Amicus Curiae Brief — Casey Cunningham, et al., Petitioners v. Cornell University, et al.

Supreme Court briefNov 26, 2024

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23-1007

IN THE

Supreme Court of the United States

_______________________

CASEY CUNNINGHAM, ET AL.,

Petitioners,

CORNELL UNIVERSITY, ET AL.,

Respondents.

_________________________

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

__________________________________

BRIEF OF AMICI CURIAE AARP AND AARP

FOUNDATION IN SUPPORT OF PETITIONERS

___________________________________

LOUIS LOPEZ

Counsel of Record

WILLIAM ALVARADO RIVERA

STEFAN SHAIBANI

VICTORIA WILLIAMSON

AARP FOUNDATION

601 E STREET NW

Washington, DC 20049

(202) 434-6666

llopez@aarp.org

November 26, 2024

Counsel for Amici Curiae

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ...................................... iii

STATEMENT OF INTEREST .................................... 1

SUMMARY OF ARGUMENT ..................................... 2

ARGUMENT ................................................................ 3

ERISA’S PLAIN TEXT AND PURPOSE

FORECLOSE THE SECOND CIRCUIT’S

HEIGHTENED PLEADING STANDARD

FOR PROHIBITED TRANSACTION

CLAIMS UNDER SECTION 1106(a) .............. 3

A. Under a Plain Reading of Section

1106(a) of ERISA, Plan Participants

State a Plausible Prohibited Transaction

Claim Without Pleading or Negating

the Applicability of Section 1108(b)’s

Exemptions ................................................. 4

B. A Heightened Pleading Standard for

Prohibited Transaction Claims under

Section 1106(a) Is Contrary to the

Common Law of Trusts, on Which

ERISA’s Framework is Built .................... 10

II.

THE SECOND CIRCUIT’S HEIGHTENED

PLEADING STANDARD FOR PROHIBITED

TRANSACTION CLAIMS UNDER SECTION

1106(a) UNDERMINES ERISA’S

ENFORCEMENT SCHEME AND HURTS

RETIREMENT INVESTORS ........................ 12

A. ERISA’s Enforcement Scheme Relies on Plan

Participants’ Ability to Enforce Fiduciary

Duties Without Having to Surmount

Unnecessarily High Pleading Standards ..... 13

B. Imposing a Heightened Pleading Standard

On Plan Participants Would Harm Retirees

Who Rely Heavily on Plan Funds for

Financial Security Now More Than Ever .... 18

CONCLUSION .......................................................... 23

iii

TABLE OF AUTHORITIES

Page

CASES

Allen v. GreatBanc Tr. Co.,

835 F.3d 670 (7th Cir. 2016) ........................ 6, 8

Ashcroft v. Iqbal,

556 U.S. 662 (2009) .......................................... 6

Beck v. PACE Int’l Union,

551 U.S. 96 (2007) .......................................... 10

Bell Atl. Corp. v. Twombly,

550 U.S. 544 (2007) .......................................... 6

Braden v. Wal-Mart Stores, Inc.,

588 F.3d 585

(8th Cir. 2009) ........................ 5, 6, 9, 10, 14, 16

Cent. States, Se. & Sw. Areas Pension Fund

v. Cent. Transp., Inc.,

472 U.S. 559 (1985) ........................................ 10

Clark v. Duke Univ.,

No. 1:16-cv-01044,

(M.D.N.C. June 4, 2019) .............................. 17

Comm’r of Internal , Revenue v. Keystone

Consol. Indus., Inc.,

508 U.S. 152 (1993) ........................................4-5

Conkright v. Frommert,

559 U.S. 506 (2010) ........................................ 12

Cunningham v. Cornell Univ.,

86 F.4th 961 (2d Cir. 2023) ...................... 7-8, 9

Daugherty v. Univ. of Chi.,

No. 1:17-cv-03736 (N.D. Ill. Aug. 15, 2018)

