The source of uncertainty — and a reason the Supreme Court agreed to hear the case, though date for oral arguments has been set — is a "circuit split," conflicting rulings among federal appeals courts on cases with similar allegations.
The court agreed to hear the Northwestern case because different appeals courts made different decisions on the trial-worthiness of alleged ERISA violations regarding excessive fees, poor-performing investment options, too many record keepers and/or inattentive management.
In the Northwestern case, participants in two university 403(b) plans sued in 2016, but a U.S. District Court judge dismissed the case in May 2018. The 7th U.S. Circuit Court of Appeals in Chicago upheld the decision in May 2020, saying there was "no error" in the judge's ruling.
The participants petitioned the Supreme Court in August 2020, saying the 7th Circuit's decision clashed with rulings by two other federal appellate courts, which allowed cases to proceed involving similar complaints against other universities' 403(b) plans.
In one of those cases, Jennifer Sweda et al. vs. Jack Heuer et al., the University of Pennsylvania announced in January 2021 that it would pay a $13 million settlement. Ms. Sweda is a participant in a university 403(b) plan; Mr. Heuer is vice president of human resources for the university.
Current and former participants sued in 2016, alleging a series of ERISA violations in plan management. A U.S. District Court judge in Philadelphia dismissed the case in 2017. However, the 3rd U.S. Circuit Court of Appeals in Philadelphia reversed the lower court's ruling on some allegations covering excessive administrative fees, failing to "comprehensively review" plan management, failing to use the plan's size to negotiate lower fees and keeping high-cost investment options when cheaper, better-performing investments were available.
The university asked the U.S. Supreme Court to review the appeals court's decision, but the request was denied in March 2020.
In the other case, the 8th U.S. Circuit Court of Appeals in St. Louis in May 2020 reversed part of a U.S. District Court judge's September 2018 ruling that dismissed the entire complaint in Davis et al. vs. Washington University in St. Louis et al.
The appeals court said plaintiffs made a valid argument about excessive fees, but it upheld the dismissal of the allegation that the university's 403(b) plan kept too many poor-performing investments in its menu. The appeals court remanded the case to the lower court, where it remains pending.