Cunningham v. Cornell Univ.

P R E L I M I N A R Y P R I N T
Volume 604 U. S. Part 2
Pages 693–711
OFFICIAL REPORTS
OF
T H E S U P R E M E C O U R T
April 17, 2025
REBECCA A. WOMELDORF
reporter of decisions
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693
Syllabus
CUNNINGHAM et al. v. CORNELL UNIVERSITY
et
al.
certiorari to the united states court of appeals for
the second circuit
No. 23–1007. Argued January 22, 2025—Decided April 17, 2025
The Employee Retirement Income Security Act of 1974 (ERISA) prohibits
plan fduciaries from causing a plan to engage in certain transactions
with parties in interest. 29 U. S. C. § 1106. A separate provision,
§ 1108(b)(2)(A), exempts from these prohibitions any transaction that
involves “[c]ontracting or making reasonable arrangements with a party
in interest for offce space, or legal, accounting, or other services neces-
sary for the establishment or operation of the plan, if no more than
reasonable compensation is paid therefor.” The question presented is
whether, to state a claim under § 1106, a plaintiff must plead that
§ 1108(b)(2)(A) does not apply to an alleged prohibited transaction.
Petitioners represent a class of current and former Cornell University
employees who participated in two defned-contribution retirement
plans from 2010 to 2016. In 2017, they sued Cornell and other plan
fduciaries for allegedly causing the plans to engage in prohibited trans-
actions for recordkeeping services with the Teachers Insurance and An-
nuity Association of America-College Retirement Equities Fund and
Fidelity Investments Inc., in violation of § 1106(a)(1)(C). Petitioners
claimed the plans paid these service providers substantially more than
reasonable recordkeeping fees. The District Court dismissed the
prohibited-transaction claim, and the Second Circuit affrmed. The
Second Circuit held that § 1108(b)(2)(A) is incorporated into § 1106(a)'s
prohibitions, requiring plaintiffs to plead that a transaction was “unnec-
essary or involved unreasonable compensation” to survive a motion to
dismiss. 86 F. 4th 961, 975.
Held: To state a claim under § 1106(a)(1)(C), a plaintiff need only plausibly
allege the elements contained in that provision itself, without address-
ing potential § 1108 exemptions. Pp. 700–709.
(a) Section 1106(a)(1)(C) contains three elements: It prohibits fduci-
aries from (1) “caus[ing a] plan to engage in a transaction” (2) that the
fduciary “knows or should know . . . constitutes a direct or indirect . . .
furnishing of goods, services, or facilities” (3) “between the plan and a
party in interest.” Its bar is categorical and does not remove from its
scope transactions that were necessary or involved reasonable compen-
sation. The exemptions in § 1108 do not impose additional pleading re-

694 CUNNINGHAM
v. CORNELL UNIV.
Syllabus
quirements for § 1106(a)(1) claims. When a statute has “exemptions
laid
out apart from the prohibitions,” and the exemptions “expressly
refe[r] to the prohibited conduct as such,” the exemptions ordinarily
constitute “affrmative defense[s]” that are “entirely the responsibility
of the party raising ” them. Meacham v. Knolls Atomic Power Labora-
tory, 554 U. S. 84, 91, 95. Like the exemptions at issue in Meacham,
the § 1108 exemptions are structured as affrmative defenses that must
be pleaded and proved by defendants who seek to beneft from them.
Pp. 700–702.
(b) Respondents' contrary arguments are unpersuasive. First, the
“[e]xcept as provided in section 1108” language in § 1106(a) does not
incorporate § 1108 exemptions as elements of § 1106(a) violations. That
reading ignores that Congress wrote the § 1108 exemptions “in the or-
thodox format of an affrmative defense” separate from the prohibitions.
Meacham, 554 U. S., at 102. The headings of the sections, “Prohibited
transactions” for § 1106 and “Exemptions from prohibited transactions”
for § 1108, confrm this understanding. Respondents also fail to explain
why some but not all § 1108 exemptions should be treated as elements
of § 1106(a) claims. Yet requiring plaintiffs to plead and disprove all
potentially relevant § 1108 exemptions would be impractical, given that
there are 21 statutory exemptions and hundreds of regulatory exemp-
tions. Pp. 703–706.
(c) Respondents' reliance on United States v. Cook, 17 Wall. 168, is
misplaced. Cook established a “rule of criminal pleading ” based on con-
stitutional considerations not present in the civil context. United
States v. Reese, 92 U. S. 214, 232. Even in criminal cases, it remains
settled that “ `an indictment or other pleading . . . need not negative the
matter of an exception made by a proviso or other distinct clause.' ”
Dixon v. United States, 548 U. S. 1, 13. Pp. 706–707.
(d) Finally, respondents' practical concerns about meritless litigation
cannot overcome the statutory text and structure. District courts have
various tools at their disposal to screen out meritless claims, including
requiring plaintiffs to fle a reply addressing exemptions under Federal
Rule of Civil Procedure 7(a), dismissing claims that fail to identify a
concrete injury under Article III, limiting discovery, imposing Rule 11
sanctions, and ordering cost shifting under § 1132(g)(1). Pp. 707–709.
