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As many of you may know, companies often fund their long-term and short-term disability policies by having the plan fiduciaries invest the company money in order to grow it over the long term to be able to pay benefits. Sometimes, these fiduciaries recklessly invest the money and it ends up significantly reduced or lost altogether, so that the company has no money to pay employee benefits. How long would an employee of a company have to bring a suit against these fiduciaries for dissipating this money?
The U.S. Supreme Court has addressed this issue in the case of Intel Corporation Investment Policy Committee v. Sulyma, case no. 18-1116. decided in the spring of 2020.
Under ERISA Section (413(2), a claim for breach of fiduciary duty can be brought within six years of the date of the breach. However, the statute of limitations date is shortened if the plaintiff in the suit had “actual knowledge” of the breach. The problem is that ERISA does not define what is meant by “actual knowledge.”
In this case, Sulyma filed suit within the six year limitations period, but outside the three year limitations period. The fiduciary argued that the three year limitations period should apply because Sulyma had received disclosures of the investments which would have given him actual knowledge of the bad investments. Sulyma testified that he did not recall reviewing these disclosures.
The district court granted summary judgment to the fiduciary, but the Ninth Circuit Court of Appeals reversed this. The Supreme Court unanimously affirmed this reversal. The Supreme Court held that the phrase “actual knowledge” means that the plaintiff must actually know about the alleged breach in order for the three-year statute of limitations to start. In coming to this conclusion, the Supreme Court rejected the argument that Section 413(2) of ERISA should be considered a “constructive-knowledge requirement” and that once a plaintiff receives a disclosure, he has the requisite knowledge since “he could acquire it with reasonable effort.” Evidence that the plaintiff had been provided with the relevant information is not sufficient for this purpose without additional evidence that the plaintiff actually read the materials that were provided. The decision states that the phrase “actual knowledge” must be given its plain meaning: “[r]eal knowledge as distinguished from presumed knowledge or knowledge imputed to one.”