Actual knowledge This is a limited preview — please sign in or subscribe to learn everything we know about the term “ actual knowledge ”. General legal English. Noting that plain statutory language must be enforced according to its terms, the Court cited regular and legal dictionary definitions indicating that “actual knowledge” means something that an individual is actually aware of, and is distinct from imputed or presumed knowledge.
01 Jul SCOTUS Defines “Actual Knowledge” for ERISA’s Three-Year Limitations Period
On February 26, 2020, the United States Supreme Court unanimously held in Intel Corporation Investment Policy Committee v. Sulyma, 140 S.Ct. 768 (2020) that to meet the “actual knowledge” requirement triggering the three-year limitations period in Section 413(2) of the Employment Retirement Income Security Act of 1974 (“ERISA”), a plaintiff must in fact become aware of the information contained in disclosures that he receives but does not read or cannot recall reading.
In Sulyma, Christopher Sulyma worked at Intel from 2010 to 2012 and participated in two retirement plans sponsored by Intel. The Intel Investment Policy Committee invested his retirement funds mostly in stocks and bonds, but also alternative assets like hedge funds, private equity, and commodities. Sulyma’s funds did not do well relative to other funds, so, in October 2015, he brought suit against the Committee and other plan administrators under ERISA for breach of fiduciary duty.
ERISA Section 413 provides that a plaintiff must file suit against a plan fiduciary for breach of fiduciary duty within six years of “the date of the last action which constituted a part of the breach or violation” (or, in the case of a breach by omission, “the latest date on which the fiduciary could have cured the breach or violation”). This filing deadline is accelerated to three years when the plaintiff gains “actual knowledge of the breach or violation.”
The defendants argued that ERISA Section 413(2) barred his suit because, while it was filed within the six-year period, it was outside of the three-year period, which applied because the defendants had sent, and Sulyma received, ERISA-mandated disclosures regarding the investment of his funds. Such disclosures included emails informing him that documents regarding investment of his funds were available to view on a third-party website as well as a summary plan description explaining how the funds were invested. Sulyma testified that he did not “remember reviewing” these disclosures and was “unaware” that his funds were being invested in alternative assets.
The District Court granted the defendants’ motion for summary judgment based on ERISA Section 413(2)’s three-year limitation period, but the Ninth Circuit reversed. The Supreme Court granted certiorari, affirmed the Ninth Circuit’s decision, and held that ERISA Section 413(2)’s language was plain and unambiguous, and “to have ‘actual knowledge’ of a piece of information, one must in fact be aware of it.”
Fmcsa Actual Knowledge
Justice Alito was careful to point out that nothing in the Court’s opinion was meant to prevent a party from proving actual knowledge through inference from circumstantial evidence such as evidence of disclosure, electronic records showing the plaintiff accessed the relevant disclosures, and evidence suggesting that the plaintiff took action in response to information in the disclosures. 2002 design driver download for windows. Justice Alito also noted that the Sulyma decision “does not preclude defendants from contending that evidence of ‘willful blindness’ supports a finding of ‘actual knowledge.’”
This decision and definition of “actual knowledge” in ERISA Section 413(2) is consistent with the Third Circuit’s jurisprudence on the issue. Air techniques driver download. SeeGluck v. Unisys Corp., 960 F.2d 1168 (3d. Cir. 1992) (finding “actual knowledge” requires plaintiff have actual knowledge of all material facts necessary to understand that some claim exists).
Plan fiduciaries should continue to keep track of disclosures sent to plan participants and beneficiaries in addition to storing electronic data that shows a participant or beneficiary accessed ERISA disclosures, if such disclosures are housed on a website.
Highlights
- U.S. Supreme Court unanimously affirmed the U.S. Court of Appeals for the Ninth Circuit's holding that the Employee Retirement Income Security Act of 1974's (ERISA) statutory three-year limitations period requires a demonstration of 'actual knowledge' of an alleged fiduciary breach to establish a claim as time-barred.
- The opinion in Intel Corp. Investment Policy Committee v. Sulyma invalidated a district court holding that proof of actual knowledge of facts forming the basis of a breach of fiduciary duty was unnecessary if all facts necessary to put a participant on notice of a fiduciary breach were otherwise disclosed.
