In a closely watched decision construing ERISA’s three-year statute of limitations, see ERISA § 413(2), 29 U.S.C. § 1113(2), the Supreme Court held unanimously (J. Alito) that “actual knowledge” means “. . . when a plaintiff actually is aware of the relevant facts, not when he should be.”

ERISA contains a two-part statute of limitations provision for breach of fiduciary duty claims.  There is a six-year statute of repose, ERISA § 413(1), 29 U.S.C. § 1113(1); also, a matter is time-barred: “three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation.”  ERISA § 413(2) (emphasis added).  The meaning of “actual knowledge” was the point of this case.

Like most plan sponsors, Intel distributed e-mails describing the Intel 401(k) Plan’s investment options.  These e-mails directed plaintiff to “fund fact sheets” describing the characteristics (risk, fees, etc.) of plan investment options.  The Summary Plan Description explained that plan funds included alternative options and directed plaintiff to the fund fact sheets that explained these assets included hedge funds, private equity, and commodities investments.  Annual disclosures identified all fund investments, respective asset performance, and relevant fees.

Plaintiff sued over three years, but less than six years after receiving plan disclosure information.  Plaintiff alleged that the plan’s alternative investments – hedge funds, private equity, and commodities investments – were imprudent because they performed below market and carried higher fees.  In motion practice, Defendants urged that plaintiff’s claims were time-barred because he filed over three years after receiving disclosures about asset performance and fees.  Defendant’s motion was converted to one for summary judgment, and limited discovery occurred.  While discovery showed that plaintiff visited the in-house benefits intranet site, he testified that he was unaware that plan monies were invested in hedge funds or private equity.

The district court granted Intel’s motion for summary judgment holding it was improper for plaintiff’s claims to survive merely because he did not look into the disclosures available to him.  The Ninth Circuit reversed and held that “actual knowledge” means knowledge that is actual, not merely a possible inference from ambiguous circumstances.

Agreeing with the Ninth Circuit, the Supreme Court held that “actual knowledge” means knowledge that is actual.  To have “actual knowledge” of a piece of information, plaintiff must in fact be aware of it.  The Court distinguished between “actual knowledge” versus hypothetical knowledge a reasonably diligent plaintiff would know from reading the plan sponsor’s disclosures.  The Court held that “actual knowledge” requires more than disclosing all relevant information to plaintiff; plaintiff must in fact have become aware of that information.

The Court did caution that the opinion did not foreclose defendants from contending that evidence of willful blindness supports a finding of “actual knowledge.”  The Court suggested that evidence of disclosure remains relevant to showing “actual knowledge,” as would a showing that Plaintiff viewed electronic records and took action in response to such information.

Conclusion

The plaintiff bar will hail this decision as a victory, but the result is more subtle with a major impact in class certification.  First, defendants will conduct discovery as to “actual knowledge.”  What did each class member actually know from the routine distributions sent by plan sponsors?  Second, the Court’s invocation of the willful blindness standard is significant.  In other cases, the Court has held that willful blindness includes scenarios where a plaintiff purposely closes his eyes to avoid what is taking place around him.  See Global-Tech Appliances, Inc. v. SEB S.A., 563 U. S. 754, 769 (2011).  Discovery as to whether class members purposely close their eyes to information contained in plan disclosures will demonstrate individualized conduct inconsistent among all class members.  Discovery as to these aspects of the three-year statute of limitations defense should trigger disparities among class members, a significant weapon in opposing class certification.