86 F. 4th 961, reversed and remanded.
Sotomayor, J., delivered the opinion for a unanimous Court. Alito, J.,
fled a concurring opinion, in which Thomas and Kavanaugh, JJ., joined,
post, p. 709.
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695
Opinion of the Court
Xiao Wang argued the cause for petitioners. With him
on
the briefs were Jerome J. Schlichter and Sean E. Soyars.
Yaira Dubin argued the cause for the United States as
amicus curiae urging reversal. With her on the brief were
Solicitor General Prelogar, Deputy Solicitor General
Kneedler, Wayne R. Berry, and Jeffrey M. Hahn.
Nicole A. Saharsky argued the cause for respondents.
With her on the brief were Minh Nguyen-Dang, Carmen
Longoria-Green, Nancy G. Ross, and Michael A. Scodro.*
Justice Sotomayor delivered the opinion of the Court.
The Employee Retirement Income Security Act of 1974
(ERISA), 88 Stat. 829, as amended, 29 U. S. C. § 1001 et seq.,
prohibits ERISA plan fduciaries from causing a plan to
enter into certain transactions with parties in interest.
§ 1106. A separate part of the statute, § 1108(b)(2)(A), ex-
empts from § 1106's prohibitions any transaction that in-
volves “[c]ontracting or making reasonable arrangements
with a party in interest for offce space, or legal, accounting,
or other services necessary for the establishment or opera-
tion of the plan, if no more than reasonable compensation
is paid therefor.” The question presented is whether, to
state a claim under § 1106, a plaintiff must plead that
*Briefs of amici curiae urging reversal were fled for AARP et al. by
Louis Lopez and William Alvarado Rivera; for the American Association
for Justice by Robert S. Peck and Jeffrey R. White; for the Pension Rights
Center by John Nestico; and for Quinn Curtis et al. by Gregory Y. Porter
and Mark G. Boyko.
Briefs of amici curiae urging affrmance were fled for AT&T Services,
Inc., et al. by Allyson N. Ho, Ashley E. Johnson, Stephen J. Hammer,
David W. Casazza, and Robert A. Batista; for the American Benefts Coun-
cil et al. by Meaghan VerGow and Deanna M. Rice; for the American
Council on Education et al. by Jessica L. Ellsworth; for the Chamber of
Commerce of the United States of America et al. by Jaime A. Santos,
James O. Fleckner, Jordan Bock, Erica T. Klenicki, and Michael A. Tilgh-
man II; and for Encore Fiduciary by Jed W. Glickstein.
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696 CUNNINGHAM
v. CORNELL UNIV.
Opinion of the Court
§ 1108(b)(2)(A) does not apply to an alleged transaction be-
tween
a plan and a party in interest. The answer is no.
The Court holds that § 1108 sets out affrmative defenses, so
it is defendant fduciaries who bear the burden of pleading
and proving that a § 1108 exemption applies to an otherwise
prohibited transaction under § 1106.
I
A
Congress enacted ERISA to “protect . . . the interests of
participants in employee beneft plans and their benefciar-
ies.” § 1001(b). It did so by “establishing standards of con-
duct, responsibility, and obligation for fduciaries of employee
beneft plans, and by providing for appropriate remedies,
sanctions, and ready access to the Federal courts.” Ibid.
To that end, every ERISA plan must have at least one named
fduciary with authority to control and manage the operation
and administration of the plan. See § 1102(a)(1); see also
§ 1002(21)(A) (“[A] person is a fduciary with respect to a plan
to the extent . . . he exercises any discretionary authority or
discretionary control respecting management of such plan or
exercises any authority or control respecting management or
disposition of its assets”).
ERISA subjects plan fduciaries to certain fduciary duties
derived from the common law of trusts. See § 1104(a); Cen-
tral States, Southeast & Southwest Areas Pension Fund v.
Central Transport, Inc., 472 U. S. 559, 570 (1985). One is
the duty of loyalty, which requires plan fduciaries to act
“solely in the interest of the [plan's] participants and benef-
ciaries.” § 1104(a)(1)(A). Among other things, the duty of
loyalty requires the fduciary to “deal fairly and honestly
with benefciaries,” Varity Corp. v. Howe, 516 U. S. 489, 506
(1996) (citing G. Bogert & G. Bogert, Law of Trusts and
Trustees § 543, pp. 218–219 (rev. 2d ed. 1992)), so as “to en-
sure that a plan receives all funds to which it is entitled,”
Central Transport, 472 U. S., at 571.
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697
Opinion of the Court
Section 1106 “supplements the fduciary's general duty of
loya
lty to the plan's benefciaries . . . by categorically barring
certain transactions deemed `likely to injure the pension
plan.' ” Harris Trust and Sav. Bank v. Salomon Smith
Barney Inc., 530 U. S. 238, 241–242 (2000) (quoting Commis-
sioner v. Keystone Consol. Industries, Inc., 508 U. S. 152,
160 (1993)). Specifcally, § 1106(a)(1) states that, “[e]xcept as
provided in section 1108,” a fduciary “shall not cause the
plan to engage” in certain transactions with a “party in in-
terest.”
