February 26, 2020
The U.S. Supreme Court handed workers a big win Wednesday by preserving a six-year deadline to file ERISA class actions as the standard, but employers have already seized on language in Justice Samuel Alito’s opinion as a road map for how to impose a shorter deadline.
Justice Alito ended the unanimous opinion — which affirmed the Ninth Circuit’s ruling that the Employee Retirement Income Security Act grants workers six years to sue except under special circumstances — by listing several tactics employers can use to invoke a three-year statute of limitations.
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The case pitted Intel Corp.’s 401(k) plan managers against a former worker in a battle over what it means to have “actual knowledge” of an ERISA fiduciary breach.
If an employer can prove to a judge that a worker gained “actual knowledge” of a breach on a certain day, the worker has three years from that date to sue. If the employer can’t, then the worker has six years to sue from the day the breach occurred or, in cases of fraud or concealment, from the day the breach came to light.
Intel’s plan managers argued that workers gain “actual knowledge” of a fiduciary breach the day they receive financial disclosures from the plan, whether they read and understand the disclosures or not.
The former Intel employee, Christopher Sulyma, argued that “actual knowledge” of a fiduciary breach means what it says: real awareness that misconduct occurred.
The justices roundly rejected the Intel plan managers’ argument, ruling that the Ninth Circuit got it right when it applied a plain-language reading of the words “actual knowledge.”
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The 14-page opinion devotes significant ink to refuting the employer-side argument, but it ends with two paragraphs that give employers a clue about how they might argue that “actual knowledge” applies.
“Nothing in this opinion forecloses any of the ‘usual ways’ to prove actual knowledge at any stage in the litigation,” Justice Alito said, listing some of those ways.
He also tossed in a new idea, right at the end: “Today’s opinion also does not preclude defendants from contending that evidence of ‘willful blindness’ supports a finding of ‘actual knowledge.'”
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Employee advocates were pleased with the high court’s ruling Wednesday, calling it important for workers.
Michelle Yau, a partner at Cohen Milstein Sellers & Toll PLLC, said the ruling gave her hope that the Supreme Court may resolve other circuit splits that could be remedied by a plain-language reading of ERISA.
“The straight textualist approach was refreshing, and for ERISA, which some find to be a complicated statute, it’s really nice to have a super simple, well-reasoned decision that is right,” Yau said. “It’s amazing how much these issues can percolate in the courts, and courts seem to be a little bit confused. And when someone says it so clearly, it seems so obvious.”