Friday, June 27, 2014
In Fifth Third Bancorp v. Dudenhoeffer, the U.S. Supreme Court declined to adopt the Moench presumption of prudence. Prior to the ruling, many circuit courts had dismissed ERISA stock drop claims unless plan participants had pled allegations that the company’s economic situation was calamitous or the company would breakdown. Yet the Court made it clear that in order to survive a motion to dismiss, a participant must plead facts and circumstances that could lead to the conclusion that the plan fiduciaries acted imprudently. “Absent ‘special circumstances,’ allegations that plan fiduciaries should have recognized from publicly available information that a company stock fund was under or overvalued are ‘implausible as a general rule.’” If an allegation of imprudence is based upon nonpublic information, “A plaintiff must plausibly allege an alternative action that the defendant could have taken that would have been consistent with the securities laws and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.”
See Russell Hirschhorn, SCOTUS Says No Presumption Of Prudence In ERISA Stock Drop Cases, Mondaq, June 26, 2014.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.