1
The Act, in turn, defnes “ `party in interest' ” to
include various plan insiders, including the plan's administra-
tor, sponsor, and its offcers, as well as entities “providing
services to [the] plan.” § 1002(14). This case concerns the
prohibited transaction set out in § 1106(a)(1)(C), which bars
a fduciary from “caus[ing] the plan to engage in a transac-
tion, if he knows or should know that such transaction consti-
tutes a direct or indirect . . . furnishing of goods, services, or
facilities between the plan and a party in interest.”
Section 1108 separately enumerates 21 exemptions to
those prohibited transactions. Relevant here is § 1108(b)
(2)(A), which exempts from § 1106(a)(1)(C) any transaction
that involves “[c]ontracting or making reasonable arrange-
ments with a party in interest for offce space, or legal, ac-
counting, or other services necessary for the establishment
or operation of the plan, if no more than reasonable compen-
sation is paid therefor.” § 1108(b)(2)(A).
B
Respondent Cornell University is the named administrator
for two defned-contribution retirement plans.
2
Cornell em-
1
Section 1106 also prohibits certain transactions between plans and the
fduciaries who manage them. See § 1106(b).
2
The facts that follow are from petitioners' operative complaint. Be-
cause this case comes to the Court on review of respondents' motion to
dismiss that complaint, the Court accepts petitioners' allegations as true.
See Hughes v. Northwestern Univ., 595 U. S. 170, 173 (2022).
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698 CUNNINGHAM
v. CORNELL UNIV.
Opinion of the Court
ployees maintain individual investment accounts within
those
plans, the value of which “is determined by the market
performance of employee and employer contributions, less
expenses.” Tibble v. Edison Int'l, 575 U. S. 523, 525 (2015).
Those expenses include fees paid to service providers.
In 2011, Cornell retained the Teachers Insurance and An-
nuity Association of America-College Retirement Equities
Fund (TIA A) and Fidelity Investments Inc. (Fidelity).
TIAA and Fidelity offered investment options to plan partic-
ipants and served as recordkeepers for the retirement plans
by tracking account balances and providing account state-
ments. Cornell compensated TIAA and Fidelity with fees
from a set portion of plan assets.
Petitioners represent a class of current and former Cornell
employees who participated in the plans from 2010 to 2016.
In 2017, they sued Cornell and other plan fduciaries alleging,
as relevant here, that respondents violated § 1106(a)(1)(C) by
causing the plans to engage in prohibited transactions for
recordkeeping services. “[B]ecause TIAA and Fidelity are
service providers and hence parties in interest,” petitioners
argued, “their furnishing of recordkeeping and administra-
tive services to the [p]lans is a prohibited transaction unless
Cornell proves an exemption.” 86 F. 4th 961, 978 (CA2
2023) (internal quotation marks and alterations omitted).
The plans, according to petitioners, also paid TIAA and Fi-
delity more than a reasonable recordkeeping fee. A reason-
able fee (petitioners allege) would be approximately $35 per
participant per year, but instead the plans paid between $115
to $183 per participant for one plan and $145 to $200 per
participant for the other. Ibid.
Respondents moved to dismiss the prohibited-transaction
claim, and the District Court granted their motion. The
court held that a plaintiff, in addition to pleading the
prohibited-transaction elements contained within § 1106(a)
(1)(C), must also allege “some evidence of self-dealing or
other disloyal conduct.” 2017 WL 4358769, *10 (SDNY,
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699
Opinion of the Court
Sept. 29, 2017). Finding that petitioners failed to do so, the
D
istrict Court dismissed their § 1106(a)(1)(C) claim.
The Second Circuit affrmed, but did so on a different
ground. It concluded that “the language of § 1106(a)(1) can-
not be read to demand explicit allegations of `self-dealing or
disloyal conduct.' ” 86 F. 4th, at 975. The Court of Appeals
further observed, however, that § 1106(a)(1)(C), if read “in
isolation,” “would appear to prohibit payments by a plan to
any entity providing it with any services.” Id., at 973.
Other Courts of Appeals determined that such a reading
would lead to “ `absurd results,' ” the Second Circuit noted,
because it would seemingly “ `prohibit fduciaries from pay-
ing third parties to perform essential services in support of
a plan.' ” Ibid.
Thus, to limit the reach of § 1106(a)(1)(C), the Second Cir-
cuit held the exemptions to § 1106(a)'s prohibited transac-
tions contained in § 1108 imposed additional pleading re-
quirements. The § 1108 exemptions, the court reasoned,
cannot “be understood merely as affrmative defenses to the
conduct proscribed in § 1106(a).” Id., at 975. Rather, in the
Second Circuit's view, “at least some of those exemptions—
particularly, the exemption for reasonable and necessary
transactions codifed by § 1108(b)(2)(A)—are incorporated
into § 1106(a)'s prohibitions,” meaning a plaintiff must af-
frmatively plead them to survive a motion to dismiss. Ibid.
In other words, a plaintiff alleging a prohibited transaction
under § 1106(a)(1)(C) must also allege “that [the] transaction
was unnecessary or involved unreasonable compensation.”
Id., at 975 (citing §§ 1106(a)(1)(C), 1108(b)(2)(A); emphasis
deleted). Concluding that petitioners had not done so,
the Court of Appeals affrmed the dismissal of their
§ 1106(a)(1)(C) claim.
