Clinic Wins Employee Retirement Fees Case at Supreme Court

Plaintiffs will have wider latitude to pursue state claims alleging violations of the Employee Retirement Income Security Act, thanks to a unanimous decision Thursday in Cunningham v. Cornell University for the Supreme Court Litigation Clinic at the University of Virginia School of Law.

Professor Xiao Wang, the clinic’s director, made his first-ever oral argument in Cunningham on Jan. 22.

Current and former workers sued Cornell University and its appointed fiduciaries, alleging violations of the Employee Retirement Income Security Act. Under ERISA, fiduciaries are barred from engaging in certain “prohibited transactions,” including transactions that constitute a direct or indirect furnishing of goods, services or facilities between the retirement plan and a party in interest.

Although the workers pointed to such transactions in their complaint, the U.S. Court of Appeals for the Second Circuit rejected their class action, ruling that their allegations were insufficient to survive dismissal. The Eighth and Ninth Circuits have held differently in other cases, presenting the Supreme Court with a circuit split.

The question before the justices was whether a plaintiff can state a claim by alleging that a plan fiduciary engaged in a prohibited transaction or whether a plaintiff must plead and prove additional elements and facts not contained in the provision’s text.

In an opinion written by Justice Sonia Sotomayor, the court reversed the Second Circuit and ruled that to state a claim under ERISA, “a plaintiff need only plausibly allege the elements contained in that provision itself.” The justices also downplayed concerns about meritless litigation, citing the law’s “statutory text and structure” and lower courts having several tools at their disposal to screen out such claims.

Wang noted that the court embraced much of the reasoning and language the clinic used in its briefs. Seeing the justices take their arguments seriously, he said, “is something that you’re really proud of.”

“You’ll see more cases being brought that allege that there are prohibited transactions,” he said. “Now, that doesn’t mean that they’re all going to be successful; it just means that the barriers are a little bit lower to bringing them.”

Wang said this ruling is especially meaningful because this was his first oral argument at the high court and the clinic’s first case under his direction. He said all 12 clinic students worked hard on Cunningham and that the Law School’s staff and resources set the clinic up for success.

“To see that pay off is really incredible,” Wang added. “Obviously, I would be proud with any sort of win, and to see 9-0 is really fantastic.”

In February, the court heard another clinic case, Ames v. Ohio Department of Social Services, which involves an employment discrimination claim under Title VII of the Civil Rights Act of 1964. A decision is expected by the end of the court’s term in June.

Launched in 2006, the yearlong Supreme Court Litigation Clinic introduces third-year students to all aspects of current U.S. Supreme Court practice through live cases. Ames and Cunningham are the clinic’s 19th and 20th cases before the court.