145 S.Ct. 1020
U.S.2025Background
- Plaintiffs are current and former Cornell University employees who participated in Cornell’s defined-contribution retirement plans between 2010-2016.
- Cornell, as plan administrator, contracted with TIAA and Fidelity (both considered "parties in interest") for recordkeeping services, allegedly paying above-market fees.
- Plaintiffs sued under the Employee Retirement Income Security Act (ERISA), alleging that Cornell engaged in prohibited transactions in violation of 29 U.S.C. §1106(a)(1)(C).
- The District Court dismissed the claim, and the Second Circuit affirmed, holding that plaintiffs must affirmatively plead that the statutory exemption under §1108(b)(2)(A) does not apply.
- The Supreme Court granted certiorari to decide if, to survive a motion to dismiss, a plaintiff must plead the inapplicability of ERISA’s §1108 exemptions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Must plaintiffs plead inapplicability of §1108(b)(2)(A) exemption to state an ERISA §1106 claim? | No—plaintiffs need only allege violation of §1106(a)(1)(C); it’s up to defendants to assert and prove exemptions as affirmative defenses. | Yes—plaintiffs must allege that the transaction was unnecessary or for more than reasonable compensation to survive dismissal. | Plaintiffs do not need to plead inapplicability of §1108 exemptions; exemptions are affirmative defenses for defendants to raise. |
Key Cases Cited
- United States v. Detroit Timber & Lumber Co., 200 U.S. 321 (statutory headnotes are not part of the opinion)
- Harris Trust and Sav. Bank v. Salomon Smith Barney Inc., 530 U.S. 238 (ERISA bars certain transactions categorically except for express statutory exemptions)
- Meacham v. Knolls Atomic Power Laboratory, 554 U.S. 84 (statutory exemptions laid out separately are affirmative defenses, not elements of plaintiff's claim)
- FTC v. Morton Salt Co., 334 U.S. 37 (burden of proving statutory exemptions generally rests on the party claiming the benefit)
- United States v. Reese, 92 U.S. 214 (exception language in criminal statutes has specific pleading consequences not applicable to civil statutes)