3
In reaching that conclusion, the Sec-
3
Although petitioners alleged that respondents paid more than a “reason-
able” fee for TIAA and Fidelity's recordkeeping services, see supra, at 698,
the Second Circuit rejected that allegation as insuffcient, reasoning that “it
is not enough to allege that the fees were higher than some theoretical
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700 CUNNINGHAM
v. CORNELL UNIV.
Opinion of the Court
ond Circuit split from the Eighth Circuit, which has held that
no
additional pleading requirements beyond § 1106(a)(1)
apply to prohibited-transaction claims. See Braden v. Wal-
Mart Stores, Inc., 588 F. 3d 585, 600–602 (CA8 2009).
This Court granted certiorari to decide whether a plaintiff
can state a claim for relief by simply alleging that a plan
fduciary engaged in a transaction proscribed by § 1106(a)
(1)(C), or whether a plaintiff must plead allegations that dis-
prove the applicability of the § 1108(b)(2)(A) exemption. 603
U. S. 948 (2024). The Court concludes that plaintiffs need
do no more than plead a violation of § 1106(a)(1)(C), and we
therefore reverse.
II
Section 1106(a)(1)(C) contains three elements. It prohib-
its fduciaries from (1) “caus[ing a] plan to engage in a trans-
action” (2) that the fduciary “knows or should know . . .
constitutes a direct or indirect . . . furnishing of goods, serv-
ices, or facilities” (3) “between the plan and a party in inter-
est.” Section 1106(a)(1)(C)'s bar is categorical: Any transac-
tion that satisfes its three elements is presumptively
unlawful. Nothing in that section removes from its categor-
ical bar transactions that were necessary for the plan or
involved reasonable compensation. According ly, under
§ 1106(a)(1)(C), plaintiffs need only plausibly allege each of
those elements of a prohibited-transaction claim.
alternative service.” 86 F. 4th, at 978. Whether respondents paid an
unreasonable fee, the court explained, turned on the nature of the services
TIAA and Fidelity provided, as “it is not unreasonable to pay more for
superior services.” Ibid. The Court of Appeals thus affrmed the dis-
missal of petitioners' § 1106(a)(1)(C) claim because (in its view) petitioners
“failed to allege any facts going to the relative quality of the recordkeep-
ing services provided, let alone facts that would suggest the fees were `so
disproportionately large' that they `could not have been the product of
arm's-length bargaining.' ” Id., at 978–979 (quoting Jones v. Harris Asso-
ciates L. P., 559 U. S. 335, 346 (2010)).
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701
Opinion of the Court
The exemptions set forth in a different part of the statute,
§
1108, do not impose additional pleading requirements to
make out a § 1106(a)(1) claim. See § 1106(a) (prohibiting cer-
tain transactions between the plan and a party in interest
“[e]xcept as provided in section 1108”). There is a well-
settled “general rule of statutory construction that the bur-
den of proving justifcation or exemption under a special ex-
ception to the prohibitions of a statute generally rests on one
who claims its benefts.” FTC v. Morton Salt Co., 334 U. S.
37, 44–45 (1948). In particular, when a statute has “exemp-
tions laid out apart from the prohibitions,” and the exemp-
tions “expressly refe[r] to the prohibited conduct as such,”
the exemptions ordinarily constitute “affrmative defense[s]”
that are “entirely the responsibility of the party raising ”
them. Meacham v. Knolls Atomic Power Laboratory, 554
U. S. 84, 91, 95 (2008). That describes exactly how ERISA
is structured: The exemptions to § 1106(a) prohibited trans-
actions are enumerated separately in § 1108, and § 1108 rec-
ognizes that the substantive “prohibitions” are “provided in
section 1106” of the statute. § 1108(b).
This Court's decision in Meacham is instructive. At issue
there were the Age Discrimination in Employment Act's
general prohibitions on age discrimination, §§ 623(a)–(c), (e),
which “are subject to a separate provision, § 623(f ), [that] cre-
at[es] exemptions for employer practices `otherwise prohib-
ited under subsectio[n] (a), (b), (c), or (e).' ” 554 U. S., at 91.
Like § 1108(b)(2)(A), the § 621(f ) exemption in Meacham
shielded defendants from liability if the challenged conduct
was “reasonable.” Compare § 1108(b)(2)(A) with § 623(f )(1).
Given Congress's structural choice to place the prohibited
conduct and the relevant exemptions in different statutory
provisions, this Court deemed it “no surprise” that the ex-
emptions presented “ `affrmative defenses.' ” Id., at 91.
Accordingly, Meacham held that the ADEA assigned to de-
fendants both the burden to “produce evidence raising the
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702 CUNNINGHAM
v. CORNELL UNIV.
Opinion of the Court
defense” of reasonableness and the burden to “persuade the
fac
tfnder of its merit.” Id., at 87.
