In April Hughes v. Northwestern University, a class-action lawsuit initiated by Northwestern University retirement plan participants, plaintiffs alleged the school mismanaged their retirement savings. The Seventh Circuit dismissed the case. In October 2021, the U.S. Chamber of Commerce urged the Supreme Court not to revive a lawsuit from Northwestern University workers, arguing that voiding the school’s win would add to a recent deluge of federal benefits suits.
The Chamber of Commerce filed an amicus curiae brief, along with six other trade associations and business lobbying groups, claiming that the high court should not allow class actions under the Employee Retirement Income Security Act (ERISA) to proceed to the discovery phase unless they contain credible allegations.
The Chamber of Commerce, American Council of Life Insurers, American Property Casualty Insurance Association, Business Roundtable, ERISA Industry Committee, Professional Liability Underwriting Society, and Securities Industry and Financial Markets Association joined the brief.
These business groups focus on the fact that ERISA suits have skyrocketed in the past two decades.
“What began as a trickle in the early 2000s (mostly lawsuits against large public companies) has in recent years become a tidal wave,” the Chamber said.
The Chamber further claimed that while ERISA enables retirement plan decision-makers to have significant discretion provided their decisions are prudent, many ERISA class actions fail to consider the decision-making process as much as the result and expect courts to find imprudent conduct based on investment results.
“This court has already established a clear roadmap for evaluating pleading-by-inference complaints: circumstantial allegations must be carefully scrutinized in context, and any inferences of wrongdoing must be plausible in light of that context, not merely conceivable,” the Chamber’s brief stated. “ERISA cases should be treated no differently.”
The lobbying groups cited two Supreme Court cases, Bell Atlantic Corp. v. Twombly, and Ashcroft v. Iqbal, in their brief, arguing that the pleading standard established by these cases is the proper standard for ERISA class actions based on the breach of fiduciary duties related to retirement plans.
The groups added that courts must review an ERISA class action complaint in its proper context, taking into account that the law may consider fiduciaries to violate federal benefits law based on essentially any choice they make.
The lawsuit against Northwestern University was filed in 2016 and dismissed by an Illinois federal judge in 2018. The Seventh Circuit upheld the dismissal in March 2020, agreeing with the lower court that Northwestern did not violate ERISA by offering the funds in question since it also offered other, better-performing funds in which workers were free to invest as an alternative.
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