On April 17, 2025, the Supreme Court unanimously reversed and remanded the Second Circuit's dismissal of an ERISA claim that was brought by plan participants alleging that their employer and other plan fiduciaries violated '1106(a)(1)(C) 1 by causing the plans to engage in prohibited transactions for recordkeeping services. Cunningham v. Cornell Univ., 145 S. Ct. 1020 (2025) (Sotomayor, J.). The Second Circuit had held that "the exemptions to '1106(a)'s prohibited transactions contained in '1108 imposed additional pleading requirements." Disagreeing, the Court held "that plaintiffs seeking to state a '1106(a)(1)(C) claim must plausibly allege that a plan fiduciary engaged in a transaction proscribed therein, no more, no less. Plaintiffs are not required to plead and prove that the myriad '1108 exemptions pose no barrier to ultimate relief."
Litigation Background and Procedural History
In 2017, current and former employees who participated in their university employer's defined-contribution retirement plans sued the university and other plan fiduciaries alleging that they violated '1106(a)(1)(C) by causing the plans to engage in prohibited transactions for recordkeeping services. In 2011, the university had retained two financial services companies to offer investment options to plan participants and the companies also served as recordkeepers for the plans by, among other things, tracking account balances and providing account statements. Plaintiffs claimed that the companies' furnishing of recordkeeping and administrative services was a prohibited transaction unless the university proved an exemption. The district court granted defendants' motion to dismiss the '1106(a)(1)(C) claim, finding...