The same is true of ERISA. Like the exemptions at issue
in Meacham, the § 1108 exemptions are “writ[ten] in the or-
thodox format of an affrmative defense.” Id., at 102. Un-
derstood as affrmative defenses, the § 1108 exemptions must
be pleaded and proved by the defendant who seeks to beneft
from them. See Taylor v. Sturgell, 553 U. S. 880, 907 (2008)
(“Ordinarily, it is incumbent on the defendant to plead and
prove [an affrmative] defense”). A plaintiff need only allege
the three elements within § 1106(a)(1)(C), notwithstanding
the potential applicability of a § 1108 exemption, because an
“affrmative defense” is “not something the plaintiff must an-
ticipate and negate in her pleading.” Perry v. Merit Sys-
tems Protection Bd., 582 U. S. 420, 435, n. 9 (2017); see also
Fed. Rule Civ. Proc. 8(c) (requiring defendants, “[i]n respond-
ing to a pleading,” to “affrmatively state any . . . affrma-
tive defense”).
Of course, a plaintiff will not prevail by simply pleading,
and later proving, the § 1106(a) elements. If a defendant es-
tablishes that a § 1108 exemption applies, the § 1106(a)(1)(C)
claim will ultimately fail. As relevant here, this means that
if respondents establish that a transaction prohibited under
§ 1106(a)(1)(C) was for “services necessary for the . . . opera-
tion of the plan” and “no more than reasonable compensation
[was] paid therefor,” § 1108(b)(2)(A), they cannot be held lia-
ble for causing the plan to enter into the transaction. At the
pleading stage, however, it suffces for a plaintiff plausibly to
allege the three elements set forth in § 1106(a)(1)(C).
4
4
In some circumstances, principles from the common law of trusts can
help inform this Court's interpretation of ERISA. See Varity Corp. v.
Howe, 516 U. S. 489, 496 (1996); accord, LaRue v. DeWol ff, Boberg & Asso-
ciates, Inc., 552 U. S. 248, 254, n. 4 (2008) (“[T]he common law of trusts
. . . informs our interpretation of ERISA's fduciary duties”). Here, those
principles would have been consistent with the Court's holding, insofar as
trustees were “under a duty to the benefciary not to delegate to others
the doing of acts which the trustee can reasonably be required personally
to perform.” Restatement (Second) of Trusts § 171, p. 373 (1957) (bold-
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703
Opinion of the Court
III
A
Agai
nst this backdrop, respondents nevertheless insist
that § 1106(a)(1)(C) is best read to incorporate as an element
the exception set out in § 1108(b)(2)(A) and that ERISA
plaintiffs must therefore plead and prove the exemption's in-
applicability. To support that construction, they highlight
that § 1106(a) begins by stating that its prohibitions apply
“[e]xcept as provided in section 1108.” That proviso, they
contend, shows that § 1106(a)(1)(C) and § 1108(b)(2)(A) to-
gether defne a prohibited transaction, such that plaintiffs
bear the burden of pleading and proving the elements in
both provisions.
This alternative reading of the statute suffers from several
faws. For one, it ignores that Congress wrote the § 1108
exemptions “in the orthodox format of an affrmative de-
fense,” with the exemptions “laid out apart” from the prohi-
bitions in separate statutory provisions. Meacham, 554
U. S., at 91, 102. As discussed above, supra, at 700–702, that
structural decision forecloses respondents' argument.
face deleted). A trustee could nonetheless delegate certain duties to an
agency only upon a showing that “the agent's employment was necessary,
that the trustee entered into a reasonable contract of employment with
the agent, and that the agent rendered services to the trust.” A. Hess,
G. Bogert, & G. Bogert, Law of Trusts and Trustees § 555, p. 48 (3d ed.
2024). Critically, the common law of trusts “placed the burden squarely
on the trustee” to make that showing. Ibid. The Court's opinion does
not rest on the common law of trusts, however. First, ERISA plans are
suffciently complex so that a question would arise as to whether fduciar-
ies can perform all necessary tasks themselves without plans incurring
greater costs. Second, ERISA allows fduciaries to delegate certain du-
ties, see, e. g., 29 U. S. C. § 1105(c) (describing a mechanism “for named
fduciaries to designate persons other than named fduciaries to carry out
fduciary responsibilities”), and requires engaging the services of outside
third parties in certain contexts, see, e. g., § 1023(a)(3) (providing that an
administrator of a plan “shall engage . . . an independent qualifed public
accountant” to conduct examinations of fnancial statements and records).
Third, the text and structure of ERISA establish that fduciaries bear the
burden of pleading and proving § 1108's exemptions.