Firestone Tire & Rubber Co. v. Bruch,

489 U.S. 101 (1989) ........................................ 10

Fort Halifax Packing Co., Inc. v. Coyne,

482 U.S. 1 (1987) .............................................. 3

Guidry v. Sheet Metal Workers Nat. Pension Fund,

493 U.S. 365 (1990) .......................................... 9

Harris Tr. & Sav. Bank v. Salomon Smith

Barney, Inc.,

530 U.S. 238 (2000) ................................... 4, 5, 9

Howard v. Shay,

100 F.3d 1484 (9th Cir. 1996) ........................... 5

Hughes v. Northwestern Univ.,

595 U.S. 170 (2022) ................................... 11, 17

Hughes v. Northwestern Univ.,

63 F.4th 615 (7th Cir. 2023) .......................... 17

Intel Corp. Inv. Pol’y Comm. v. Sulyma,

140 S. Ct. 768 (2020) ........................................ 7

LaRue v. DeWolff, Boberg & Assocs., Inc.,

552 U.S. 248 (2008) ........................................ 20

Lockheed Corp. v. Spink,

517 U.S. 882 (1996) .......................................... 4

Lowen v. Tower Asset Management, Inc.,

829 F.2d 1209 (2d Cir. 1987) ........................5-6

Massachusetts Mut. Life Ins. Co. v. Russell,

473 U.S. 134 (1985) ........................................ 14

Nachman Corp. v. Pension Benefit Guar. Corp.,

446 U.S. 359 (1980) .......................................... 4

Pension Benefit Guar. Corp. v. Morgan

Stanley Inv. Mgmt., Inc.,

712 F.3d 705 (2d Cir. 2013) ............................. 6

Perez v. Bruister,

823 F.3d 250 (5th Cir. 2016) ............................ 6

Pilot Life Ins. Co. v. Dedeaux,

481 U.S. 41 (1987) ........................ 12, 13, 14, 18

Short v. Brown Univ.,

No. 1:17-cv-00318-WES-PAS

(D.R.I. Aug. 2, 2019) ...................................... 17

Tibble v. Edison Int’l,

575 U.S. 523 (2015) ............................ 10, 11, 20

Varity Corp. v. Howe,

516 U.S. 489 (1996) .............................. 3, 10, 16

LEGISLATIVE HISTORY

120 Cong. Rec. 29197 (1974) ...................................... 3

S. Rep. No. 93-127 (1973) ................................... 13, 14

H.R. Rep. No. 93-533 (1974) ............................... 13, 14

Investigating Challenges to American Retirement

Security Before the Subcomm. On Social Security,

Pensions, and Family Policy,

S. Fin. Comm., 116th Cong. (2020) ........................... 18

STATUTES AND REGULATIONS

Employee Retirement Income Security Act

of 1974 (ERISA),

29 U.S.C. §1001, et seq. .................................... 2

29 U.S.C. § 1001(a) .......................................... 3

29 U.S.C. § 1001(b) .................................... 4, 18

29 U.S.C. § 1002(b) ........................................... 4

29 U.S.C. § 1002(14)(B) ................................... 5

29 U.S.C. § 1104 ............................................... 3

29 U.S.C. § 1104(a)(1)(A) ............................... 10

29 U.S.C. § 1104(a)(1)(B) ............................... 11

29 U.S.C. § 1106(a) .......... 3, 4, 5, 7, 8, 9, 10, 14

29 U.S.C. § 1106(a)(1)(C) ............................. 5, 6

vii

29 U.S.C. § 1108 .............................................. 5

29 U.S.C. § 1108(b)(2)(A) ..................... 5, 7, 8, 9

29 U.S.C. § 1109(a) .................................. 12, 14

29 U.S.C. § 1132(a) ........................................ 16

29 U.S.C. § 1132(a)(1)(b) ............................... 12

29 U.S.C. § 1132(a)(2) ............................... 12, 14

TREATISE

Restatement (Third) of Trusts § 78 (2007) .............. 11

MISCELLANEOUS

Bureau of Labor Statistics,

EBS Latest Numbers,

https://www.bls.gov/ebs/latest-numbers.htm

(last visited Oct. 29, 2024) ............................. 16

Mark Debofsky,

Expert Insights—Hughes v. Northwestern

University—the Seventh Circuit Upholds

Plaintiffs’ Excessive Fee Claims,

Empl. Benefits Mgmt. 4903361 (2023) ......... 17

viii

Mindy Fetterman,

How Older Adults Are Changing America,

AARP Bulletin, Sep. 2023,

https://www.aarp.org/politicssociety/history/info-2023/older-adultschangingamerica.html?msockid=1d9456174635606a340

b42fc47ac61af .................................................... 21

Alicia H. Munnell, Anqi Chen, & Wenliang Hou,

How Widespread Unemployment Might Affect

Retirement Security,

Ctr. for Ret. Rsch. at B.C.,

July 2020,

https://crr.bc.edu/wpcontent/uploads/2020/06/IB_20-11.pdf .......... 22

Alicia H. Munnell, Wenliang Hou, and Geoffrey T.

Sanzenbacher,

How Would More Saving Affect the National

Retirement Risk Index?,

Ctr. for Ret. Rsch. at B.C.,

Oct. 2019,

https://crr.bc.edu/wpcontent/uploads/2019/10/IB_19-16.pdf .......... 22

Public Hearing on Improving Investment Advice for

Workers and Retirees: Prohibited Transaction

Class Exemption Before the U.S. Dep’t of

Labor Employee Benefits Security

Administration (2020)

(oral testimony of David Certner, AARP) ...... 19

Surv. Rsch. Ctr., Inst. for Social Rsch., Univ. of

Mich.,

The Health and Retirement Study: Aging in the

21st Century (2017) ................................................ 22

U.S. Dep’t of Labor,

EBSA Restores Over $1.4 Billion to Employee

Benefit Plans, Participants, and Beneficiaries,

https://www.dol.gov/sites/dolgov/files/EBSA/ab

out-ebsa/our-activities/resource-center/factsheets/ebsa-monetary-recoveries.pdf

(last visited Oct. 29, 2024) ............................... 16

U.S. Dep’t of Labor,

PWBA TASK FORCE ON ASSISTANCE TO

THE PUBLIC (1992) ...................................... 15

U.S. Gen. Accounting Office, 4 GAO-02-232,

PENSION AND WELFARE BENEFITS

ADMINISTRATION—OPPORTUNITIES

EXIST FOR IMPROVING MANAGEMENT

OF THE ENFORCEMENT

PROGRAM (2002) ........................................... 15

U.S. Gov’t Accountability Office, GAO-07-22,

EMPLOYEE BENEFITS SECURITY

ADMINISTRATION—ENFORCEMENT

IMPROVEMENTS MADE BUT ADDITIONAL

ACTIONS COULD FURTHER ENHANCE

PENSION PLAN OVERSIGHT (2007) ......... 15

U.S. Gov’t Accountability Office, GAO-21-376,

EMPLOYEE BENEFITS SECURITY

ADMINISTRATION: ENFORCEMENT

EFFORTS TO PROTECT PARTICIPANTS’

RIGHTS IN EMPLOYER-SPONSORED

RETIREMENT AND HEALTH BENEFIT

PLANS (2021) ................................................ 15

Holly Yeager,

Mutual Fund Fees Still Hard to Challenge,

AARP Bulletin, Apr. 2010,

https://www.aarp.org/content/aarpe/en/home/p

olitics-society/advocacy/info-042010/mutual_fund_fees_still_hard_to_challeng

e.html ............................................................. 19

Edward A. Zelinsky, The Defined Contribution

Paradigm, 114 YALE L.J. 451 (2004) ........... 20

STATEMENT OF INTEREST 1

AARP is the nation’s largest nonprofit,

nonpartisan organization dedicated to empowering

Americans age 50 and older to choose how they live as

they age. With a nationwide presence, AARP

strengthens communities and advocates for what

matters most to the more than 100 million Americans

50-plus and their families: health and financial

security, and personal fulfillment. AARP’s charitable

affiliate, AARP Foundation, works for and with

vulnerable people over 50 to end senior poverty and

reduce financial hardship by building economic

opportunity.

