ERISA Defendants See Unexpected Boost From High Court Worker Win

A recent US Supreme Court victory for retirement investors that lowered the bar for bringing certain ERISA claims is becoming a blessing in disguise for employers seeking to escape litigation.

The Supreme Court’s 2025 decision in Cunningham v. Cornell Univ. made it easier for employees to bring prohibited transaction claims under the Employee Retirement Income Security Act without first disproving statutory exemptions that could render the transactions legal.

The justices expressed concerns that this outcome would supercharge ERISA litigation by allowing more cases to get to the costly and time-consuming discovery phase. Their opinion flagged a handful of tactics lower courts could use to weed out flawed cases, including ordering plaintiffs to address affirmative defenses early on, assessing attorneys’ fees and sanctions, and carefully scrutinizing whether cases should be dismissed for lack of actionable injuries.

Trial court judges have begun to follow the high court’s advice, providing a potential roadmap for defendants’ attorneys juggling the hundreds of would-be class suits filed under ERISA over the past several years.

This panoply of potential defense tools “really drives home the importance of an early assessment with clients when a complaint is filed to be sure you’re setting up an appropriate strategy to defend the complaint,” said Nate Ingraham, senior managing associate with Thompson Hine LLP in Washington.

Replies

In his concurring opinion in Cunningham, Justice Samuel Alito instructed district courts to “strongly consider” the uncommon procedural step of requiring plaintiffs to file a reply under Federal Rule of Civil Procedure 7(a) when an ERISA defendant files an answer raising one of the statute’s prohibited transaction exemptions as an affirmative defense.

Court-ordered replies are very rare in ERISA cases or otherwise, said Amanda S. Amert, a Willkie Farr & Gallagher LLP partner who chairs the firm’s ERISA litigation group.

“It’s almost like it’s a new tool even though the rule isn’t new,” she said. “And the downside of using a new tool is you don’t have deep knowledge of how the tool actually works or how someone might respond to it.”

At least one judge has followed Alito’s suggestion, ordering OC Communications workers to reply to the answer filed by Alerus Financial NA and others they sued over their employee stock ownership plan. The workers sent in their reply in January, arguing that Alerus’ answer—in which it said it lacked knowledge to respond to certain allegations—demonstrates that the company wasn’t “well-informed” about the challenged transaction and thus couldn’t have fulfilled its statutory duties.

It’s uncertain the extent to which court-ordered replies will help cases advance, because it’s not immediately clear what the next step in litigation is, said Andrew Holly, a partner with Dorsey & Whitney LLP. It’s also unclear how they address the information asymmetry common in ERISA cases, in which plan participants challenge decisions and transactions they know little about, he said.

Replies could at a minimum help defendants if they force plaintiffs to take positions or make statements that could justify seeking attorneys’ fees or sanctions, Holly said.

Amert predicted court-ordered replies may become more common in ERISA cases, as there’s “not much downside” for judges requiring them.

Attorneys’ Fees

Ordering unsuccessful ERISA plaintiffs to pay attorneys’ fees is another tool the justices suggested for curbing excessive litigation. Courts have traditionally been hesitant to do this, said Amert, who’s seen it only a handful of times over more than two decades of litigating.

“Courts don’t want to make it hard for plaintiffs who have real claims to find a lawyer to take them,” she said. “They’re very thoughtful about not creating disincentives for lawyers to take cases.”

Holly, who agreed that fee awards favoring ERISA defendants are very rare, said judges might be more open to the possibility now that the Supreme Court has “put it on the table.” Even so, they’ll likely be reserved for cases in which plaintiffs “are not proceeding in good faith,” he said.

An early indication on how courts will handle post-Cunningham fee requests could come from South Carolina, where US District Judge Sherri A. Lydon is reviewing a fee motion filed by Southeastern Freight Lines Inc. The California-based trucking company, which defeated claims of excessive retirement plan fees in 2025, said it’s entitled to fees because the plaintiffs’ initial complaint “was nothing more than a gamble, setting forth allegations based on pure conjecture and hoping discovery will reveal a lucky guess.”

Fee awards are “blunt instruments” that could deter plaintiffs’ attorneys from filing cases, but because they typically come at the end of litigation, they don’t provide a pathway for resolving cases before discovery costs have been incurred, Amert said.

“For a tool to really address the issue the Supreme Court was grappling with, which is the cost of discovery in asymmetrical litigation where one side has all of the information and so bears most of the discovery costs, the tool really has to work early in the case,” she said.

An appeal challenging an assessment of attorneys’ fees against an individual ERISA plaintiff is pending in the US Court of Appeals for the Fourth Circuit.

Standing

The standing doctrine—in which courts require plaintiffs to have a concrete stake in the claims they’re litigating—is another potential pathway the Supreme Court endorsed for weeding out flawed ERISA complaints.

Though Holly said Cunningham “didn’t really add much” to the existing standing doctrine, at least one judge has explicitly cited that opinion’s instruction to dismiss suits that “fail to identify an injury” in the course of rejecting an ERISA challenge to a retirement plan’s fee levels and fund menu.

The standing doctrine in ERISA cases “isn’t well-developed or uniform across jurisdictions,” said Amert, who predicted an increase in litigation on this question.

“I think you will see more standing challenges early in cases, and I think the law on standing to bring an ERISA case will get much better developed,” she said.