A unanimous U.S. Supreme Court decision in Intel Corp. Investment Policy Committee v. Sulyma affirmed a Ninth Circuit ruling that a plaintiff must have actual knowledge of a fiduciary breach for ERISA’s three-year limitation period to apply.
Under ERISA, claims for breach of fiduciary duty are required to be brought within the shorter of:
- 6 years after occurrence of the alleged breach;
- 3 years after a plaintiff gains “actual knowledge” of the alleged breach; or
- 6 years after a plaintiff discovers the alleged breach in cases involving fraud or concealment.
Christopher Sulyma was an employee of Intel Corporation and participated in two Intel retirement plans. The plans invested in funds comprised mostly of stocks and bonds. The Intel Investment Policy Committee, which managed the plans, diversified into alternative investments like commodities, hedge funds and private equity during the stock market decline in 2008.
Sulyma sued the Intel Investment Policy Committee on behalf of a putative class, alleging breach of fiduciary duty for overinvestment in alternative investments. The suit was filed within six years of the alleged breach, but more than three years after the Committee sent disclosures to Sulyma with breakdowns of the plans’ investments.
A district court granted summary judgment to Intel, finding that Sulyma had actual knowledge of the alleged breaches once he received the disclosures. Based on Sulyma’s testimony that he did not read the disclosures, the Ninth Circuit Court of Appeals reversed, holding that there was a question of fact as to whether or not Sulyma had “actual knowledge” of the alleged breaches since he did not review the disclosures.
On appeal, the U.S. Supreme Court affirmed the Ninth Circuit’s ruling, holding that in order to have “actual knowledge” of the disclosure information, “the plaintiff must in fact have become aware of that information.” The Court observed that “actual knowledge” as defined — “existing in fact or reality” — is distinguishable from constructive knowledge.
The Court noted that while some sections of ERISA provide a distinction between actual and constructive knowledge, there is no inclusion of a constructive knowledge standard for breach of fiduciary duty claims in the three-year statute of limitations. The Court interpreted this omission as intentional by Congress, and that any modifications were up to Congress to make.
However, the Court also noted that its opinion did not rule out alternative ways for defendants to prove “actual knowledge,” saying that it could be proven through “inference from circumstantial evidence.” In addition, the Court said that its ruling did not prevent defendants from arguing that evidence of “willful blindness” supported a finding of actual knowledge.
Litigation can be time-consuming and expensive, resulting in harmful distractions for your business. The team of experienced employee benefits attorneys at Hall Benefits Law pays close attention to trends in litigation and helps our clients take proactive steps to memorialize decisions and defend their plans against potential lawsuits. Call our team today at 678-439-6236.
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