Supreme Court’s Intel Decision Gives ERISA Class Action Defendants a Powerful New Weapon

On February 26, the U.S. Supreme Court decided Intel Corp. v. Sulyma and addressed an unsettled question about the three-year statute of limitations in the Employee Retirement Security Act (ERISA). Although the decision generally makes it harder to enforce the three-year limitations period, the decision could also prove incredibly valuable to ERISA defendants at the class certification stage.

The Intel case was one of many ERISA fee and expense class actions file over the last decade. Plaintiff alleged that plan fiduciaries breached their fiduciary duties by offering too many alternative investments. Many of the plan’s ERISA-required disclosures, however, told participants about those investments. Intel argued that, because of those disclosures, plaintiff’s claims were barred by ERISA's three-year statute of limitations, which required plaintiff to sue within three years of obtaining “actual knowledge” of a breach. Plaintiff claimed he could not have had actual knowledge because he did not recall reviewing the key disclosures.

The district court held that the claims were time-barred, but the U.S. Court of Appeals for the Ninth Circuit reversed. The Supreme Court then sided with plaintiff. The Court held that “actual knowledge” cannot be established merely by making disclosures available or through other forms of constructive knowledge. The decision arguably makes for bad policy: Why are employers required to send out all sorts of disclosures if participants can just claim not to have read them?

At the same time, the decision hands defendants in ERISA class actions a potentially powerful new class certification weapon. “Actual knowledge” now may depend on whether a participant read certain disclosures and that usually can be determined only through evidence specific to a particular participant. This means that whether a claim is time-barred will be a highly individual issue that will require mini-trials to resolve and thus cannot be decided on a classwide basis. Courts will now have to carefully scrutinize whether to certify ERISA class actions in which an actual knowledge issue is present.

In addition, practitioners should not overlook the last two paragraphs of the opinion, which strongly suggest that plaintiffs cannot defeat a summary judgment motion by simply claiming not to remember reviewing the pertinent disclosures. The Court made clear that there are many ways to satisfy the summary judgment standard, and if a plaintiff’s denial is “blatantly contradicted by the record,” summary judgment should still be granted. One option for employers to consider: providing disclosures electronically and requiring an acknowledgement that the participant has read and received them, as many click-wrap agreements do today.