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Supreme Court wrestles with who must plead ERISA exemptions in prohibited-transaction suits
Summary
At oral argument in Cunningham v. Cornell University, advocates and justices disputed whether plaintiffs must negate ERISA exemptions at the pleading stage or whether fiduciaries bear that burden, a question with implications for retirement-plan litigation and discovery costs.
At oral argument in Cunningham v. Cornell University, the Supreme Court debated whether plaintiffs bringing prohibited-transaction claims under the Employee Retirement Income Security Act (ERISA) must plead facts negating statutory exemptions in 29 U.S.C. §1108(b), or whether those exemptions are affirmative defenses that fiduciaries must plead and prove.
The issue matters because it shapes who must shoulder early litigation tasks and the scope of discovery in suits alleging improper plan transactions. Petitioners argued that the statutory exemptions are affirmative defenses and that defendants should bear the burden of pleading them; opponents warned that allowing bare-bones complaints to proceed would spawn costly, wide-ranging discovery that would strain plans and institutions.
Mister Wang, counsel for the petitioners, told the court that “when Congress enacted ERISA, it identified a number of prohibited transactions and codified that understanding in 29 U.S.C. section 1106,” and argued the Second Circuit erred by requiring plaintiffs to negate…
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