within six years after the date of the disputed investments. Sulyma, however, testified that he did not recall reviewing the applicable disclosures. While the District Court granted summary judgment to Intel, the Ninth Circuit Court of Appeals reversed.  

The Supreme Court unanimously affirmed the Court of Appeals’ decision, holding that the phrase “actual knowledge” means that the plaintiff must actually know about the alleged breach in order for the three-year statute of limitations to start. In coming to this conclusion, the Supreme Court rejected the argument that Section 413(2) of ERISA should be considered a “constructive-knowledge requirement” and that once a plaintiff receives a disclosure, he has the requisite knowledge since “he could acquire it with reasonable effort.” Evidence that the plaintiff had been provided with the relevant information is not sufficient for this purpose without additional evidence that the plaintiff actually read the materials that were provided. The decision states that the phrase “actual knowledge” must be given its plain meaning: “[r]eal knowledge as distinguished from presumed knowledge or knowledge imputed to one.” 

It remains to be seen how future decisions will interpret and apply Intel. The Supreme Court stressed that its decision does not mean that actual knowledge cannot be proven and, further, evidence of “willful blindness” can support a finding of actual knowledge. However, at the present time, the decision seems to establish a very high threshold for the application of the three-year statute of limitations. Employers should work with their advisers to design programs that will make actual knowledge easier to establish.

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