On Wednesday, the Supreme Court handed down a unanimous decision against the fiduciaries of two Intel Corp. defined contribution plans.
At issue before the court in Intel Corp. Investment Policy Committee v. Sulyma was a statute of limitation provision under the Employee Retirement Income Security Act (ERISA).
The Supreme Court upheld a decision in the 9th U.S. Circuit Court of Appeals, ruling that a plan participant needs “actual knowledge” of a fiduciary breach to trigger a three-year statute of limitation to file suit against a plan sponsor.
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In 2015, a former Intel employee filed suit against the plan, alleging fiduciaries mismanaged plan assets by investing in alternative asset classes.
At the district court level, Intel won a motion to dismiss on the grounds that the claim was brought outside of the three-year window from the time the participant had knowledge of the allegation.
The 9th Circuit reversed that decision. Throughout the dispute, the plaintiff admitted to receiving plan documents explaining how his savings were invested, as well as visiting the online portal that hosted plan documents.
But he testified that he did not “think” he read the plan documents, which the 9th Circuit unanimously said was enough to show he did not have “actual knowledge” of the claims he ultimately brought.
A Literal Interpretation of ERISA
Under ERISA, participants can’t sue plan sponsors after the earlier of six years from the time of a fiduciary breach, or three years after the time the plaintiff had “actual knowledge” of the violation, according to the statute.
Writing for the unanimous court, Justice Samuel Alito implied the issue before the justices was easy to answer.
“The question here is whether a plaintiff necessarily has ‘actual knowledge’ of the information contained in disclosures that he receives but does not read or cannot recall reading,” wrote Alito. “We hold that he does not.”
While ERISA does not define “actual knowledge,” Alito said the meaning is “plain.”
“Dictionaries are hardly necessary to confirm the point, but they do,” wrote Alito, citing definitions of ‘actual’ from four sources.
“To have ‘actual knowledge’ of a piece of information, one must in fact be aware of it,” he added.
Alito’s brief underscored that the adequacy of Intel’s disclosures to the plaintiff was never at question.
“That’s what struck me about this case,” said Kim Jones, an ERISA attorney and partner at Faegre Drinker. “The individual accessed the information on line numerous time, and they were able to determine he accessed it.”