In a unanimous decision, the U.S. Supreme Court on April 17 clarified that plaintiffs bringing prohibited transaction claims under the Employee Retirement Income Security Act (ERISA) do not have to satisfy additional pleading requirements. Reviving plaintiffs’ claims, the high court rejected concerns that its decision would result in a flood of litigation.

“This decision makes it easier for plaintiffs to plead prohibited transactions related to service provider contracts with plans, because all they need to plausibly allege is that plan fiduciaries caused the plan to enter into a transaction with a service provider for goods, services, or facilities,” said Joanne Roskey, an attorney with Miller & Chevalier in Washington, D.C.

District courts have procedural tools at their disposal to dismiss meritless cases, such as ordering plaintiffs to file replies to defendants’ answers to complaints, Roskey noted. But, she added, “We may also hear more talk of having Congress enact a legislative fix to ERISA” to circumvent this decision.

Case Background

In Cunningham v. Cornell University, Cornell employees sued the university and other plan fiduciaries, alleging that they violated 29 U.S.C. Section 1106(a)(1)(C) by causing the plans to engage in prohibited transactions for recordkeeping services. “Because TIAA [Teachers Insurance and Annuity Association of America] and Fidelity are service providers and hence parties in interest,” they argued, “their furnishing of recordkeeping...

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