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704 CUNNINGHAM
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Opinion of the Court
If there were any remaining doubt, the headings of § 1106
and
§ 1108 confrm that it is the former, on its own, that de-
fnes the offense. See Yates v. United States, 574 U. S. 528,
540 (2015) (plurality opinion) (“ `[T]he title of a statute and
the heading of a section are tools available for the resolution
of a doubt about the meaning of a statute' ”). Section 1106's
heading is plain: “Prohibited transactions.” (Boldface de-
leted.) Section 1108, meanwhile, reads: “Exemptions from
prohibited transactions.” (Boldface deleted.) That Con-
gress chose to label § 1108 as “exemptions” suggests that,
even if § 1108(b)(2)(A) were best understood as an element of
a § 1106(a)(1)(C) claim (and not an affrmative defense), the
statute should still be read to place on ERISA defendants
the burden of proving the exemption's applicability. That is
because this Court has held that “the burden of persuasion
as to certain elements of a plaintiff 's claim may be shifted to
defendants, when such elements can fairly be characterized
as affrmative defenses or exemptions.” Schaffer v. Weast,
546 U. S. 49, 57 (2005) (emphasis added).
Structural considerations also weigh against respondents'
reading of § 1106(a)(1)(C) and § 1108(b)(2)(A). Respondents'
interpretation of the “except as provided” language would
imply that all of the § 1108 exemptions are incorporated as
elements of every § 1106(a) violation. After all, each of the
exemptions is set forth in § 1108, and the “[e]xcept as pro-
vided in section 1108” language applies to § 1106(a) in its en-
tirety. § 1106(a); cf. Cyan, Inc. v. Beaver County Employees
Retirement Fund, 583 U. S. 416, 428 (2018) (rejecting an in-
terpretation that “cherry pick[ed] from the material covered
by the statutory cross-reference,” since “the except clause
poi nts to `sec ti on 77p' as a whole —not to paragraph
77p(f )(2)”). Respondents fail to offer a principled basis for
treating some, but not all, of the § 1108 exemptions as ele-
ments incorporated into § 1106(a)'s prohibitions. Yet Con-
gress intended for § 1106(a) to create “per se prohibitions on
transacting with a party in interest.” Harris Trust, 530
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705
Opinion of the Court
U. S., at 252; see id., at 241–242. Incorporating all 21 § 1108
exempti
ons as elements into the otherwise straightforward
prohibitions in § 1106(a) would plainly frustrate Congress's
intent to create a “categorica[l]” bar. Keystone, 508 U. S.,
at 160.
Indeed, because § 1106(a), by its terms, sets out per se pro-
hibitions, it would make little sense to put the onus on plain-
tiffs to plead and disprove any potentially relevant separate
§ 1108 exemptions. That burden, moreover, would not be
limited to those statutory exemptions: Beyond the 21 exemp-
tions enumerated in § 1108, the Secretary of Labor has pro-
mulgated hundreds of regulatory exemptions pursuant to
§ 1108. See § 1108(a) (authorizing the Secretary to “grant a
conditional or unconditional exemption of any fduciary or
transaction, or class of fduciaries or transactions, from all or
part of the restrictions imposed by sectio[n] 1106”); see also
Brief for United States as Amicus Curiae 3, and n. 1.
When statutory exceptions “are numerous,” “fairness usu-
ally requires that the adversary give notice of the particular
exception upon which it relies and therefore that it bear the
burden of pleading.” 2 R. Mosteller et al., McCormick on
Evidence § 337, p. 699 (8th ed. 2020); cf. NLRB v. Kentucky
River Community Care, Inc., 532 U. S. 706, 711 (2001).
That Congress enumerated 21 separate exceptions and then
authorized the Secretary to add additional classes of ex-
empted transactions thereto only heightens the fairness con-
cern, as respondents' proposed approach would require plain-
tiffs to plead and dispute myriad exceptions before knowing
which of them the defendant will seek to invoke. That
would be especially illogical here, where several of the § 1108
exemptions turn on facts one would expect to be in the fdu-
ciary's possession. See, e. g., § 1108(b)(16) (exempting trans-
actions involving the purchase or sale of securities or other
property between a plan and a party in interest, provided
the transaction occurred over certain approved platforms
and complied with applicable rules of the Securities and Ex-
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Opinion of the Court
change Commission, the price and compensation refect an
ar
m's-length transaction, and the plan fduciary received no-
tice of the execution of such transaction through the
approved platform, among other criteria); § 1108(b)(19)
(exempting certain prohibited “cross-trading ” transactions
based on the satisfaction of nine separate conditions related
to a plan manager's dealings and receipt of information from
an investment manager).
B
Respondents' argument from precedent is similarly un-
availing. Respondents rely on th is Cour t's decisi on in
United States v. Cook, 17 Wall. 168 (1872), to support their
construction of § 1108(b)(2)(A) as an additional element of a
§ 1106(a)(1)(C) claim. Cook held that, “[w]here a statute de-
fning an offence contains an exception,” the pleadings must
allege that the prohibited conduct does not fall within the
exception whenever the exception “is so incorporated with
the language defning the offence that the ingredients of the
offence cannot be accurately and clearly described if the ex-
ception is omitted.” Id., at 173. In respondents' telling,
§ 1106(a)(1)(C) is the kind of statute the Court contemplated
in Cook. Respondents aver that it is routine for service pro-
viders to “perform many necessary and valuable functions
for plan participants and fduciaries,” such as “offer[ing] in-
vestment funds and platforms, investment assistance, and
recordkeeping services,” as well as “perform[ing] critical ac-
counting and legal functions.” Brief for Respondents 11.
Many of those transactions are legal, respondents maintain,
even though they fall within the scope of § 1106(a)(1)(C), be-
cause they are “reasonable arrangements” that are “neces-
sary for the . . . operation of the plan” and involve “rea-
sonable compensati on” under § 1108( b)(2)(A). Thus, in
respondents' view, § 1108(b)(2)(A) is a missing “ingredien[t]”
“incorporated with the language” of a § 1106(a)(1)(C) viola-
tion, for the lawfulness of these transactions will often turn
on their necessity and reasonableness. Cook, 17 Wall., at 173.