AARP and AARP Foundation seek to increase

the financial security of older individuals’ retirement,

pension, and other employee benefit plans through

participation as amicus curiae in federal and state

courts. One of amici’s main objectives is to ensure that

plan participants receive all the benefits they are

entitled to in retirement. To achieve this goal, amici

work to ensure that fiduciaries manage and

administer plans loyally and prudently in accordance

with the requirements outlined in the Employee

1 Pursuant to Supreme Court Rules 37.2 and 37.6, no counsel for

any party authored the brief in whole or in part. In addition, no

person or entity, other than amici, their members, and their

counsel, has made any monetary contribution to the preparation

or submission of this brief. Counsel for all parties were given

timely notice of our intent to file this brief.

Retirement Income Security Act of 1974 (ERISA), 29

U.S.C. §1001, et seq.

SUMMARY OF ARGUMENT

ERISA established broad protections against

mismanagement and abuse in retirement and pension

plans. The statute’s plain text and remedial purpose

foreclose attempts to impose a heightened pleading

requirement on plan participants to identify and

negate a fiduciary’s myriad affirmative defenses to

transactions that are deemed prohibited under the

statute. Imposition of such an onerous standard is also

contrary to the common law of trusts, which

undergirds ERISA’s statutory framework. Requiring

that plan participants plead information that lies

solely within the control of fiduciaries at the outset of

a case improperly shifts the burden in ERISA cases

and will effectively exclude potentially meritorious

claims and absolve plans for breaches of their

fiduciary duties under the statute.

Now, more than ever, the amount of retirement

income being saved is insufficient for an increasing

segment of the U.S. population. Older Americans need

strong statutory safeguards, including protections

against breaches of fiduciary obligations. Imposing

roadblocks for plan participants to bring causes of

action to protect their retirement and pension plans is

contrary to what Congress intended when enacting

ERISA. Perhaps more telling, a heightened pleading

standard will result in significant financial losses to

retirement savers, many of whom already face

substantial financial hurdles as they age, including

the ability to work and earn additional income during

their retirement.

ARGUMENT

ERISA’S PLAIN TEXT AND PURPOSE

FORECLOSE THE SECOND CIRCUIT’S

HEIGHTENED PLEADING STANDARD

FOR

PROHIBITED

TRANSACTION

CLAIMS UNDER SECTION 1106(a).

Fifty years ago, Congress enacted ERISA to

address public concern that the funds of private

pension plans were being mismanaged and abused.

The statute’s detailed framework recognizes that “the

continued well-being and security of millions of

employees and their dependents are directly affected

by [such employee benefit] plans.” 29 U.S.C. § 1001(a).

To protect the interest of employees and their

beneficiaries, ERISA’s plain language imposes duties

of loyalty and prudence on fiduciaries who manage

these plans. See 29 U.S.C. § 1104. ERISA’s fiduciary

standards were intended to “prevent abuses of the

special responsibilities borne by those dealing with

plans.” Fort Halifax Packing Co., Inc. v. Coyne, 482

U.S. 1, 15 (1987) (quoting 120 Cong. Rec. 29197

(1974)).

ERISA’s remedial purpose is “to protect the

interests of participants and beneficiaries by

establishing standards of conduct, responsibility and

obligations for fiduciaries and providing for

appropriate remedies and ready access to federal

courts.” Varity Corp. v. Howe, 516 U.S. 489, 513 (1996)

(cleaned up) (quoting 29 U.S.C. § 1002(b)).

Accordingly, one of ERISA’s core enforcement goals is

to remedy participants’ injuries resulting from a

breach of one of these duties by plan fiduciaries. See

29 U.S.C. § 1001(b). ERISA seeks to “ensure that

employees will not be left empty-handed once

employers have guaranteed them certain benefits.”

Lockheed Corp. v. Spink, 517 U.S. 882, 887 (1996); see

also Nachman Corp. v. Pension Benefit Guar. Corp.,

446 U.S. 359, 361, 374-75 (1980) (ERISA was enacted

to prevent the “great personal tragedy” suffered by

employees whose retirement benefits were not paid).

Given this broad remedial purpose, the imposition of

extra-textual heightened pleading requirements on

plan participants to simply bring a prohibited

transaction claim would be inconsistent with the plain

language of section 1106(a) and congressional intent.

Under a Plain Reading of Section

1106(a) of ERISA, Plan Participants

State

Plausible

Prohibited

Transaction Claim Without Pleading

or Negating the Applicability of

Section 1108(b)’s Exemptions.

When interpreting remedial statutes, courts

start with the statutory language. “In ERISA cases, as

in any case of statutory construction, our analysis

begins with the language of the statute.” Harris Tr. &

Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S.

