Cunningham v. Cornell Univ.

(Slip Opinion)              OCTOBER TERM, 2024                                       1

                                       Syllabus

         NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
       being done in connection with this case, at the time the opinion is issued.
       The syllabus constitutes no part of the opinion of the Court but has been
       prepared by the Reporter of Decisions for the convenience of the reader.
       See United States v. Detroit Timber & Lumber Co., 

.


SUPREME COURT OF THE UNITED STATES

                                       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 fiduciaries from causing a plan to engage in certain transactions with parties in interest. 

. 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 office space, or legal, accounting, or other services
  necessary 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 defined-contribution retirement plans from 2010 to 2016. In 2017, they sued Cornell and other
  plan fiduciaries for allegedly causing the plans to engage in prohibited
  transactions for recordkeeping services with the Teachers Insurance
  and Annuity 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 affirmed. The Second Circuit held that §1108(b)(2)(A) is incorporated
  into §1106(a)’s prohibitions, requiring plaintiffs to plead that a transaction was “unnecessary or involved unreasonable compensation” to
  survive a motion to dismiss. 

, 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 addressing potential §1108 exemptions. Pp. 6–15.
2                   CUNNINGHAM v. CORNELL UNIV.

                                    Syllabus

        (a) Section 1106(a)(1)(C) contains three elements: It prohibits fiduciaries from (1) “caus[ing a] plan to engage in a transaction” (2) that
    the fiduciary “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 compensation. The exemptions in §1108 do not impose additional pleading
    requirements 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 “affirmative defense[s]” that are “entirely the responsibility
    of the party raising” them. Meacham v. Knolls Atomic Power Laboratory, 

. Like the exemptions at issue in Meacham,
    the §1108 exemptions are structured as affirmative defenses that must
    be pleaded and proved by defendants who seek to benefit from them.
    Pp. 6–8.
        (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 orthodox format of an affirmative defense” separate from the prohibitions. Meacham, 

. The headings of the sections, “Prohibited transactions” for §1106 and “Exemptions from prohibited
    transactions” for §1108, confirm 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 exemptions. Pp. 9–12.
        (c) Respondents’ reliance on United States v. Cook, 

, is
    misplaced. Cook established “a rule of criminal pleading” based on
    constitutional considerations not present in the civil context. United
    States v. Reese, 

. 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, 

. Pp. 12–13.
        (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 file 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. 13–15.
                    Cite as: 

 (2025)                 3

                              Syllabus

, reversed and remanded.

   SOTOMAYOR, J., delivered the opinion for a unanimous Court. ALITO,
J., filed a concurring opinion, in which THOMAS and KAVANAUGH, JJ.,
joined.
                        Cite as: 

 (2025)                              1

                             Opinion of the Court

     NOTICE: This opinion is subject to formal revision before publication in the
     United States Reports. Readers are requested to notify the Reporter of
     Decisions, Supreme Court of the United States, Washington, D. C. 20543,
     [email protected], of any typographical or other formal errors.


SUPREME COURT OF THE UNITED STATES
                                   _________________

                                   No. 23–1007
                                   _________________


     CASEY CUNNINGHAM, ET AL., PETITIONERS
         v. CORNELL UNIVERSITY, ET AL.
 ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
           APPEALS FOR THE SECOND CIRCUIT
                                 [April 17, 2025]

   JUSTICE SOTOMAYOR delivered the opinion of the Court.
   The Employee Retirement Income Security Act of 1974
(ERISA), 

, as amended, 

et seq., prohibits ERISA plan fiduciaries from causing a
plan to enter into certain transactions with parties in interest. §1106. A separate part of the statute, §1108(b)(2)(A),
exempts from §1106’s prohibitions any transaction that involves “[c]ontracting or making reasonable arrangements
with a party in interest for office space, or legal, accounting,
or other services necessary 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 transaction between a plan and a party in interest. The answer is no. The
Court holds that §1108 sets out affirmative defenses, so it
is defendant fiduciaries who bear the burden of pleading
and proving that a §1108 exemption applies to an otherwise
prohibited transaction under §1106.
2              CUNNINGHAM v. CORNELL UNIV.

