Earlier this year, ERISA fiduciary breach defendant Parker-Hannifin filed a petition for a writ of certiorari to the United States Supreme Court that, if granted, could settle a circuit split created by the Sixth Circuit regarding the correct pleading standard for ERISA class actions challenging defined contribution plan investment performance. Johnson v. Parker-Hannifin, 122 F.4th 205 (6th Cir. 2024). It would also allow the Court to weigh in substantively on the pleadings standard for similar claims – an issue percolating in the courts below for years.
The Seventh, Eighth, and Tenth circuits have each held that plaintiffs asserting an ERISA fiduciary breach claim based on offering imprudent investments in a defined contribution Plan must allege in the complaint that other investment options with similar qualities, aims and goals – often called "meaningful benchmarks" – outperformed the Plan's investments.
The Sixth Circuit departed from this consensus in Johnson v. Parker-Hannifin. There, participants in the Parker-Hannifin retirement plan brought various fiduciary breach claims, including the relevant claim here: that the Plan's suite of target date funds underperformed. The district court dismissed the suit on the pleadings, but a divided panel of the Sixth Circuit reversed. The majority held that, to state a viable imprudent investment claim based on performance, plaintiffs do not need to allege a meaningful benchmark. The Sixth Circuit further held that, even if the meaningful benchmark standard was required, plaintiffs had properly pled one by comparing the passively managed target date funds at issue in their Plan to the S&P target date fund benchmark, even though plaintiffs had not alleged why that was a meaningful benchmark.
Parker-Hannifin thensought a writ of certiorari from the U.S. Supreme Court, posing the question of "[w]hether pleading an imprudent-investment claim under ERISA, based on how the investment's returns compared to some performance benchmark, requires allegations showing that the benchmark is a sound basis for comparison for that investment." On June 30, 2025, the Court invited the Solicitor General to file a brief expressing the views of the United States on the case. This invitation signals the Court's potential interest in granting certiorari.
The Sixth Circuit holding in Parker-Hannifin lowers the bar for plaintiffs to plead an imprudent investment claim, which could lead to significant increases in duration and cost of litigating such claims, as well as further open the litigation floodgates. It also creates uncertainty through a circuit split and runs afoul of the Supreme Court's prior instructions in Hughes v. Northwestern University and Fifth Third Bancorp v. Dudenhoeffer to conduct a rigorous, context-specific analysis of ERISA fiduciary breach claims at the pleadings stage. If certiorari is granted, Parker-Hannifin provides the Court with a clear path forward to substantively address these concerns.
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