238, 254 (2000). Congress enacted “broad language” in

the statute to “bar categorically [any] transaction that

was likely to injure the pension plan.” Comm’r of

Internal Revenue v. Keystone Consol. Indus., Inc., 508

U.S. 152, 160 (1993). More specifically, section 1106(a)

enumerates various prohibited transactions between

an employee benefit plan and a party in interest. As

relevant in this case, this provision bars transactions

that constitute a “furnishing of goods, services, or

facilities between the plan and a party in interest.” 29

U.S.C. § 1106(a)(1)(C). ERISA defines “party in

interest” broadly to include a variety of parties that

may contract with or provide services to a plan. 29

U.S.C. § 1002(14)(B). Notably, “Congress defined

‘party in interest’ to encompass those entities that a

fiduciary might be inclined to favor at the expense of

the plan’s beneficiaries.” Harris Tr., 530 U.S. at 242.

In a separate provision of ERISA, Congress

enumerated various exemptions to the prohibited

transactions listed in section 1106(a). In section

1108(b), and as relevant in this case, Congress

provided an exemption for “[c]ontracting or making

reasonable arrangements with a party in interest for

office space, or legal, accounting, or other services

necessary for the establishment or operation of the

plan, if no more than reasonable compensation is paid

therefor.” 29 U.S.C. § 1108(b)(2)(A). These exemptions

are considered affirmative defenses to the prohibited

transactions set forth in section 1106(a). See, e.g.,

Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 601

(8th Cir. 2009) (“the statutory exemptions established

by §1108 are defenses which must be proven by the

defendant”); Howard v. Shay, 100 F.3d 1484, 1489

(9th Cir. 1996) (“A fiduciary who engages in a selfdealing transaction . . . has the burden of proving that

he fulfilled his duties of care and loyalty.”); Lowen v.

Tower Asset Management, Inc., 829 F.2d 1209, 1215

(2d Cir. 1987); Allen v. GreatBanc Tr. Co., 835 F.3d

670, 675 (7th Cir. 2016); Perez v. Bruister, 823 F.3d

250, 262 (5th Cir. 2016).

Thus, ERISA’s plain language provides that a

plaintiff may bring a prohibited transaction claim by

alleging that a plan fiduciary engaged in a prohibited

transaction constituting the “furnishing of goods,

services, or facilities between the plan and a party in

interest[.]” 29 U.S.C. § 1106(a)(1)(C). At the initial

pleading stage, it is generally “sufficient for a plaintiff

to plead facts indirectly showing unlawful behavior,”

in part because “ERISA plaintiffs generally lack the

inside information necessary to make out their claims

in detail unless and until discovery commences.”

Braden, 588 F.3d at 595, 598. This standard is

typically met “if the complaint alleges facts that, if

proved, would show that an adequate investigation

would have revealed to a reasonable fiduciary that the

investment at issue was improvident.” Pension Benefit

Guar. Corp. v. Morgan Stanley Inv. Mgmt., Inc., 712

F.3d 705, 718 (2d Cir. 2013). This approach enables

plan participants who have been injured due to a

breach of fiduciary duty to fulfill ERISA’s remedial

purpose while still requiring that they provide more

than “mere conclusory statements.” Ashcroft v. Iqbal,

556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly,

550 U.S. 544, 555 (2007).

Here, Petitioners met their burden under the

statute by alleging that because TIAA and Fidelity are

service providers and hence parties in interest, their

furnishing of recordkeeping and administrative

services to the plans is a prohibited transaction unless

Cornell University proves an exemption. J.A. 145146.In Petitioners further asserted that Cornell

“failed to seek bids from other recordkeepers,”

neglected to “monitor the amount of revenue sharing

received” by TIAA and Fidelity, and “paid

substantially more than a reasonable recordkeeping

fee.” J.A. 143. In support of their claims, Petitioners

specifically alleged that the market rate for

recordkeeping fees is “$35 per participant” whereas

Cornell paid Fidelity and TIAA between “$115 and

$183 per participant” in the retirement plan. J.A. 65.

Petitioners also contended that Cornell’s failure to

address the excessive recordkeeping fees was a breach

of the duty of loyalty and that participants were

harmed as a result. These allegations are sufficient to

state a plausible claim under the statute and shift the

burden to Cornell to establish that “no more than

reasonable compensation [was] paid” for TIAA and

Fidelity’s services. 29 U.S.C. § 1108(b)(2)(A); see Intel

Corp. Inv. Pol’y Comm. v. Sulyma, 140 S. Ct. 768, 776

(2020) (“We must enforce plain and unambiguous

statutory language in ERISA, as in any statute,

according to its terms.”).

Yet the Second Circuit rejected this plain and

common-sense reading of ERISA. Instead, that court

held that to state a prohibited transaction claim under

section 1106(a), “it is not enough to allege that a

fiduciary caused the plan to compensate a service

provider for its services; rather, the complaint must

plausibly allege that the services are unnecessary or

involved unreasonable compensation, [section]

1108(b)(2)(A), thus supporting an inference of

disloyalty.” Cunningham v. Cornell Univ., 86 F.4th

961, 968 (2d Cir. 2023). The court’s extraordinary

finding that the exemption for reasonable and

necessary services under section 1108(b)(2)(A) is

incorporated into a plan participant’s initial burden

when pleading a section 1106(a) claim—and not an

affirmative defense to be asserted by a plan

fiduciary—is contrary to the express text and remedial

purpose of ERISA.

First, nowhere in section 1106(a) is there any

statutory requirement that a plaintiff seeking to state

a prohibited transaction claim must plead and then

negate the myriad possible affirmative defenses that

may be asserted by plan fiduciaries. See Allen, 835

F.3d at 676 (“ERISA plaintiff need not plead the

absence of exemptions to prohibited transactions”).

Indeed, the Second Circuit’s approach effectively

requires a plan participant to allege the absence of “at

least some of” the exemptions under section 1108(b)

when filing suit. See Cunningham, 86 F.4th at 975.