                      Opinion of the Court

                                I
                               A
   Congress enacted ERISA to “protect . . . the interests of
participants in employee benefit plans and their beneficiaries.” §1001(b). It did so by “establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit 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 fiduciary 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 fiduciary
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 fiduciaries to certain fiduciary duties derived from the common law of trusts. See §1104(a);
Central States, Southeast & Southwest Areas Pension Fund
v. Central Transport, Inc., 

 (1985). One
is the duty of loyalty, which requires plan fiduciaries to act
“solely in the interest of the [plan’s] participants and beneficiaries.” §1104(a)(1)(A). Among other things, the duty of
loyalty requires the fiduciary to “deal fairly and honestly
with beneficiaries,” Varity Corp. v. Howe, 

(1996) (citing G. Bogert & G. Bogert, Law of Trusts and
Trustees §543, pp. 218–219 (rev. 2d ed. 1992)), so as “to ensure that a plan receives all funds to which it is entitled,”
Central Transport, 

.
   Section 1106 “supplements the fiduciary’s general duty of
loyalty to the plan’s beneficiaries . . . by categorically barring certain transactions deemed ‘likely to injure the pension plan.’ ” Harris Trust and Sav. Bank v. Salomon Smith
Barney Inc., 

, 241–242 (2000) (quoting Commissioner v. Keystone Consol. Industries, Inc., 

 (1993)). Specifically, §1106(a)(1) states that,
                      Cite as: 

 (2025)                     3

                          Opinion of the Court

“[e]xcept as provided in section 1108,” a fiduciary “shall not
cause the plan to engage” in certain transactions with a
“party in interest.”1 The Act, in turn, defines “ ‘party in interest’ ” to include various plan insiders, including the
plan’s administrator, sponsor, and its officers, 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 fiduciary from “caus[ing] the
plan to engage in a transaction, if he knows or should know
that such transaction constitutes 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 arrangements with a party in interest for office space,
or legal, accounting, or other services necessary for the establishment or operation of the plan, if no more than reasonable compensation is paid therefor.” §1108(b)(2)(A).
                             B
  Respondent Cornell University is the named administrator for two defined-contribution retirement plans.2 Cornell
employees 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, 

, 525
(2015). Those expenses include fees paid to service providers.

——————
  1 Section 1106 also prohibits certain transactions between plans and

the fiduciaries 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., 

, 173 (2022).
4             CUNNINGHAM v. CORNELL UNIV.

                     Opinion of the Court

   In 2011, Cornell retained the Teachers Insurance and Annuity Association of America-College Retirement Equities
Fund (TIAA) and Fidelity Investments Inc. (Fidelity).
TIAA and Fidelity offered investment options to plan participants and served as recordkeepers for the retirement
plans by tracking account balances and providing account
statements. 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 fiduciaries
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 administrative services to the [p]lans is a prohibited transaction unless Cornell proves an exemption.” 

, 978 (CA2 2023) (internal quotation marks and alterations omitted). The plans, according to petitioners, also
paid TIAA and Fidelity more than a reasonable recordkeeping fee. A reasonable 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. 

   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.” 

, *10
(SDNY, Sept. 29, 2017). Finding that petitioners failed to
do so, the District Court dismissed their §1106(a)(1)(C)
claim.
   The Second Circuit affirmed, but did so on a different
                     Cite as: 

 (2025)                     5

                          Opinion of the Court

ground. It concluded that “the language of §1106(a)(1) cannot 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 fiduciaries from paying third parties to perform essential services in support of
a plan.’ ” Ibid.
   Thus, to limit the reach of §1106(a)(1)(C), the Second Circuit held the exemptions to §1106(a)’s prohibited transactions contained in §1108 imposed additional pleading requirements. The §1108 exemptions, the court reasoned,
cannot “be understood merely as affirmative 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 codified by §1108(b)(2)(A)—are incorporated
into §1106(a)’s prohibitions,” meaning a plaintiff must affirmatively 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 (emphasis deleted) (citing §§1106(a)(1)(C),
1108(b)(2)(A)). Concluding that petitioners had not done so,
the Court of Appeals affirmed the dismissal of their
§1106(a)(1)(C) claim.3 In reaching that conclusion, the Second Circuit split from the Eighth Circuit, which has held
——————
  3 Although petitioners alleged that respondents paid more than a “rea-

sonable” fee for TIAA and Fidelity’s recordkeeping services, see supra, at
4, the Second Circuit rejected that allegation as insufficient, reasoning
that “it is not enough to allege that the fees were higher than some theoretical alternative service.” 86 F. 4th, at 978. Whether respondents
paid an unreasonable fee, the court explained, turned on the nature of
6                 CUNNINGHAM v. CORNELL UNIV.

