Seyfarth Synopsis: On February 26, 2020, the Supreme Court unanimously affirmed the Ninth Circuit’s ruling in Intel Corp. Investment Policy Committee, et al. v. Sulyma. 589 U.S. ___ (2020), holding that plan participants must read plan disclosures to have the “actual knowledge” required to trigger ERISA’s shorter 3-year limitation period for breach of fiduciary duty claims. ERISA’s 3-year statute of limitations is triggered when a plaintiff has “actual knowledge” of the alleged breach (29 U.S.C. § 1113(2)); however, without actual knowledge, a 6-year limitations period applies. The Court found that plan participants who have access to plan disclosures but do not read them cannot be said to have “actual knowledge ” of their contents. This interpretation of “actual knowledge” reduces protections conferred by proper disclosures on diligent fiduciaries, and will raise fact questions in many cases where plaintiffs had access to disclosures that clearly put them on notice of alleged fiduciary breaches.

Plaintiff Christopher Sulyma filed a putative class action in October 2015, alleging that Intel’s investment committee and other plan administrators breached their fiduciary duties by utilizing “alternative investments” that lagged behind high-performing index funds. The Northern District of California granted summary judgment to the committee based on plan disclosures that clearly revealed the disputed investments and were published more than three years before the plaintiff filed suit. The Ninth Circuit reversed the ruling, finding that Sulyma’s deposition testimony that he did not recall reviewing plan disclosures created a dispute of fact as to his “actual knowledge” and precluded summary judgment.

Affirming the Ninth Circuit, the Supreme Court unanimously found in an opinion authored by Justice Alito that although ERISA does not define “actual knowledge,” it plainly requires awareness of the “relevant facts” provided in the plan’s disclosures. In addition, Congress’s language in ERISA clearly identifies whether a particular statute of limitations is triggered by what a plaintiff actually knows or what he reasonably should know. The language in § 1113(2), however, clearly notes that only a plaintiff’s “actual knowledge” triggers the 3-year limitations period for a fiduciary breach action, rather than what he should have known from disclosures provided to him.

Justice Alito, however, stressed that that a participant’s assertion that he did not know about the disclosed information related to the alleged breach might not be the end of the story. “Actual knowledge” may be proved through inference from circumstantial evidence. For instance, electronic records may show that a plaintiff reviewed plan disclosures and acted in response. If a plaintiff’s denial of knowledge is “blatantly contradicted” by the factual record, the Supreme Court instructed trial courts to act accordingly.

The case provides succor to the plaintiffs’ bar because the Court could have found that mere delivery of plan disclosures triggers the three-year limitations period. While disclosures are not an automatic shield, they form an important part of the defense in most cases. To rebut claims of lack of knowledge, plans may wish to consider adopting electronic procedures to confirm that participants have reviewed disclosures, such as requiring participant acknowledgments.