However, at the pleading stage, a plaintiff does not

know which of the 21 possible exemptions a defendant

is going to assert as affirmative defenses in order to

negate them. Such a heightened pleading standard

would seemingly absolve a plan fiduciary of liability

for engaging in a prohibited transaction under section

1106(a) merely because a plaintiff incorrectly guesses

the exemption asserted by the fiduciary.

Second, by grafting a heightened pleading

requirement on to section 1106(a), the Second Circuit

improperly shifts the burden to plan participants to

plead and prove that a plan’s prohibited transaction

does not fall under an applicable exemption. In doing

so, the court effectively forecloses meritorious claims

by demanding that plaintiffs meet an unattainable

standard: to plead information such as the processes

and methods that fiduciaries used to arrive at the

challenged decision. This burden cannot be met

without the benefit of discovery as the information

needed to plead fraud or disloyalty lies within the

control of plan fiduciaries. As the court recognized in

Braden, “it would be perverse to require plaintiffs

bringing prohibited transaction claims to plead facts

that remain in the sole control of the parties who stand

accused of wrongdoing.” 588 F.3d at 598.

Underlying the Second Circuit’s refusal to

follow a plain reading of section 1106(a) is its belief

that such an interpretation would lead to “absurd

results” by “prohibit[ing] payments by a plan to any

entity providing it with any services.” Cunningham,

86 F.4th at 973. But this analysis ignores the separate

statutory provision in ERISA that allows plan

fiduciaries to assert and prove affirmative defenses,

which would avoid much of the court’s so-called

“absurd results.” Id.; 29 U.S.C. § 1108(b). As such, the

court’s extra-textual reading of section 1106(a) should

be rejected. See Harris Tr., 530 U.S. at 254; see also

Guidry v. Sheet Metal Workers Nat. Pension Fund, 493

U.S. 365, 376 (1990) (“As a general matter, courts

should be loath to announce equitable exceptions to

legislative requirements or prohibitions that are

unqualified by the statutory text.”). Because ERISA

was enacted to protect employees’ retirement and

pension plans, the statute’s fiduciary duties must be

applied consistently with its plain text and with a

breadth that fulfills Congress’s remedial intent. See

Varity Corp., 516 U.S. at 496.

A Heightened Pleading Standard for

Prohibited

Transaction

Claims

under Section 1106(a) Is Contrary to

the Common Law of Trusts, on

Which ERISA’s Framework is Built.

In enacting ERISA, “Congress invoked the

common law of trusts to define the general scope of”

the “authority and responsibility” of fiduciaries. Cent.

States, Se. & Sw. Areas Pension Fund v. Cent. Transp.,

Inc., 472 U.S. 559, 570 (1985). The statute states that

“a fiduciary shall discharge his duties with respect to

a plan solely in the interest of the participants and

beneficiaries.” 29 U.S.C. § 1104(a)(1)(A). Because “the

common law of trusts . . . serves as ERISA’s backdrop,”

Beck v. PACE Int’l Union, 551 U.S. 96, 101 (2007), this

Court often turns to the common law of trusts to

interpret the statute. Tibble v. Edison Int’l, 575 U.S.

523, 528-29 (2015); Cent. States, 472 U.S. at 571; see

also Firestone Tire & Rubber Co. v. Bruch, 489 U.S.

101, 110 (1989) (“ERISA abounds with the language

and terminology of trust law.”).

The Second Circuit’s new heightened pleading

standard for section 1106(a) claims alleging prohibited

transactions is contrary to the common law of trusts,

which requires the plan fiduciary—not a plan

participant—to justify the transactions in question

and establish the applicability of any defenses. See

Braden, 588 F.3d at 602 (“At common law, the

fiduciary bears the burden of justifying such

transactions.”). Requiring plan participants to state

their claims with greater specificity—including the

plan fiduciary’s potential defenses—is at direct odds

with both congressional intent and the basic principles

of fiduciary duties in the common law of trusts. See

Tibble, 575 U.S. at 530 (interpreting the fiduciary duty

of prudence in ERISA based on the common law of

trusts).

Participants in trusts regulated by ERISA enjoy

a rich array of legal rights, which include the right to

have all plan assets used exclusively for their benefit

and invested prudently. See 29 U.S.C. § 1104(a)(1)(B);

see also Hughes v. Northwestern Univ., 595 U.S. 170,

172-73 (2022). Participants also have the right to

membership in a plan free of the types of fiduciary

imprudence, fraud, and self-dealing that predated

ERISA. Fiduciaries who, through breach of their

statutorily imposed duties, impinge on any one of

these rights cause harm and, thus, injury-in-fact to

the legal rights of plan participants in trusts regulated

under ERISA.

Building on the common law of trusts, the

statute’s fiduciary duty provisions seek to protect the

best interests of participants and beneficiaries against

the mismanagement and abuse of plan assets. See

Restatement (Third) of Trusts § 78 (2007) (“trustee

has a duty to administer the trust solely in the interest

of the beneficiaries”). This purposeful approach

guarantees, to the extent possible, a plan free from

fiduciary malfeasance. Diverting from congressional

intent with respect to pleading standards for breaches

of fiduciary duty creates unwarranted limitations that

could cause great harm to plan participants. Indeed,

adoption of the Second Circuit’s stringent pleading

standard would unnecessarily burden and restrict

participants from the statutory means created to

protect their plans should they suspect a breach of

fiduciary duty. See Conkright v. Frommert, 559 U.S.

506, 517 (2010) (ERISA was intended to “ensur[e] fair

and prompt enforcement of rights under a plan”).