                           Opinion of the Court

that no additional pleading requirements beyond
§1106(a)(1) apply to prohibited-transaction claims. See
Braden v. Wal-Mart Stores, Inc., 

, 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
fiduciary engaged in a transaction proscribed by
§1106(a)(1)(C), or whether a plaintiff must plead allegations that disprove the applicability of the §1108(b)(2)(A)
exemption. 

 (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 prohibits fiduciaries from (1) “caus[ing a] plan to engage in a
transaction” (2) that the fiduciary “knows or should know
. . . constitutes a direct or indirect . . . furnishing of goods,
services, or facilities” (3) “between the plan and a party in
interest.” Section 1106(a)(1)(C)’s bar is categorical: Any
transaction that satisfies its three elements is presumptively unlawful. Nothing in that section removes from its
categorical bar transactions that were necessary for the
plan or involved reasonable compensation. Accordingly,
under §1106(a)(1)(C), plaintiffs need only plausibly allege
each of those elements of a prohibited-transaction claim.
    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
——————
the services TIAA and Fidelity provided, as “it is not unreasonable to pay
more for superior services.” Ibid. The Court of Appeals thus affirmed
the dismissal of petitioners’ §1106(a)(1)(C) claim because (in its view) petitioners “failed to allege any facts going to the relative quality of the
recordkeeping 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 Associates L. P., 

 (2010)).
                  Cite as: 

 (2025)              7

                      Opinion of the Court

certain transactions between the plan and a party in interest “[e]xcept as provided in section 1108”). There is a wellsettled “general rule of statutory construction that the burden of proving justification or exemption under a special exception to the prohibitions of a statute generally rests on
one who claims its benefits.” FTC v. Morton Salt Co., 

, 44–45 (1948). In particular, 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 “affirmative defense[s]” that are “entirely the responsibility of the party
raising” them. Meacham v. Knolls Atomic Power Laboratory, 

 (2008). That describes exactly how
ERISA is structured: The exemptions to §1106(a) prohibited transactions are enumerated separately in §1108, and
§1108 recognizes 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] creat[es] exemptions for employer practices ‘otherwise prohibited under subsectio[n] (a), (b), (c), or (e).’ ” 

. 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 exemptions presented “ ‘affirmative defenses.’ ” Id., at 91. Accordingly, Meacham held that the
ADEA assigned to defendants both the burden to “produce
evidence raising the defense” of reasonableness and the
burden to “persuade the factfinder of its merit.” Id., at 87.
   The same is true of ERISA. Like the exemptions at issue
8                 CUNNINGHAM v. CORNELL UNIV.

                           Opinion of the Court

in Meacham, the §1108 exemptions are “writ[ten] in the orthodox format of an affirmative defense.” Id., at 102. Understood as affirmative defenses, the §1108 exemptions
must be pleaded and proved by the defendant who seeks to
benefit from them. See Taylor v. Sturgell, 

 (2008) (“Ordinarily, it is incumbent on the defendant to
plead and prove [an affirmative] defense”). A plaintiff need
only allege the three elements within §1106(a)(1)(C), notwithstanding the potential applicability of a §1108 exemption, because an “affirmative defense” is “not something the
plaintiff must anticipate and negate in her pleading.” Perry
v. Merit Systems Protection Bd., 

, 435, n. 9
(2017); see also Fed. Rule Civ. Proc. 8(c) (requiring defendants, “[i]n responding to a pleading,” to “affirmatively state
any . . . affirmative defense”).
   Of course, a plaintiff will not prevail by simply pleading,
and later proving, the §1106(a) elements. If a defendant
establishes 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 . . . operation of the plan” and “no more than reasonable compensation [was] paid therefor,” §1108(b)(2), they
cannot be held liable for causing the plan to enter into the
transaction. At the pleading stage, however, it suffices 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, 

 (1996); accord, LaRue v. DeWolff, Boberg & Associates, Inc., 

 (2008) (“[T]he common law of trusts
. . . informs our interpretation of ERISA’s fiduciary duties”). Here, those
principles would have been consistent with the Court’s holding, insofar
as trustees were “under a duty to the beneficiary 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) (boldface
deleted). A trustee could nonetheless delegate certain duties to an
                      Cite as: 

 (2025)                       9

                           Opinion of the Court

                              III
                               A
   Against 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
inapplicability. 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)
together define 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 flaws. For one, it ignores that Congress wrote the
§1108 exemptions “in the orthodox format of an affirmative
defense,” with the exemptions “laid out apart” from the prohibitions in separate statutory provisions. Meacham, 

