Cunningham v. Cornell University

In this case, the court considered this issue: Can a plaintiff state a claim under ERISA’s provision prohibiting a plan fiduciary from knowingly engaging in transactions with barred parties, solely by alleging that such a transaction took place?The case was decided on April 17, 2025.The Supreme Court held that To state a claim under Section 1106(a)(1)(C) of ERISA, a plaintiff need only plausibly allege the elements listed in that provision itself: that a plan fiduciary knowingly caused the plan to engage in a transaction involving goods, services, or facilities with a party in interest. The plaintiff is not required to plead that the transaction does not qualify for an exemption under Section 1108. Justice Sonia Sotomayor authored the unanimous opinion of the Court.Section 1106(a)(1)(C) establishes a clear, categorical prohibition on certain transactions between a pension plan and a party in interest. ERISA’s structure places relevant exemptions, including those for reasonable and necessary services under Section 1108(b)(2)(A), in a separate statutory provision. Because those exemptions are laid out apart from the prohibitions and refer back to conduct already defined as unlawful, they function as affirmative defenses. As a result, plan fiduciaries who wish to invoke an exemption bear the burden of pleading and proving it. Plaintiffs, on the other hand, are not obliged to anticipate and refute every possible statutory or regulatory exemption.Reading exemptions as affirmative defenses also aligns with longstanding legal principles and avoids unworkable results. Requiring plaintiffs to negate all exemptions—especially when ERISA includes 21 statutory and hundreds of regulatory exemptions—would be impractical and unfair, particularly because the relevant facts are often in the defendant’s possession. Procedural safeguards such as pleading requirements, discovery limits, and Rule 11 sanctions enable federal courts to deter and manage meritless litigation without shifting the pleading burden to plaintiffs. Consequently, only the elements in Section 1106(a)(1)(C) must be pleaded to survive a motion to dismiss.Justice Samuel Alito joined the majority opinion in full and authored a concurrence, in which Justices Clarence Thomas and Brett Kavanaugh joined.The opinion is presented here in its entirety, but with citations omitted. If you appreciate this episode, please subscribe. Thank you.