Summary
This Supreme Court opinion resolves a circuit split regarding pleading standards under the Employee Retirement Income Security Act (ERISA). The Court held that plaintiffs alleging prohibited transactions under ERISA §1106(a)(1)(C) need only plead the elements of the prohibition itself, as the statutory exemptions in §1108 constitute affirmative defenses that defendants must raise and prove. Consequently, the Court reversed the Second Circuit's requirement that plaintiffs affirmatively plead the inapplicability of these exemptions.
Topics
Practice areas
Questions Presented
- Whether a plaintiff must plead that §1108(b)(2)(A) does not apply to survive a motion to dismiss a §1106(a)(1)(C) claim.
Holdings
- A plaintiff need only plausibly allege the three elements of §1106(a)(1)(C); the §1108 exemptions are affirmative defenses that defendants must plead and prove.
Key quotations
“The Court holds that §1108 sets out affirmative defenses, so it is defendant fiduciaries who bear the burden of pleading and proving that a §1108 exemption applies to an otherwise prohibited transaction under §1106.” (5)
“Plaintiffs need only plausibly allege each of those elements of a prohibited‑transaction claim.” (5)
Factual background
Cornell retained TIAA and Fidelity as recordkeepers for two defined‑contribution retirement plans, paying fees that plaintiffs alleged were substantially higher than reasonable. Plaintiffs claimed the plans engaged in prohibited transactions under ERISA §1106(a)(1)(C).
Procedural history
Petitioners sued Cornell and plan fiduciaries alleging prohibited transactions under ERISA §1106(a)(1)(C). The district court dismissed the claim; the Second Circuit affirmed, holding that plaintiffs must also plead that §1108(b)(2)(A) exemption does not apply. The Supreme Court granted certiorari to resolve the pleading requirement.
Remand instructions
Remand for further proceedings consistent with this opinion.