ERISA

On April 17, 2025, the Supreme Court issued its opinion in Cunningham v. Cornell University, No. 23-1007, 604 U.S. ___ (2025), a case addressing the pleading standard for prohibited-transaction claims under § 406(a) of the Employee Retirement Income Security Act of 1974 (ERISA).  Section 406(a) proscribes certain transactions between plans and “parties in interest” absent a statutory exemption enumerated under ERISA § 408.  The core question on appeal was whether plaintiffs must allege, as an element of a prohibited-transaction claim under § 406(a), that an exemption under § 408 does not render the challenged transaction lawful.

In a decision that is expected to have wide-ranging implications, the Court held that exemptions under § 408 provide affirmative defenses to liability under § 406(a).  Consequently, plaintiffs need not allege that any of the exemptions set forth in § 408 are unavailable to state a plausible claim for relief.  Rather, the burden falls on plan fiduciary defendants to plead and prove that an exemption under § 408 nullifies a plaintiff’s claim.Continue Reading A Closer Look:  Supreme Court Rejects Heightened Pleading Standard for Prohibited-Transaction Claims under ERISA § 406(a)

Last week, a divided Second Circuit panel affirmed a district court ruling denying a motion to compel arbitration of a putative class action seeking classwide equitable remedies under ERISA for alleged mismanagement of an employee stock ownership plan.  The Second Circuit found the defined contribution plan’s mandatory arbitration clause unenforceable because it limited plaintiff’s ability to assert a claim that would result in any relief other than individual relief, and specifically prevented him from pursuing the plan-wide remedy authorized by ERISA Section 502(a)(2).  The Court’s decision extends the “effective vindication exception” and raises questions about the extent to which plans can force individual arbitration of ERISA claims that apply to an entire plan.  

In Cedeno v. Sasson, 2024 WL 1895053 (2d Cir. May 1, 2024), the plaintiff asserted claims under ERISA Sections 502(a)(2) and 409(a), alleging that defendants breached fiduciary duties by purchasing stock shares for purportedly more than fair market value, saddling the Plan with tens of millions of dollars of debt and decreasing its value. Continue Reading Second Circuit Blocks Use of Arbitration Clause to Prevent Class Action ERISA Claims

The Second Circuit recently vacated a district court ruling certifying a class of thousands of employee benefit plans whose fiduciaries contracted with the Teachers Insurance and Annuity Association of America (TIAA) to provide collateralized loans to plan participants, in a case that clarifies how courts must analyze challenges to Rule…

Continue Reading Second Circuit Clarifies Predominance Analysis in Decision Overturning Class Certification of 8,000 Retirement Plans