Term: 2019
Docket: 18-1165
Retirement Plans Committee Of Ibm v. Jander
- Pro
18-1165 RETIREMENT PLANS COMMITTEE OF IBM V. JANDER DECISION BELOW: 910 F.3d 620 CERT. GRANTED 6/3/2019 QUESTION PRESENTED: In Fifth Third Bancorp v. Dudenhoeffer, this Court unanimously held that to state a claim under the Employee Retirement Income Security Act of 1974 ("ERISA''), 29 U.S.C. § 1001 et seq., for breach of the fiduciary duty of prudence based on inside information, a plaintiff must "plausibly allege[] that a prudent fiduciary in the defendant's position could not have concluded that [an alternative action] would do more harm than good to the fund." 573 U.S. 409, 429-30 (2014); accord Amgen Inc. v. Harris, 136 S. Ct. 758 (2016). The Court designed this "context specific" standard to deter the kind of meritless suits lower courts had eliminated through a presumption of prudence (which the Court rejected) and to "readily divide the plausible sheep from the meritless goats" at the pleading stage. 573 U.S. at 425. In the decision below, the Court of Appeals subverted that pleading standard and opened a circuit split by relying on boilerplate allegations that the harm of an eventual disclosure of an alleged fraud typically increases the longer the fraud continues. Those allegations "always" can be, and routinely are, pleaded in support of a Fifth Third claim. Other courts of appeals have rejected the same allegations as insufficient as a matter of law, in order to avoid undermining the pleading standard imposed by Fifth Third and Amgen and to deter meritless ERISA suits. The question presented is: Whether Fifth Third's "more harm than good" pleading standard can be satisfied by generalized allegations that the harm of an inevitable disclosure of an alleged fraud generally increases over time. LOWER COURT CASE NUMBER: 17-3518
The case Retirement Plans Committee of IBM v. Jander, 2019, revolved around the question of whether a retirement fund manager for IBM breached their fiduciary duty under the Employee Retirement Income Security Act (ERISA) by not disclosing inside information that could have potentially affected stock prices and thus harmed employees' investments in company stock. The plaintiffs argued that the managers knew about significant overvaluation issues related to one of IBM's business units but failed to take appropriate action or disclose this information. Initially, a lower court ruled in favor of the plaintiffs stating that no prudent fiduciary could have concluded that earlier disclosure would do more harm than good. However, upon reaching the Supreme Court, it was remanded back to lower courts for further consideration on other defenses raised by defendants which were left unresolved previously.
In the Supreme Court case Retirement Plans Committee of IBM v. Jander, Justice Neil Gorsuch penned a dissenting opinion. He argued that the court should have made a definitive ruling instead of remanding it back to lower courts for further consideration. According to Gorsuch, the majority's decision avoided answering important questions about how fiduciaries can balance their obligations under both ERISA and securities laws when they possess inside information that could affect stock prices in employee retirement plans. The justice contended that by not providing clear guidance on these issues, the court left companies and workers in an uncertain position regarding potential liabilities and responsibilities related to insider trading rules and pension plan management.
