Believe it or not, the Supreme Court of the United States just decided whether “to have ‘actual knowledge’ of a piece of information, one must in fact be aware of it.” The Court said “yes,” and it was unanimous. Most non-lawyers (and even some lawyers) would probably be surprised that this issue was even being debated. But it was a question that had divided the lower courts, with the Sixth Circuit ruling that “actual knowledge” did not require actually seeing or reading a document that was provided. The Supreme Court agreed with the six other circuits that had concluded that “actual knowledge” means what it says. The Court’s opinion potentially holds a silver lining for defendants though when it comes to class certification.

In Intel Corp. Investment Policy Committee v. Sulyma, No. 18-1116, the Court was asked to construe a statute of limitations for breach of fiduciary duty claims under the Employee Retirement Income Security Act  (ERISA), which requires that suit must be filed within three years of “the earliest date on which the plaintiff had actual knowledge of the breach or violation.” The plaintiff in this putative class action was a former Intel employee who claimed that retirement plans that he participated in had poor investment options with high fees and high risks. Various disclosures were made available to him on a website that he had access to, and in fact visited, but he did not remember reviewing the relevant disclosures, and claimed he was unaware that his money was being invested in hedge funds or private equity. He brought suit more than three years after receiving the disclosures.

Justice Alito wrote the opinion for a unanimous Court holding that “actual knowledge” under this statute means that you have to actually be aware of something. The opinion cited various dictionary definitions of “actual” and “knowledge” (even noting that the meaning of those words has not changed since ERISA was enacted in 1974), and explained how Congress in other parts of ERISA used a “should have known” type of standard instead of an “actual knowledge” standard, thereby choosing its words carefully.

What I found most interesting from a class certification perspective though is Part III. In that section, the Court explained how defendants could go about proving that plaintiffs had “actual knowledge”:

Nothing in this opinion forecloses any of the “usual ways” to prove actual knowledge at any stage in the litigation. [Citation omitted.] Plaintiffs who recall reading particular disclosures will of course be bound by oath to say so in their depositions. On top of that, actual knowledge can be proved through “inference from circumstantial evidence.” . . . Evidence of disclosure would no doubt be relevant, as would electronic records showing that a plaintiff viewed the relevant disclosures and evidence suggesting that the plaintiff took action in response to the information contained in them. . . . Today’s opinion also does not preclude defendants from contending that evidence of “willful blindness” supports a finding of “actual knowledge.”

In the context of a putative class action like this one, defendants will no doubt argue that they must be entitled to depose every putative class member regarding which disclosures or other relevant information he or she read, and to present at trial electronic records of every time a class member viewed the disclosures or other relevant information on a website or called to inquire about his or her account. Unless the proposed class is limited to the shortest possible three-year period, this would seem to be a potentially strong defense to class certification.

This post was authored by Wystan Ackerman and is also being shared on our Class Actions Insider blog. If you’re interested in getting updates on developments that address class actions in numerous substantive areas, ranging from antitrust and employment to sales practices and securities, we invite you to subscribe to the blog.