Federal appeals court reverses dismissal of class action over Intel putting employee retirement savings in allegedly risky investments

By Karen Kidd | Nov 30, 2018

New York Stock Exchange on Wall Street.   Morguefile

SAN FRANCISCO — A plaintiff must have actual knowledge, rather than constructive knowledge, to trigger a three-year limitation in an Employee Retirement Income Security Act (ERISA) claim, a federal appeals court ruled earlier this week.

A U.S. Ninth Circuit Court of Appeals three-judge panel reversed an earlier lower federal court judge's decision last year to grant summary judgment in favor of defendants in the case, ruling time limits under ERISA had expired. The panel disagreed with the lower court's conclusion that plaintiffs had "requisite actual knowledge" to trigger ERISA’s three-year limitation period under a section of U.S. law.

"The panel held that actual knowledge does not mean that a plaintiff had knowledge that the underlying action violated ERISA, nor does it merely mean that a plaintiff had knowledge that the underlying action occurred," said the 18-page opinion issued Nov. 28. "Rather, the defendant must show that the plaintiff was actually aware of the nature of the alleged breach more than three years before the plaintiff's action was filed. In an ERISA section 1104 case, the plaintiff must have been aware that the defendant had acted and that those acts were imprudent."

Appeals court Judge J. Clifford Wallace wrote the opinion in which Judge Susan P. Graber and District Judge Robert S. Lasnik concurred. Judge Lasnik, on the bench in U.S. District Court for Washington's Western District, had been designated to sit in on the case.

Christopher M. Sulymam, a former Intel Corporation employee and participant in Intel's retirement plans, filed suit in late 2015 on behalf of two proposed classes of 401(k) participants in the defendant companies' plans. The plaintiffs claimed the defendant companies breached their fiduciary duties when they invested much of the plans' assets in risky, high-cost hedge fund and private equity investments.

In April of last year, a U.S. District Court judge on the bench in California's Northern District granted summary judgment in favor of the defendant companies, saying ERISA time limitations had expired.

The appeals court panel disagreed, saying the lower court's grant of summary judgment had been inappropriate because a dispute remained over whether Sulyma had "actual knowledge" of the alleged breach by 2012.

"If Sulyma in fact never looked at the documents Intel provided, he cannot have had 'actual knowledge of the breach' because he cannot have been aware that imprudent investments were made and that other Intel fiduciaries were failing to monitor or remedy that imprudence," the opinion said. "Because there was a dispute of material fact over Sulyma's actual knowledge, the district court erred by entering summary judgment in favor of Intel on these claims."

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