Fifth Third Bancorp v. Dudenhoeffer Archives

The Quandary of Publicly-Traded Employer Stock in a 401(k) Plan

by McDermott Will & Emery | Jun 20, 2017 | Benefit Controversies, Employee Benefits, Employee Stock Ownership Plans (ESOPs), Fiduciary and Investment Issues, Retirement Plans

Offering employer stock in a 401(k) plan investment lineup can seem like a win-win situation. It can enable employees to become company owners—real, skin-in-the-game, participants in their employer’s economic future—through a simple deferral election. The U.S. Supreme Court has even recognized the value of employer stock funds, confirming that Congress sought to encourage their creation through provisions and standards contained in the Employee Retirement Income Security Act of 1974 (“ERISA”).

However, in the wake of a series of high-profile employee lawsuits seeking recovery against Enron, Lehman Brothers, and other employers for losses from 401(k) investments in employer stock, such funds can—almost as easily—seem a recipe for disaster. This article examines the quandary that employer stock funds pose for plan sponsors, who must navigate ERISA’s careful balance of (1) ensuring fair and prompt enforcement of employee rights under employer-provided retirement plans while (2) encouraging employer creation of these plans.

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Originally published in Bloomberg Law, May 25, 2017

Supreme Court Emphasizes Heightened Pleading Standard for Stock Drop Cases

by McDermott Will & Emery | Mar 4, 2016 | Employee Stock Ownership Plans (ESOPs), Fiduciary and Investment Issues, Health and Welfare Plans

On January 25, 2016, the Supreme Court of the United States issued a per curiam opinion in Amgen Inc. v. Harris, holding that the Amgen, Inc. employees who filed suit after the value of the employer stock in which they had invested dramatically decreased, failed to sufficiently plead a breach of fiduciary duty claim under ERISA in light of the Court’s decision last term in Fifth Third Bancorp v. Dudenhoeffer.

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View From McDermott: 2014 ERISA Litigation Review–Decisions From the Supreme Court and Beyond

by Michael T. Graham | Apr 7, 2015 | Retirement Plans

Recently, the U.S. Supreme Court issued a number of significant ERISA cases. In its 2013-14 term, the Supreme Court decided two ERISA-based appeals – Fifth Third Bancorp v. Dudenhoeffer and Heimeshoff v. Hartford Life & Acc. