CUNNINGHAM ET AL. v. CORNELL UNIVERSITY ET AL.
No. 23-1007
SUPREME COURT OF THE UNITED STATES
April 17, 2025
604 U. S. ____ (2025)
Argued January 22, 2025
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by
SUPREME COURT OF THE UNITED STATES
Syllabus
CUNNINGHAM ET AL. v. CORNELL UNIVERSITY ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
No. 23-1007. Argued January 22, 2025—Decided April 17, 2025
The Employee Retirement Income Security Act of 1974 (ERISA) prohibits plan fiduciaries from causing a plan to engage in certain transactions with parties in interest.
Petitioners represent a class of current and former Cornell University employees who participated in two defined-contribution retirement plans from 2010 to 2016. In 2017, they sued Cornell and other plan fiduciaries for allegedly causing the plans to engage in prohibited transactions for recordkeeping services with the Teachers Insurance and Annuity Association of America-College Retirement Equities Fund and Fidelity Investments Inc., in violation of
Held: To state a claim under
(a) Section
(b) Respondents’ contrary arguments are unpersuasive. First, the “[e]xcept as provided in section 1108” language in
(c) Respondents’ reliance on United States v. Cook, 17 Wall. 168, is misplaced. Cook established “a rule of criminal pleading” based
(d) Finally, respondents’ practical concerns about meritless litigation cannot overcome the statutory text and structure. District courts have various tools at their disposal to screen out meritless claims, including requiring plaintiffs to file a reply addressing exemptions under
86 F. 4th 961, reversed and remanded.
SOTOMAYOR, J., delivered the opinion for a unanimous Court. ALITO, J., filed a concurring opinion, in which THOMAS and KAVANAUGH, JJ., joined.
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, pio@supremecourt.gov, of any typographical or other formal errors.
SUPREME COURT OF THE UNITED STATES
No. 23-1007
CASEY CUNNINGHAM, ET AL., PETITIONERS v. CORNELL UNIVERSITY, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
[April 17, 2025]
JUSTICE SOTOMAYOR delivered the opinion of the Court.
The Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended,
I
A
Congress enacted ERISA to “protect . . . the interests of participants in employee benefit plans and their beneficiaries.”
ERISA subjects plan fiduciaries to certain fiduciary duties derived from the common law of trusts. See
Section
“[e]xcept as provided in section 1108,” a fiduciary “shall not cause the plan to engage” in certain transactions with a “party in interest.”1 The Act, in turn, defines “party in interest” to include various plan insiders, including the plan‘s administrator, sponsor, and its officers, as well as entities “providing services to [the] plan.”
Section
B
Respondent Cornell University is the named administrator for two defined-contribution retirement plans.2 Cornell employees maintain individual investment accounts within those plans, the value of which “is determined by the market performance
In 2011, Cornell retained the Teachers Insurance and Annuity Association of America-College Retirement Equities Fund (TIAA) and Fidelity Investments Inc. (Fidelity). TIAA and Fidelity offered investment options to plan participants and served as recordkeepers for the retirement plans by tracking account balances and providing account statements. Cornell compensated TIAA and Fidelity with fees from a set portion of plan assets.
Petitioners represent a class of current and former Cornell employees who participated in the plans from 2010 to 2016. In 2017, they sued Cornell and other plan fiduciaries alleging, as relevant here, that respondents violated
Respondents moved to dismiss the prohibited-transaction claim, and the District Court granted their motion. The court held that a plaintiff, in addition to pleading the prohibited-transaction elements contained within
The Second Circuit affirmed, but did so on a different
ground. It concluded that “the language of §1106(a)(1) cannot be read to demand explicit allegations of ‘self-dealing or disloyal conduct.‘” 86 F. 4th, at 975. The Court of Appeals further observed, however, that
Thus, to limit the reach of
that no additional pleading requirements beyond
This Court granted certiorari to decide whether a plaintiff can state a claim for relief by simply alleging that a plan fiduciary engaged in a transaction proscribed by
II
Section
The exemptions set forth in a different part of the statute,
the services TIAA and Fidelity provided, as “it is not unreasonable to pay more for superior services.” Ibid. The Court of Appeals thus affirmed the dismissal of petitioners’
certain transactions between the plan and a party in interest “[e]xcept as provided in section 1108“). There is a well-settled “general rule of statutory construction that the burden of proving justification or exemption under a special exception to the prohibitions of a statute generally rests on one who claims its benefits.” FTC v. Morton Salt Co., 334 U. S. 37, 44-45 (1948). In particular, when a statute has “exemptions laid out apart from the prohibitions,” and the exemptions “expressly refe[r] to the prohibited conduct as such,” the exemptions ordinarily constitute “affirmative defense[s]” that are “entirely the responsibility of the party raising” them. Meacham v. Knolls Atomic Power Laboratory, 554 U. S. 84, 91, 95 (2008). That describes exactly how ERISA is structured: The exemptions to
This Court‘s decision in Meacham is instructive. At issue there were the Age
The same is true of ERISA. Like the exemptions at issue
in Meacham, the
Of course, a plaintiff will not prevail by simply pleading, and later proving, the
A
Against this backdrop, respondents nevertheless insist that
This alternative reading of the statute suffers from several flaws. For one, it ignores that Congress wrote the
agency only upon a showing that “the agent‘s employment was necessary, that the trustee entered into a reasonable contract of employment with the agent, and that the agent rendered services to the trust.” A. Hess, G. Bogert, & G. Bogert, Law of Trusts and Trustees §555, p. 54 (3d ed. 2024). Critically, the common law of trusts “placed the burden squarely on the trustee” to make that showing. Ibid. The Court‘s opinion does not rest on the common law of trusts, however. First, ERISA plans are sufficiently complex so that a question would arise as to whether fiduciaries can perform all necessary tasks themselves without plans incurring greater costs. Second, ERISA allows fiduciaries to delegate certain duties, see, e.g.,
structural decision forecloses respondents’ argument.
