Two trade groups recently offered support to Cornell University after the academic institution settled a class-action lawsuit brought by participants in Cornell’s retirement program. The U.S. Chamber of Commerce and the American Benefits Council filed an amici curiae (friend of the court) brief in Cunningham et al. v. Cornell University et al., case number 21-88 in the U.S. Court of Appeals for the Second Circuit. The brief supports Cornell and the decision rendered in 2019. The determinative issue of the case was which party bears the burden of proof once an injury has been alleged.

In August of 2016, a lawsuit was brought by Casey Cunningham on behalf of 28,000 current and former plan participants in Cornell’s 403(b) plan. The suit alleged Cornell offered insufficient options for its employees’ retirement plans, which he referred to as “high-cost and poor-performing investments compared to available alternatives.” The class of Cornell retirement plan participants gained certification in early 2019.

The lawsuit alleged that the university, retirement plan oversight committee, the committee’s chair, and the investment advisory firm Captrust Financial Advisors of allowing Cornell’s two employee retirement plans to overpay for recordkeeping services and administrative fees. This acquiescence and failure to act constituted neglect of Cornell’s ERISA-required duty to act in plan participants’ best interests. The complaint further alleged that Cornell’s failure to act caused participants to lose more than $28 million in retirement savings. 

In 2019, in the U.S. District Court for the Southern District of New York, Judge P. Kevin Castel ruled that the plaintiffs had plausibly argued that it was imprudent to pay annual recordkeeping fees of more than $115 per participant but presented no evidence of this causing the plan to suffer any losses. Judge Castel also found on Cornell’s behalf regarding allegations that specific plan investments underperformed or were too expensive. Judge Castel stated that Cornell’s retirement plan committee weighed the benefits and disadvantages of retaining them in the plan. 

Both business groups urged the Second Circuit to rule that the legal burden of proving loss is on plan participants, not employers. In effect, the framework that the lower court relied on when dismissing the litigation was correct. Both business advocacy groups urged the Second Circuit to reject the workers’ argument that Judge Castel should have applied a more lenient framework. They also made the point that corporations rely on the current standard to manageably maintain litigation costs.

“Plaintiffs spend a significant portion of their brief advocating for a … standard that would shift the burden to ERISA defendants to disprove loss causation,” ABC and the Chamber wrote in their brief. “But there is nothing in ERISA to indicate that Congress departed from the … rule that places the burden on plaintiffs of proving every element of claims arising under federal statutes.”

The plaintiff class argued that Judge Castel was wrong to reject most of their lawsuit because he improperly placed the burden of proof on them regarding any evidence of any deficiencies in Cornell’s management of the retirement plans. The plaintiff class argued that Castel should have placed the onus on Cornell to prove they met their duty in managing the plans.

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