Unanimous US Supreme Court adopts higher bar to dismiss ERISA claims

The U.S. Supreme Court on April 17, 2025, revived a class action by 28,000 Cornell University employees accusing the school's retirement plans of paying excessive fees for recordkeeping and other services.

The Employee Retirement Income Security Act of 1974 (ERISA), a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry, has as its main purpose the protection of the financial well-being of individuals participating in qualified plans by establishing rules and procedures to prevent fraud and mismanagement.

Justice Sonia Sotomayor wrote the opinion stating that plaintiffs in such lawsuits have no obligation to allege that exemptions from the federal law governing employee benefit plans do not apply, because the exemptions are affirmative defenses that must be raised by plans themselves when they move to dismiss lawsuits, resolving a circuit split on the issue.

The justices reversed a ruling by the New York-based 2nd U.S. Circuit Court of Appeals that had dismissed the class action filed against Cornell in 2016. The 2nd Circuit had agreed with Cornell and three other federal appeals courts that the plaintiffs were required to plead in their lawsuit that the school did not qualify for any statutory exemptions under ERISA.

Sotomayor wrote that Cornell's "proposed approach would require plaintiffs to plead and dispute myriad exceptions before knowing which of them the defendant will seek to invoke. That would be especially illogical here, where several of the exemptions turn on facts one would expect to be in the fiduciary's possession."

"The U.S. Supreme Court on April 17, 2025, revived a class action by 28,000 Cornell University employees"

In a 2022 decision involving Northwestern University, the justices unanimously ruled that offering workers a broad range of choices for their retirement investments does not shield employers from claims that specific options are imprudent because they come with high fees.

The case, Cunningham v. Cornell University, U.S. Supreme Court, No. 23-1007, can be seen HERE