Without explanation, the U.S. Supreme Court denied a petition by the University of Pennsylvania to have the high court review a case alleging its retirement plan fiduciaries violated their Employee Retirement Income Security Act (ERISA) duties.
In its petition, the university asked whether the pleading standard the court established in its decision in Bell Atlantic Corp. v. Twombly governs breach of fiduciary duty claims under ERISA. The petition also asked “whether a complaint states a plausible claim for breach of fiduciary duty under ERISA if it alleges that a retirement plan’s investment options charged excessive fees and underperformed, but does not allege any fiduciary conduct inconsistent with lawful management of the plan.”
The university pointed out that in Twombly, the high court held that allegations that are “merely consistent with” antitrust violations—but “just as much in line with” lawful behavior—fail to state a claim for relief. It reaffirmed that principle in Ashcroft v. Iqbal, stressing that Twombly provides “the pleading standard for ‘all civil actions.’” And, in Fifth Third Bancorp v. Dudenhoeffer, it held that “the pleading standard as discussed in Twombly and Iqbal” governs breach of fiduciary duty claims under ERISA.
Last May, the 3rd U.S. Circuit Court of Appeals revived the lawsuit against fiduciaries of the University of Pennsylvania’s 403(b) plan, which had been fully dismissed by a District Court in 2017. The petition pointed out that the 3rd Circuit’s reasoning was a split from other circuit court decisions.
On March 26, the university filed a supplemental brief attempting to bolster its argument to the Supreme Court based on a 7th Circuit decision to affirm the dismissal of a similar case against Northwestern University. In that case, the appellate court found no fiduciary misconduct by plan fiduciaries and said, “Taken as a whole, the amended complaint appears to reflect plaintiffs’ own opinions on ERISA and the investment strategy they believe is appropriate for people without specialized knowledge in stocks or mutual funds.”
Apparently, the Supreme Court was unpersuaded.
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