Cornell 403(b) Plan Lawsuit Returns to District Court

The marquee retirement industry case Cunningham v. Cornell University is headed back to district court following April’s pro-plaintiff ruling by the U.S. Supreme Court, according to court documents.

The U.S. 2nd Circuit Court of Appeals, which hears appeals for cases filed in district courts in Connecticut, New York and Vermont, announced that it would send the case back to the U.S. District Court for the Southern District of New York after the parties failed to reach an agreement on how to proceed with the case following the Supreme Court’s ruling.

According to recent court documents, after the remand to the district court, the district judge should decide whether to schedule summary judgment motions, reopen discovery or if the plaintiffs should be offered a jury trial.

The Supreme Court’s unanimous decision in April sided with the case’s plaintiffs, making it easier for cases to withstand early-stage motions to dismiss or reach discovery in a prohibited-transaction claim under the Employee Retirement Income Security Act.

ERISA attorneys who defend plan sponsors have cautioned that the ruling would “open the floodgates” to more litigation, because plaintiffs alleging a “prohibited transaction” under ERISA Section 406 need to only allege that such a transaction—such as hiring a service provider—occurred to survive a motion to dismiss.

Jerry Schlichter, who represents the plaintiffs in the Cornell case, told PLANADVISER in April that the case will go forward in district court and proceed to trial.

Mayer Brown LLP is representing Cornell in the case.