- The ruling rejects a standard of 'constructive knowledge' and aligns with the majority of federal appellate courts that have addressed the issue.
The U.S. Supreme Court unanimously affirmed the U.S. Court of Appeals for the Ninth Circuit's holding that the Employee Retirement Income Security Act of 1974's (ERISA) statutory three-year limitations period requires a demonstration of 'actual knowledge' of an alleged fiduciary breach to establish a claim as time-barred. The Feb. 26, 2020, opinion in Intel Corp. Investment Policy Committee v. Sulyma invalidated a district court holding that proof of actual knowledge of facts forming the basis of a breach of fiduciary duty was unnecessary if all facts necessary to put a participant on notice of a fiduciary breach were otherwise disclosed. Rejecting a standard of 'constructive knowledge,' the Supreme Court aligned with the majority of federal appellate courts that have addressed the issue, holding that the plain meaning of the three-year limitations period expressly requires 'actual knowledge' of a breach.
The plaintiff in Sulyma was a participant in two employer 401(k) plans. He alleged that the plans' administrators imprudently invested assets in two of the 401(k) retirement plan investment options. The plan administrators countered that they had disclosed to participants in numerous communications and locations information about the plans' investments, and further established that the plaintiff had accessed on several occasions the websites that contained these disclosures. The plaintiff countered that he 'did not remember' reading the disclosures.
The district court granted summary judgment to the plan administrators based on ERISA's three-year actual knowledge statute of limitations, holding that the disclosures were sufficient to have put the participants on notice of a breach of fiduciary duty more than three years prior to the filing of the lawsuit. The Ninth Circuit reversed the district court's grant of summary judgment, holding that constructive knowledge did not satisfy the statute's requirement of actual knowledge and the lower court was required to assess whether the participant possessed actual knowledge of the breach.
The Supreme Court held that the meaning of the statute's requirement of actual knowledge was 'plain' and that '[d]ictionaries are hardly necessary to confirm the point, but they do.' The high court, therefore, concluded that to have 'actual knowledge' of a piece of information, one must in fact be aware of it,' and that 'imputed knowledge' (constructive knowledge) did not meet the standard. The Supreme Court further reasoned that while the plain meaning of the statute was clear on its face, the conclusion was further supported by the context of other ERISA statute of limitations provisions that expressly lower the bar to a 'constructive knowledge' standard.
As a result of the holding, the Supreme Court confirmed that defendants will need to establish that participants read plan disclosures to bar a claim under the three-year limitation period, something it notes can be established through 'inference from circumstantial evidence.' Accordingly, the Supreme Court confirmed that '[e]vidence of disclosure would no doubt be relevant, as would electronic records showing that a plaintiff viewed the relevant disclosures .. .' Interestingly, the Supreme Court also wrote that nothing in its opinion would preclude an argument that evidence of 'willful blindness' (which generally would require a showing that the plaintiff subjectively believed that there is a high probability a fact exists and takes deliberate actions to avoid learning of that fact) could support a finding of actual knowledge.
The Supreme Court left for another day the question that has vexed (and split) the federal appellate courts for many years – what demonstration of actual knowledge is required to satisfy that prong of the three-year statute of limitations: 1) the lenient approach that plaintiff knew of the facts or transaction that formed the basis of the alleged breach, 2) a middle-ground approach requiring a showing of actual knowledge of the underlying facts of the breach plus something additional (which can vary depending on the court and circumstances) or 3) a strict interpretation requiring a showing that plaintiff knew of the underlying conduct of the breach and knew that it supported a cause of action under ERISA.
Actual Knowledge Without Inquiry
The Sulyma holding heightens the importance of developing evidence of disclosures and participant access to such disclosures (e.g., electronic evidence of site visits) that defendants can use to establish an inference of actual knowledge. Because of the standard applied at summary judgment, this holding is also likely to have the effect of a greater reliance on ERISA's fallback six-year statute of repose, which extinguishes fiduciary breach claims that are not brought within six years of the fiduciary breach.
Actual Knowledge Vs Best Knowledge
If you have any questions regarding the impact of this decision on your company or specific considerations for your qualified retirement plan, please contact the authors or another member of Holland & Knight's Employee Benefits and Executive Compensation Group.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.
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