If there were any remaining doubt, the headings of
Structural considerations also weigh against respondents’ reading of
exemptions as elements incorporated into
Indeed, because
the purchase or sale of securities or other property between a plan and a party in interest, provided the transaction occurred over certain approved platforms and complied with applicable rules of the Securities and Exchange Commission, the price and compensation reflect an arm‘s-length transaction, and the plan fiduciary received notice of the execution of such transaction through the approved platform, among other criteria);
B
Respondents’ argument from precedent is similarly unavailing. Respondents rely on this Court‘s decision in United States v. Cook, 17 Wall. 168 (1872), to support their construction of
and involve “reasonable compensation” under
Respondents ignore, however, that this Court has said Cook created “a rule of criminal pleading” for indictments intended to ensure that defendants have fair notice “of every fact which is legally essential to the punishment to be inflicted.” United States v. Reese, 92 U. S. 214, 232 (1876) (emphasis added). Indeed, Cook “construed” the “constitutional right ‘to be informed of the nature and cause of‘” a criminal accusation. United States v. Cruikshank, 92 U. S. 542, 557-558 (1876). Hence, it rested on constitutional considerations not present in the civil context. Moreover, the Court has applied the Cook rule narrowly, such as when an exception to a criminal offense is contained within the same sentence of the provision defining the offense. See, e.g., United States v. Britton, 107 U. S. 655, 669-670 (1883); United States v. Vuitch, 402 U. S. 62, 67–68, 70 (1971). Even in the criminal context, it remains a ““settled rule“” ““that an indictment or other pleading . . . need not negative the matter of an exception made by a proviso or other distinct clause.“” Dixon v. United States, 548 U. S. 1, 13 (2006). Cook is thus of no help to respondents.
C
Lastly, respondents contend that there will be an avalanche of meritless litigation if disproving the applicability of
see also Law of Trusts and Trustees §555, at 48 (“[E]xpecting a trustee to personally perform every single act necessary to execute a modern trust not only is unreasonable but may not even be the best way to assure efficient and knowledgable administration of the trust“). To the extent such transactions fall within the scope of
These are serious concerns but they cannot overcome the statutory text and structure. Here, Congress “set the balance” in “creating [an] exemption and writing it in the orthodox format of an affirmative defense,” so the Court must “read it the way Congress wrote it.” Meacham, 554 U. S., at 101-102.
dismiss the suits of those plaintiffs who cannot plausibly do so. District courts must also, consistent with Article III standing, dismiss suits that allege a prohibited transaction occurred but fail to identify an injury. Cf. Thole v. U. S. Bank N. A., 590 U. S. 538, 544 (2020) (explaining that ““Article III standing requires a concrete injury even in the context of a statutory violation” and affirming the dismissal of an ERISA claim because “plaintiffs . . . failed to plausibly and clearly allege a concrete injury” (quoting Spokeo, Inc. v. Robins, 578 U. S. 330, 341 (2016))). For
*
The Court today holds that plaintiffs seeking to state a
It is so ordered.
ALITO, J., concurring
SUPREME COURT OF THE UNITED STATES
No. 23-1007
CASEY CUNNINGHAM, ET AL., PETITIONERS v. CORNELL UNIVERSITY, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
[April 17, 2025]
JUSTICE ALITO, with whom JUSTICE THOMAS and JUSTICE KAVANAUGH join, concurring.
I join all of the opinion of the Court for the simple reason that
Unfortunately, this straightforward application of established rules has the potential to cause—and, indeed, I expect it will cause—untoward practical results. The administrator of an ERISA plan like the one at issue will almost always find it necessary to employ outside firms to provide services that the plan needs. When it does so, these outside firms become “part[ies] in interest” under the terms of ERISA, see
services to the plan is unlawful under
In this case, for example, Cornell set up a plan under which employees could invest in the Teachers Insurance and Annuity Association of America-College Retirement Equities Fund and Fidelity funds, and then those companies provided the recordkeeping services for their own funds, as they customarily do. There is nothing nefarious about any of that. Yet under our decision that is all that a plaintiff must plead to survive a motion to dismiss. And, in modern civil litigation, getting by a motion to dismiss is often the whole ball game because of the cost of discovery. Defendants facing those costs often calculate that it is efficient to settle a case even though they are convinced that they would win if the litigation continued. See J. Beisner, Discovering a Better Way: The Need for Effective Civil Litigation Reform, 60 Duke L. J. 547, 550 (2010); see also Dura Pharmaceuticals, Inc. v. Broudo, 544 U. S. 336, 347 (2005); Chubb, Excessive Litigation Over Excessive Plan Fees in 2023, pp. 2-3 (Apr. 2023), https://www.chubb.com/content/dam/chubb-sites/chubb-com/us-en/business-insurance/fiduciary-liability/pdfs/excessive-litigation-over-excessive-plan-fees-infographic.pdf (noting that the number of excessive plan fee cases that settle has increased six-fold since 2016 and that these cases can “cost more to defend than to settle“). When that happens in a case like the one now before us, the few plan participants named as plaintiffs and their attorneys get a windfall, and a cost that the administrator incurs may be passed on to the other plan participants.
With a realistic appreciation of this dynamic, the Second Circuit tried to formulate a rule that would weed out plainly
unmeritorious suits at the pleading stage. The court attempted to achieve an admirable goal, but established pleading rules do not allow that workaround.
In Part III-C of its opinion, the Court sets out some alternative safeguards. Perhaps the most promising of these is the suggestion, offered by the Solicitor General, that a district court may insist that a plaintiff file a reply to an answer that raises one of the