. As discussed above, supra, at 6–8, that
——————
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. 54 (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 sufficiently complex so that a question would arise as to whether fiduciaries can perform all necessary tasks themselves without plans incurring greater costs. Second, ERISA allows fiduciaries to delegate certain duties, see, e.g., 

(c) (describing a mechanism “for
named fiduciaries to designate persons other than named fiduciaries to
carry out fiduciary 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
qualified public accountant” to conduct examinations of financial statements and records). Third, the text and structure of ERISA establish
that fiduciaries bear the burden of pleading and proving §1108’s exemptions.
10             CUNNINGHAM v. CORNELL UNIV.

                      Opinion of the Court

structural decision forecloses respondents’ argument.
   If there were any remaining doubt, the headings of §1106
and §1108 confirm that it is the former, on its own, that
defines the offense. See Yates v. United States, 

, 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
deleted.) Section 1108, meanwhile, reads: “Exemptions
from prohibited transactions.” (Boldface deleted.) That
Congress 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 affirmative 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 affirmative defenses or exemptions.” Schaffer v. Weast, 

 (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 provided in section 1108” language applies to
§1106(a) in its entirety. §1106(a); cf. Cyan, Inc. v. Beaver
County Employees Retirement Fund, 

, 428
(2018) (rejecting an interpretation that “cherry pick[ed]
from the material covered by the statutory cross-reference,”
since “the except clause points to ‘section 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
                  Cite as: 

 (2025)            11

                      Opinion of the Court

exemptions as elements incorporated into §1106(a)’s prohibitions. Yet Congress intended for §1106(a) to create “per se
prohibitions on transacting with a party in interest.” Harris Trust, 

; see 

 at 241–242. Incorporating all 21 §1108 exemptions as elements into the otherwise
straightforward prohibitions in §1106(a) would plainly
frustrate Congress’s intent to create a “categorica[l]” bar.
Keystone, 

.
   Indeed, because §1106(a), by its terms, sets out per se prohibitions, it would make little sense to put the onus on
plaintiffs to plead and disprove any potentially relevant
separate §1108 exemptions. That burden, moreover, would
not be limited to those statutory exemptions: Beyond the 21
exemptions enumerated in §1108, the Secretary of Labor
has promulgated hundreds of regulatory exemptions pursuant to §1108. See §1108(a) (authorizing the Secretary to
“grant a conditional or unconditional exemption of any fiduciary or transaction, or class of fiduciaries 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 usually 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.,

 (2001). That Congress enumerated 21
separate exceptions and then authorized the Secretary to
add additional classes of exempted transactions thereto
only heightens the fairness concern, as respondents’ proposed approach would require plaintiffs 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 fiduciary’s possession.
See, e.g., §1108(b)(16) (exempting transactions involving
12             CUNNINGHAM v. CORNELL UNIV.

                      Opinion of the Court

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 Exchange Commission, the price and compensation reflect an arm’s-length
transaction, and the plan fiduciary received notice 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 unavailing. Respondents rely on this Court’s decision in United
States v. Cook, 

 (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 defining 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 defining the offence that the ingredients of the
offence cannot be accurately and clearly described if the exception 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 providers to “perform many necessary and valuable functions
for plan participants and fiduciaries,” such as “offer[ing] investment funds and platforms, investment assistance, and
recordkeeping services,” as well as “perform[ing] critical accounting 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), because they are “reasonable arrangements” that are “necessary for the . . . operation of the plan”
                  Cite as: 

 (2025)             13

                      Opinion of the Court

and      involve     “reasonable     compensation”        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) violation, for the lawfulness of these
transactions will often turn on their necessity and reasonableness. Cook, 

.
    Respondents ignore, however, that this Court has said
Cook 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
inflicted.” United States v. Reese, 

 (1876)
(emphasis added). Indeed, Cook “construed” the “constitutional right ‘to be informed of the nature and cause of ’ ” a
criminal accusation. United States v. Cruikshank, 

, 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 defining the offense. See, e.g.,
United States v. Britton, 

, 669–670 (1883);
United States v. Vuitch, 

, 67–68, 70 (1971).
Even in the criminal 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, 

 (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,” respondents attest, therefore require fiduciaries to
transact with service providers. Brief for Respondents 47;
14             CUNNINGHAM v. CORNELL UNIV.