Thus, this Court should reject any effort to shift to

participants the plan’s well-established fiduciary

duty—rooted in the common law of trusts—to assert

defenses for any prohibited transactions at issue in

section 1106(a) claims.

II.

THE SECOND CIRCUIT’S HEIGHTENED

PLEADING

STANDARD

FOR

PROHIBITED TRANSACTION CLAIMS

UNDER SECTION 1106(a) UNDERMINES

ERISA’S ENFORCEMENT SCHEME AND

HURTS RETIREMENT INVESTORS.

When enacting ERISA, Congress “set forth a

comprehensive civil enforcement scheme.” Pilot Life

Ins. Co. v. Dedeaux, 481 U.S. 41, 54 (1987). This

detailed scheme provides plan participants with an

avenue of relief for both individual and collective

losses. See 29 U.S.C. § 1132(a)(1)(b), (2). The statute

expressly empowers the Secretary of Labor,

participants, beneficiaries, and fiduciaries to bring

civil actions for relief. Id. § 1132(a)(2). Section 1109(a)

establishes liability for a plan fiduciary “who breaches

any of the responsibilities, obligations, or duties”

under the statute. Id. § 1109(a) (emphasis added).

Adopting the Second Circuit’s new standard could

result in having the carefully crafted enforcement

mechanism Congress created for addressing potential

mismanagement and abuse of pensions fall apart.

As “one of the essential tools for accomplishing

the stated purposes of ERISA,” its civil enforcement

scheme depends greatly on the ability of plan

participants to initiate civil actions to protect their

retirement security. Pilot Life, 481 U.S. at 52. Yet

studies show that retirement income is now, more

than ever, likely to be insufficient for an increasing

number of older Americans. As such, it is vitally

important that plan participants not be held to such

high pleading standards that they are effectively

prevented from suing for ERISA violations and robbed

of their savings at the time they need it most.

ERISA’s Enforcement Scheme Relies

on Plan Participants’ Ability to

Enforce Fiduciary Duties Without

Having to Surmount Unnecessarily

High Pleading Standards.

To further ERISA’s statutory scheme and

remedial purpose of “strengthen[ing] and improv[ing]

the protections and interests of plan participants,”

Congress sought to “remove jurisdictional and

procedural obstacles” to “effective enforcement of

fiduciary responsibilities.” S. Rep. No. 93-127 (1973);

H.R. Rep. No. 93-533 (1974). The Secretary of Labor

agreed, “express[ing] concern over the erection of

‘unnecessarily high pleading standards’ in ERISA

cases” because of the statute’s reliance on private

litigation. Braden, 588 F.3d at 597 n.8 (citing Brief for

the Secretary of Labor as Amicus Curiae Supporting

Plaintiff–Appellant Braden and Requesting Reversal,

at 2). This Court thus should reject the Second

Circuit’s new heightened pleading standard for

section 1106(a) claims because it would add

unnecessary obstacles to plan participants’ ability to

protect their interests as well as run afoul of

Congress’s intent to establish a robust enforcement

scheme under the statute.

ERISA expressly empowers four distinct classes

of persons—the Secretary of Labor, participants,

beneficiaries, and fiduciaries—to bring civil actions for

relief when fiduciary duties have been breached in

violation of the statute. 29 U.S.C. §§ 1132(a)(2),

1109(a). While the Department of Labor (DOL) is

tasked with administering ERISA, Congress intended

the “principal focus of the enforcement effort” to be

civil litigation initiated by all four classes of plaintiffs.

H.R. Rep. No. 93-533 (1974). Indeed, the statute’s

enforcement provisions “provide both the Secretary

and participants and beneficiaries with broad

remedies for redressing” ERISA violations. S. Rep. No.

93-127 (1973); H.R. Rep. No. 93-533 (1974).

Participants’ power to bring a cause of action for

breach of fiduciary duty under the statute has been

unambiguously affirmed by the Supreme Court. See

Pilot Life, 481 U.S. at 53. Thus, all four classes alike

share a “common interest . . . in the financial integrity

of the plan.” Massachusetts Mut. Life Ins. Co. v.

Russell, 473 U.S. 134, 142 n.9 (1985).

Under ERISA, DOL “is charged with protecting

the rights of participants in employer-sponsored

benefit plans” and may refer cases to its Office of the

Solicitor for civil litigation.2 But DOL’s resources are

inadequate to enforce the statute on its own.3 Because

of the expense of litigation, DOL regularly declines to

initiate civil litigation.4 In 2013, DOL changed its

strategy to focus on “major cases,” which require more

resources and yield larger recoveries for participants.5

As a result, “the total number of investigations that

were closed dropped by more than 62 percent.” 6

More recently, in fiscal year 2023, DOL

reported responsibility for overseeing “approximately

2.8 million health plans, 619,000 other welfare benefit

plans, and 765,000 private pension plans,” which

cover 153 million people and an estimated $12.8

trillion in assets.7 In 2024, nearly a quarter of civilian

2 U.S. Gov’t Accountability Office, GAO-21-376, EMPLOYEE

BENEFITS SECURITY ADMINISTRATION: ENFORCEMENT

EFFORTS TO PROTECT PARTICIPANTS’ RIGHTS IN

EMPLOYER-SPONSORED RETIREMENT AND HEALTH

BENEFIT PLANS (2021) [hereinafter, GAO-21-376].

3 See, e.g., U.S. Gov’t Accountability Office, GAO-07-22,

EMPLOYEE BENEFITS SECURITY ADMINISTRATION—

ENFORCEMENT IMPROVEMENTS MADE BUT

ADDITIONAL ACTIONS COULD FURTHER ENHANCE

PENSION PLAN OVERSIGHT 10, 28 (2007); U.S. Gen.

