The U.S. Supreme Court is being asked to rule on the ERISA version of the famous question, "What did he know and when did he know it?"
Intel Corp.'s investment policy committee asked the court Tuesday to review litigation involving a participant in two Intel defined contribution plans.
The participant alleged that plan managers violated their ERISA obligations by offering too many alternative investments in the plans' lineups and that the plans' disclosures of investment information were inadequate. The investment policy committee has argued that the participant missed the three-year deadline for filing ERISA claims.
The participant sued on Oct. 29, 2015. A U.S. Magistrate Judge issued a summary judgment in March 2017, saying the participant had failed to file his complaint within the three-year limitations period covering allegations of fiduciary breaches. The judge said the participant had sufficient knowledge about the investments in the case of Christopher Sulyma vs. Intel Corp. Investment Policy Committee et al.
However, a three judge panel of the 9th Circuit Court of Appeals reversed and remanded the decision in November.
The panel said the participant lacked sufficient knowledge of the investments according to ERISA standards, adding that the lower court judge erred in supporting the three-year limitation.
The Intel petition to the Supreme Court said the 9th Circuit Court of Appeals decision conflicts with a 2010 opinion by the 6th Circuit Court of Appeals in a similar case involving the ERISA limitations standard. Given this so-called circuit split, Intel said the Supreme Court should act to achieve uniformity.
The 9th Circuit Court of Appeals ruling "provided plaintiffs with an easy-to-execute and difficult-to-refute tactic for evading (ERISA's) statute of limitations," the Intel petition said. "That is the definition of an intolerable conflict."
Plan fiduciaries are being blamed even though "all of the relevant information was disclosed to the plaintiff by the defendants more than three years before the plaintiff filed the complaint," the petition said. "The plaintiff chose not to read or could not recall having read the information."
The case focuses on the interpreting the legal standard called "actual knowledge." The U.S. Magistrate judge said the participant had it; the 9th Circuit Court of Appeals panel said he didn't.
"We agree that Intel's evidence demonstrates that Sulyma had sufficient information available to him to know about the allegedly imprudent investments before Oct. 29, 2012," the start of the three-year period prior to the filing of the original lawsuit, the appeals court wrote.
"However, that is insufficient" to meet the ERISA standard, the court wrote. "He was required to have actual knowledge both that those investments occurred and that they were imprudent."
The appeals court acknowledged Mr. Sulyma's claim that he was '"unaware" that some of his 401(k) investments were in hedge funds or private equity and that he "did not recall" seeing any documents from the Intel plans describing the investment strategy
"If Sulyma in fact never looked at the documents Intel provided, he cannot have had 'actual knowledge of the breach' because he cannot have been aware that imprudent investments were made and that other Intel fiduciaries were failing to monitor or remedy that imprudence," the appeals court wrote. "Because there was a dispute of material fact over Sulyma's actual knowledge, the district court erred by entering summary judgment in favor of Intel on these claims."