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707
Opinion of the Court
Respondents ignore, however, that this Court has said
C
ook created a “rule of criminal pleading ” for indictments
intended to ensure that defendants have fair notice “of every
fact which is legally essential to the punishment to be in-
ficted.” United States v. Reese, 92 U. S. 214, 232 (1876) (em-
phasis added). Indeed, Cook “construed” the “constitutional
right `to be informed of the nature and cause of ' ” a criminal
accusation. United States v. Cruikshank, 92 U. S. 542, 557–
558 (1876). Hence, it rested on constitutional considerations
not present in the civil context. Moreover, the Court has
applied the Cook rule narrowly, such as when an exception
to a criminal offense is contained within the same sentence
of the provision defning the offense. See, e. g., United
States v. Britton, 107 U. S. 655, 669–670 (1883); United States
v. Vuitch, 402 U. S. 62, 67–68, 70 (1971). Even in the crimi-
nal context, it remains a “ `settled rule' ” “ `that an indictment
or other pleading . . . need not negative the matter of an
exception made by a proviso or other distinct clause.' ”
Dixon v. United States, 548 U. S. 1, 13 (2006). Cook is thus
of no help to respondents.
C
Lastly, respondents contend that there will be an avalanche
of meritless litigation if disproving the applicability of
§ 1108(b)(2)(A) is not treated as a required element of pleading
§ 1106(a)(1)(C) violations. ERISA plans, after all, often have
thousands of participants and hold millions of dollars in
assets. The “realities of modern trust administration,” re-
spondents attest, therefore require fduciaries to transact with
service providers. Brief for Respondents 47; see also Law of
Trusts and Trustees § 555, at 48 (3d ed. 2024) (“[E]xpecting a
trustee to personally perform every single act necessary to
execute a modern trust not only is unreasonable but may not
even be the best way to assure effcient and knowledgable
administration of the trust”). To the extent such transac-
tions fall within the scope of § 1106(a)(1)(C), respondents
argue, most would be lawful in light of § 1108(b)(2)(A)'s
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Opinion of the Court
exemption for “necessary” and “reasonable” transactions.
Y
et if plaintiffs must plead only that a transaction barred
by § 1106(a)(1)(C)'s plain text occurred, respondents argue,
plaintiffs could too easily get past the motion-to-dismiss
stage and subject defendants to costly and time-intensive
discovery. Such meritless litigation, respondents claim,
would harm the administration of plans and force plan fdu-
ciaries and sponsors to bear most of the associated costs.
These are serious concerns but they cannot overcome the
statutory text and structure. Here, Congress “set the bal-
ance” in “creating [an] exemption and writing it in the ortho-
dox format of an affrmative defense,” so the Court must
“read it the way Congress wrote it.” Meacham, 554 U. S.,
at 101–102.
To the extent future plaintiffs do bring barebones § 1106(a)
(1)(C) suits, district courts can use existing tools at their dis-
posal to screen out meritless claims before discovery. For
instance, if a fduciary believes an exemption applies to bar
a plaintiff's suit and fles an answer showing as much, Fed-
eral Rule of Civil Procedure 7 empowers district courts to
“insist that the plaintiff” fle a reply “ `put[ting] forward spe-
cifc, nonconclusory factual allegations' ” showing the exemp-
tion does not apply. Crawford-El v. Britton, 523 U. S. 574,
598 (1998); cf. Cole v. Carson, 935 F. 3d 444, 446 (CA5 2019)
(“[C]ourts have developed procedures and pretrial practices,
including . . . a reply to an answer under Rule 7(a) on order
of the district court, particularized to address the defense of
immunity”). Lower courts may then dismiss the suits of
those plaintiffs who cannot plausibly do so. District courts
must also, consistent with Article III standing, dismiss suits
that allege a prohibited transaction occurred but fail to iden-
tify an injury. Cf. Thole v. U. S. Bank N. A., 590 U. S. 538,
544 (2020) (explaining that “ `Article III standing requires a
concrete injury even in the context of a statutory violation' ”
and affrming the dismissal of an ERISA claim because
“plaintiffs . . . failed to plausibly and clearly allege a concrete
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709
Alito, J., concurring
injury” (quoting Spokeo, Inc. v. Robins, 578 U. S. 330, 341
(2016)).
For § 1106(a)(1)(C) claims that do proceed past the
motion to dismiss stage, moreover, district courts retain dis-
cretionary authority to expedite or limit discovery as neces-
sary to mitigate unnecessary costs. Additionally, in cases
where an exemption obviously applies, and a plaintiff and his
counsel lack a good-faith basis to believe otherwise, Rule 11
may permit a district court to impose sanctions against
them. Lastly, it bears mention that ERISA itself gives dis-
trict courts an additional tool to ward off meritless litigation:
cost shifting. See § 1132(g)(1) (“[T]he court in its discretion
may allow a reasonable attorney's fee and costs of action to
either party”). District courts therefore have available a
variety of means to address the concerns raised by respond-
ents and the court below.