Accounting Office, 4 GAO-02-232, PENSION AND WELFARE

BENEFITS ADMINISTRATION—OPPORTUNITIES EXIST

FOR IMPROVING MANAGEMENT OF THE ENFORCEMENT

PROGRAM 2-3 (2002); U.S. Dep’t of Labor, PWBA TASK

FORCE ON ASSISTANCE TO THE PUBLIC (1992).

4 GAO-21-376 at 18.

5 Id. at 22, 24.

6 Id. at 24.

7 U.S. Dep’t of Labor, EBSA Restores Over $1.4 Billion to

Employee Benefit Plans, Participants, and Beneficiaries,

https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-

workers had access to defined benefit retirement

plans.8 The Secretary of Labor “depends in part on

private litigation to ensure compliance with” ERISA.

Braden, 588 F.3d at 597 n.8. The empowerment of

participants to bring actions against plan fiduciaries

arising from breaches of their duties is thus integral

to the successful enforcement of the fiduciary

obligations in ERISA.

That ERISA extended civil enforcement rights

for breach of fiduciary obligations related to plan

management to participants and beneficiaries is

noteworthy. 29 U.S.C. § 1132(a); Varity Corp., 516

U.S. at 512. This enforcement regime—if allowed to

work as intended—is both fair and effective, as no one

will police a plan more diligently than the participants

who have a vital stake in the proper management of

their retirement and pension funds. Imposing a

heightened pleading standard on participants,

however, would curtail their rights to bring

meritorious prohibited transaction claims because

while they possess the same statutory authority as

DOL to bring such actions, they lack that agency’s

investigatory and administrative compliance tools to

obtain the necessary information to meet any

heightened pleading requirements.

Thus, the successful enforcement of ERISA

depends on plan participants’ ability to initiate class

activities/resource-center/fact-sheets/ebsa-monetaryrecoveries.pdf (last visited Oct. 29, 2024).

8 Bureau of Labor Statistics, EBS Latest Numbers,

https://www.bls.gov/ebs/latest-numbers.htm (last visited Oct.

29, 2024).

and other civil actions to vindicate their rights under

the statute. And such lawsuits have been effective. For

example, they have reduced the management and

recordkeeping fees charged by interested parties

rendering services to retirement plans. 9 Several class

actions alleging excessive fees have also explicitly

provided for prospective relief in the form of employers

taking steps toward reducing management and

recordkeeping fees via settlement agreements.10 Thus,

this Court should reject the Second Circuit’s attempt

to thwart a fair and effective enforcement scheme set

up to protect against mismanagement and abuse of

retirement and pension plan assets.

9 See Mark Debofsky, Expert Insights—Hughes v. Northwestern

University—the Seventh Circuit Upholds Plaintiffs’ Excessive

Fee Claims, Empl. Benefits Mgmt. 4903361 (2023) (Hughes

“imposed a powerful incentive on employers to exercise far

greater scrutiny . . . to monitor . . . the fees paid by employees”);

Hughes v. Northwestern Univ., 63 F.4th 615, 637 (7th Cir. 2023)

(plan participants stated ERISA claim for breach of duty of

prudence due to excessive recordkeeping fees), on remand from

Hughes, 595 U.S. at 172-73.

10 See, e.g., Memorandum of Law in Support of Plaintiffs’ Motion

for an Order: Finally Approving Class Action Settlement;

Approving the Plan of Allocation; Approving Case Contribution

Awards to Plaintiffs; and Awarding Attorneys’ Fees and Costs

at 6-7, Daugherty v. Univ. of Chi., No. 1:17-cv-03736 (N.D. Ill.

Aug. 15, 2018), ECF No. 67; Final Approval Order and Final

Judgment at 2, Short v. Brown Univ., No. 1:17-cv-00318-WESPAS (D.R.I. Aug. 2, 2019), ECF No. 55; Plaintiffs’ Memorandum

in Support of Unopposed Motion for Final Approval of Class

Settlement at 4-5, Clark v. Duke Univ., No. 1:16-cv-01044,

(M.D.N.C. June 4, 2019), ECF No. 163.

Imposing a Heightened Pleading

Standard on Plan Participants

Would Harm Retirees Who Rely

Heavily on Plan Funds for Financial

Security Now More Than Ever.

Ensuring that ERISA’s robust safeguards

remain in place is crucial to an individual’s retirement

security. A cornerstone of these statutory protections

lies in the participants’ ability to preserve the plan’s

assets and their financial well-being by challenging

prohibited transactions based on breaches of fiduciary

obligations. See Pilot Life, 481 U.S. at 52-53; 29 U.S.C.

§ 1001(b). If plan participants are required to meet

onerous pleading requirements, these protections will

lose their efficacy and, equally important, many older

Americans who no longer have the ability to earn

income will face greater retirement insecurity.

A strong fiduciary standard is based on the core

principle that financial and other professionals who

provide personalized investment advice to customers

must always act in the sole interest of those

customers.11 If plan fiduciaries fail to manage a

retirement or pension plan carefully, their actions

could be disastrous for participants. Even a small

increase in the fees charged by plan administrators

can make a very significant difference in the amount

in employees’ retirement accounts when they retire.

For instance, DOL has explained:

11 See Investigating Challenges to American Retirement Security

Before the Subcomm. On Social Security, Pensions, and Family

Policy, S. Fin. Comm., 116th Cong. (2020) (statement of AARP).

Assume that you are an employee with

35 years until retirement and a current

401(k) account balance of $25,000. If

returns on investments in your account

over the next 35 years average 7% and

fees and expenses reduce your average

returns by 0.5%, your account balance

will grow to $227,000 at retirement,

even if there are no further

contributions to your account. If fees

and expenses are 1.5%, however, your

account balance will grow to only

$163,000. The 1% difference in fees and

expenses would reduce your account

balance at retirement by 28%.12

The Government Accountability Office (GAO)

also cautions plan participants about the effects that

may result from fiduciary mismanagement of fees.