                      Opinion of the Court

see also Law of Trusts and Trustees §555, at 48 (“[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 efficient and knowledgable administration of the trust”). To the extent such
transactions fall within the scope of §1106(a)(1)(C), respondents argue, most would be lawful in light of
§1108(b)(2)(A)’s exemption for “necessary” and “reasonable”
transactions. Yet 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 fiduciaries 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 balance” in “creating [an] exemption and writing it in the orthodox format of an affirmative 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 disposal to screen out meritless claims before discovery. For instance, if a fiduciary believes an exemption applies to bar a plaintiff ’s suit and files an answer showing as
much, Federal Rule of Civil Procedure 7 empowers district
courts to “insist that the plaintiff ” file a reply “ ‘put[ting]
forward specific, nonconclusory factual allegations’ ” showing the exemption does not apply. Crawford-El v. Britton,

 (1998); cf. Cole v. Carson, 

 (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
                  Cite as: 

 (2025)            15

                      Opinion of the Court

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 identify an injury. Cf. Thole v. U. S.
Bank N. A., 

, 544 (2020) (explaining that “ ‘Article III standing requires a concrete injury even in the context of a statutory violation’ ” and affirming the dismissal of
an ERISA claim because “plaintiffs . . . failed to plausibly
and clearly allege a concrete injury” (quoting Spokeo, Inc. v.
Robins, 

, 341 (2016)). For §1106(a)(1)(C)
claims that do proceed past the motion to dismiss stage,
moreover, district courts retain discretionary authority to
expedite or limit discovery as necessary to mitigate unnecessary costs. Additionally, in cases where an exemption obviously applies, and a plaintiff and his counsel lack a goodfaith basis to believe otherwise, Rule 11 may permit a district court to impose sanctions against them. Lastly, it
bears mention that ERISA itself gives district 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 respondents 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 fiduciary 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.
                     Cite as: 

 (2025)                   1

                         ALITO, J., concurring

SUPREME COURT OF THE UNITED STATES
                             _________________

                             No. 23–1007
                             _________________


      CASEY CUNNINGHAM, ET AL., PETITIONERS
          v. CORNELL UNIVERSITY, ET AL.
 ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
           APPEALS FOR THE SECOND CIRCUIT
                            [April 17, 2025]

   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 

 sets out affirmative defenses, and it
is black letter law that a plaintiff need not plead affirmative
defenses.1 See Fed. Rule Civ. Proc. 8(c); Taylor v. Sturgell,

 (2008). Here, as the Court points out,
§1108 sets out a long list of affirmative defenses, and it
would make no sense to require a complaint to anticipate
and attempt to refute all the affirmative defenses that a defendant might raise.
   Unfortunately, this straightforward application of established rules has the potential to cause—and, indeed, I expect
it will cause—untoward practical results. The administrator of an ERISA plan like the one at issue will almost always find it necessary to employ outside firms to provide
services that the plan needs. When it does so, these outside
firms become “ ‘part[ies] in interest’ ” under the terms of
ERISA, see §1002(14)(B), and as a result, their provision of
——————
  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
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.
2             CUNNINGHAM v. CORNELL UNIV.

                      ALITO, J., concurring

services to the plan is unlawful under §1106 unless one of
the exemptions in §1108 applies. The upshot is that all that
a plaintiff must do in order to file 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 Annuity Association of America-College Retirement
Equities Fund and Fidelity funds, and then those companies provided the recordkeeping services for their own
funds, as they customarily 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 litigation, 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 efficient to settle a case even though they are convinced that
they would win if the litigation continued. See J. Beisner,
Discovering a Better Way: The Need for Effective Civil Litigation Reform, 60 Duke L. J. 547, 550 (2010); see also Dura
Pharmaceuticals, Inc. v. Broudo, 

 (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-excessiveplan-fees-infographic.pdf (noting that the number of excessive plan fee cases that settle 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
                    Cite as: 

 (2025)         3

                        ALITO, J., concurring

unmeritorious suits at the pleading stage. The court attempted to achieve an admirable goal, but established
pleading rules do not allow that workaround.
   In Part III–C of its opinion, the Court sets out some alternative safeguards. Perhaps the most promising of these
is the suggestion, offered by the Solicitor General, that a
district court may insist that a plaintiff file a reply to an
answer that raises one of the §1108 exemptions as an affirmative defense.2 Ante, at 17. 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, 

 (1998). District courts should strongly consider
utilizing this option—and employing the other safeguards
that the Court describes—to achieve “the prompt disposition of insubstantial claims.” 

. 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.