Term: 2013
Docket: 12-751
Fifth Third Bancorp v. Dudenhoeffer
- Pro
12-751 FIFTH THIRD BANCORP V. DUDENHOEFFER DECISION BELOW: 692 F. 3d 410 LIMITED TO QUESTION 1 PRESENTED BY THE PETITION. CERT. GRANTED 12/13/2013 QUESTION PRESENTED: 1.Whether the Sixth Circuit erred by holding that Respondents were not required to plausibly allege in their complaint that the fiduciaries of an employee stock ownership plan ("ESOP") abused their discretion by remaining invested in employer stock, in order to overcome the presumption that their decision to invest in employer stock was reasonable, as required by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1101, et seq. ("ERISA"), and every other circuit to address the issue. 2.Whether the Sixth Circuit erred by refusing to follow precedent of this Court (and the holdings of every other circuit to address the issue) by holding that filings with the Securities and Exchange Commission ("SEC") become actionable ERISA fiduciary communications merely by virtue of their incorporation by reference into plan documents. LOWER COURT CASE NUMBER: 11-3012
The U.S. Supreme Court case Fifth Third Bancorp v. Dudenhoeffer (2013) revolved around the issue of fiduciary duty under the Employee Retirement Income Security Act (ERISA). The plaintiffs, former employees and participants in Fifth Third's ESOP (Employee Stock Ownership Plan), alleged that the company breached its fiduciary duties by continuing to invest in company stock when it was imprudent to do so due to insider knowledge about financial difficulties. They claimed this led to a significant drop in their retirement savings when the bank's stock price plummeted during the 2008 financial crisis. The Supreme Court unanimously vacated an earlier ruling from a lower court which had dismissed these claims based on a presumption of prudence for ESOP fiduciaries, known as Moench presumption. The high court held that no such special presumption exists under ERISA law and remanded back for further proceedings consistent with its opinion. It ruled that ESOP fiduciaries are subject to same duty of prudence applicable generally under ERISA except where law specifically provides otherwise.
The dissenting opinion in the Fifth Third Bancorp v. Dudenhoeffer case argued that the majority's decision to reject a presumption of prudence for fiduciaries managing Employee Stock Ownership Plans (ESOPs) was misguided. The dissenters believed that this rejection could lead to an increase in meritless lawsuits, which would ultimately harm employees by increasing plan expenses and discouraging companies from offering ESOPs altogether. They also disagreed with the majority's view on how fiduciaries should respond when they have inside information suggesting their company’s stock is overvalued, arguing it contradicts securities laws and puts fiduciaries in an impossible position where they are damned if they do act on insider information and damned if they don't.