GAO estimated that a 401(k) account that had a one

percentage point higher fee for 20 years would result

in a more than 17% reduction in the account balance.

Even a difference of only half a percentage point would

reduce the value of the account by 13% over 30 years.13

Consequently, holding plan fiduciaries accountable for

failing to prune investment options with excessive fees

12 Holly Yeager, Mutual Fund Fees Still Hard to Challenge,

AARP Bulletin, Apr. 2010,

https://www.aarp.org/content/aarpe/en/home/politicssociety/advocacy/info-042010/mutual_fund_fees_still_hard_to_challenge.html.

13 Public Hearing on Improving Investment Advice for Workers

and Retirees: Prohibited Transaction Class Exemption Before the

U.S. Dep’t of Labor Employee Benefits Security Administration

(2020) (oral testimony of David Certner, AARP).

is crucial to ERISA’s effectiveness in the modern

retirement landscape.

Currently, most employers offer defined

contribution plans, which require participants to put

great trust in the quality of the plan investments for

their retirement savings. Defined contribution plans,

which now constitute most retirement funds, involve

a fundamental reallocation of investment risk. See

LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S.

248, 255 n.5 (2008). With the increasing number of

defined contribution plans, more participants bear the

risk associated with the performance of the funds in

which their money is invested. 14 Although defined

contribution plans may have accumulated millions of

dollars in the aggregate, individual accounts tend to

be modest, and plan participants rely on them heavily.

The quality of plan performance hugely affects the

income that participants receive upon retirement. See

Tibble, 575 U.S. at 530.

Now, more than ever, the amount of retirement

income being saved is likely to be insufficient for an

increasing portion of the U.S. population. “Last year,

Americans held about $18 trillion in IRAs and 401(k)

retirement accounts—more than triple the figure from

14 See Edward A. Zelinsky, The Defined Contribution Paradigm,

114 YALE L.J. 451, 453 (2004) (“The defined benefit

configuration principally assigns risk to the employer because

the employer guarantees the employee a specified benefit, while

the more privatized defined contribution approach apportions

risk to the employee[.]”).

2005.”15 According to the Federal Reserve, households

headed by people ages 65 to 74 held a median of

$164,000 in retirement accounts in 2019, up from

$60,000 (in inflation-adjusted dollars) in 1998.16 Older

Americans relying primarily on Social Security for

their retirement savings will be acutely affected:

Of 23 million households ages 60 to 69,

16 million have less than $250,000 in

financial assets . . . most of their income

likely will be Social Security—and

hopefully a little wiggle room. The

unpleasant truth [] is that for many

older Americans, there is not a lot of

wiggle room in their budgets. Roughly

one out of every five Americans 65 and

older rely on Social Security for more

than three-quarters of their income,

according to the latest estimates from

the Social Security Administration.

Fourteen percent of older Americans

rely on Social Security for more than 90

percent of their income, and 11 percent

are living near or below the poverty

line.17

These statistics are even more troubling

because older Americans are retiring at record rates.

Mindy Fetterman, How Older Adults Are Changing America,

AARP Bulletin, Sep. 2023, https://www.aarp.org/politicssociety/history/info-2023/older-adults-changingamerica.html?msockid=1d9456174635606a340b42fc47ac61af.

16 Id.

17 Id.

As the Baby Boomer generation ages, approximately

10,000 individuals retire each day.18 By 2030, 20% of

the U.S. population will be at typical retirement age.19

However, Americans are financially unprepared for

retirement. Since the Covid-19 pandemic began,

retirement insecurity has increased dramatically: 55%

of Americans had insufficient savings to retire

securely as of July 2020, a 5% jump in only three

months.20 Given the absence of pensions and the

modest amount available in Social Security benefits,

saving money through work—usually through defined

contribution plans—is the only way for most

Americans to have any hope of a secure retirement. 21

Yet many older Americans are no longer able to

work or earn income because of their age or other

factors. When they learn that their retirement or

pension plan has been mismanaged by a fiduciary

through a prohibited transaction, they should not be

required to meet a heightened pleading standard that

effectively restricts their protections under ERISA

18 Surv. Rsch. Ctr., Inst. for Social Rsch., Univ. of Mich., The

Health and Retirement Study: Aging in the 21st Century

8 (2017).

19 Id.

20 See Alicia H. Munnell, Anqi Chen, & Wenliang Hou, How

Widespread Unemployment Might Affect Retirement Security,

Ctr. for Ret. Rsch. at B.C., July 2020, at 4, https://crr.bc.edu/wpcontent/uploads/2020/06/IB_20-11.pdf.

21 See Alicia H. Munnell, Wenliang Hou, and Geoffrey T.

Sanzenbacher, How Would More Saving Affect the National

Retirement Risk Index?, Ctr. For Ret. Rsch. at B.C., Oct. 2019,

at 1, https://crr.bc.edu/wp-content/uploads/2019/10/IB_19-16.pdf

(“[I]ncreasing saving is a realistic option only for those workers

who have access to a retirement plan at work”).

because—as described earlier—they do not have

access to the information needed to meet such an

arduous standard. Imposing an onerous burden at a

time when many retirees are already facing

retirement insecurity is neither what Congress

intended nor what the statute requires. As such, this

Court should reject the Second Circuit’s new

heightened pleading standard.

CONCLUSION

For the foregoing reasons, amici respectfully

request the Court to reverse the Second Circuit’s

decision.