***
The Court today holds that plaintiffs seeking to state a
§ 1106(a)(1)(C) claim must plausibly allege that a plan fdu-
ciary engaged in a transaction proscribed therein, no more,
no less. Plaintiffs are not required to plead and prove that
the myriad § 1108 exemptions pose no barrier to ultimate
relief. The judgment of the Second Circuit is reversed, and
the case is remanded for further proceedings consistent with
this opinion.
It is so ordered.
Justice Alito, with whom Justice Thomas and Justice
Kavanaugh join, concurring.
I join all of the opinion of the Court for the simple reason
that 29 U. S. C. § 1108 sets out affrmative defenses, and it is
black letter law that a plaintiff need not plead affrmative
defenses.
1
See Fed. Rule Civ. Proc. 8(c); Taylor v. Sturgell,
1
The decision does not rely on the common law of trusts. As the Court
points out, the Employee Retirement Income Security Act of 1974
(ERISA) departs in important ways from that body of case law; ERISA
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Alito, J., concurring
553 U. S. 880, 907 (2008). Here, as the Court points out,
§
1108 sets out a long list of affrmative defenses, and it would
make no sense to require a complaint to anticipate and at-
tempt to refute all the affrmative defenses that a defendant
might raise.
Unfortunately, this straightforward application of estab-
lished rules has the potential to cause—and, indeed, I expect
it will cause—untoward practical results. The administra-
tor of an ERISA plan like the one at issue will almost always
fnd it necessary to employ outside frms to provide services
that the plan needs. When it does so, these outside frms
become “ `part[ies] in interest' ” under the terms of ERISA,
see § 1002(14)(B), and as a result, their provision of services
to the plan is unlawful under § 1106 unless one of the exemp-
tions in § 1108 applies. The upshot is that all that a plaintiff
must do in order to fle a complaint that will get by a motion
to dismiss under Federal Rule of Civil Procedure 12(b)(6) is
to allege that the administrator did something that, as a
practical matter, it is bound to do.
In this case, for example, Cornell set up a plan under which
employees could invest in the Teachers Insurance and An-
nuity Association of America-College Retirement Equities
Fund and Fidelity funds, and then those companies provided
the recordkeeping services for their own funds, as they cus-
tomarily do. There is nothing nefarious about any of that.
Yet under our decision that is all that a plaintiff must plead
to survive a motion to dismiss. And, in modern civil litiga-
tion, getting by a motion to dismiss is often the whole ball
game because of the cost of discovery. Defendants facing
those costs often calculate that it is effcient to settle a case
even though they are convinced that they would win if the
litigation continued. See J. Beisner, Discovering a Better
plans like Cornell's are vastly different from garden variety common law
trusts; and in my judgment, reliance here on the common law of trusts
would be unhelpful and, indeed, misleading.
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as: 604 U. S. 693 (2025)
711
Alito, J., concurring
Way: The Need for Effective Civil Litigation Reform, 60
Duke
L. J. 547, 550 (2010); see also Dura Pharmaceuticals,
Inc. v. Broudo, 544 U. S. 336, 347 (2005); Chubb, Excessive
Litigation Over Excessive Plan Fees in 2023, pp. 2–3 (Apr.
2023), https://www.chubb.com/content/dam/chubb-sites/
chubb-com/us-en/ business-insurance/fiduciary-liability/pdfs/
excessive-litigation-over-excessive-plan-fees-infographic.pdf
(noting that the number of excessive plan fee cases that set-
tle has increased six-fold since 2016 and that these cases can
“cost more to defend than to settle”). When that happens
in a case like the one now before us, the few plan participants
named as plaintiffs and their attorneys get a windfall, and a
cost that the administrator incurs may be passed on to the
other plan participants.
With a realistic appreciation of this dynamic, the Second
Circuit tried to formulate a rule that would weed out plainly
unmeritorious suits at the pleading stage. The court at-
tempted to achieve an admirable goal, but established plead-
ing rules do not allow that workaround.
In Part III–C of its opinion, the Court sets out some alter-
native safeguards. Perhaps the most promising of these is
the suggestion, offered by the Solicitor General, that a dis-
trict court may insist that a plaintiff fle a reply to an answer
that raises one of the § 1108 exemptions as an affrmative
defense.
2
Ante, at 708. It does not appear that this is a
commonly used procedure, but the Court has endorsed its
use in the past. See Crawford-El v. Britton, 523 U. S. 574,
598 (1998). District courts should strongly consider utiliz-
ing this option—and employing the other safeguards that the
Court describes—to achieve “the prompt disposition of in-
substantial claims.” Id., at 597. Whether these measures
will be used in a way that adequately addresses the problem
that results from our current pleading rules remains to be
seen.
2
See Brief for United States as Amicus Curiae 30–31.
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Reporter’s Note
The attached opinion has been revised to refect the usual publication
and citation style of the United States Reports. The revised pagination
makes available the offcial United States Reports citation in advance of
publication. The syllabus has been prepared by the Reporter of Decisions
for the convenience of the reader and constitutes no part of the opinion of
the Court. A list of counsel who argued or fled briefs in this case, and
who were members of the bar of this Court at the time this case was
argued, has been inserted following the syllabus. Other revisions may
include adjustments to formatting, captions, citation form, and any errant
punctuation. The following additional edits were made:
None