U.S. Supreme Court Holds Plaintiffs Need Actual Knowledge Of Breach Of Fiduciary Duty To Be Held To Three-Year Statute Of Limitations Under ERISA
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  • U.S. Supreme Court Holds Plaintiffs Need Actual Knowledge Of Breach Of Fiduciary Duty To Be Held To Three-Year Statute Of Limitations Under ERISA
    On February 26, 2020, the United States Supreme Court, in a unanimous decision by Justice Samuel Alito, held that for purposes of assessing the appropriate statute of limitations for a breach of fiduciary duty claim under the Employee Retirement Income Security Act of 1974 (“ERISA”), a plaintiff does not gain “actual knowledge” of allegedly improper investments disclosed in documents that he receives but does not read or cannot recall reading.  Intel Corp. Inv. Policy Comm. v. Sulyma,—U.S.—, 2020 WL 908881 (2020).  Thus, under such circumstances, the applicable statute of limitations is ERISA’s general six-year statute of repose, which begins to run from “the date of the last action which constituted a part of the breach or violation,” rather than the three-year limitations period, which begins to run from the earliest date on which a plaintiff gains “actual knowledge” of the breach or violation.  Id. at *2.

    The Supreme Court affirmed the ruling of the Ninth Circuit, which, as noted in our prior post,  held that to meet the “actual knowledge” requirement and fall under the more restrictive three-year limitations period, “the plaintiff must have been aware that the defendant had acted and that those acts were imprudent.”  The Ninth Circuit determined that it was not enough merely to receive ERISA-mandated disclosures from the plan administrator, which might support a finding of constructive knowledge.  In so holding, the Ninth Circuit disagreed with a ruling by the Sixth Circuit, which had not required proof that a plaintiff saw or read the disclosures, and which the Supreme Court abrogated in affirming the Ninth Circuit’s decision.  See Intel, 2020 WL 908881, at *4 & n.3 (citing Brown v. Owens Corning Investment Review Comm., 622 F. 3d 564, 571 (6th Cir. 2010)).

    The Supreme Court held that “[a]lthough ERISA does not define the phrase ‘actual knowledge,’ its meaning is plain”—“to have ‘actual knowledge’ of a piece of information, one must in fact be aware of it.”  Id. at *4.  The Court explained that “actual knowledge” is distinct in the law from the concept of “constructive knowledge,” pursuant to which the law will “impute knowledge . . . to a person who fails to learn something that a reasonably diligent person would have learned.”  Id.  The Court further emphasized that “Congress has repeatedly drawn a linguistic distinction between what an ERISA plaintiff actually knows and what he should actually know.”  Id. at *5.  Although petitioners argued that a plaintiff should be deemed to have actual knowledge if he merely possessed the financial disclosures in question, the Court concluded “if a plaintiff is not aware of a fact, he does not have ‘actual knowledge’ of that fact however close at hand the fact might be.”  Id.

    The Court further clarified that “[n]othing in this opinion forecloses any of the usual ways to prove actual knowledge at any stage in the litigation.”  Id. at *6.  For example, the Court noted that a plaintiff could be called to testify under oath as to whether he had read the disclosure, and actual knowledge can be proved through inference from circumstantial evidence.  Id.  The Court also noted that the decision would not “preclude defendants from contending that evidence of ‘willful blindness’ supports a finding of ‘actual knowledge.’” Id. at *7.  The Court concluded, however, that it was unnecessary to consider any of those theories, as petitioners had argued that they need not offer any such proof—which the Court held was “incorrect.”  Id.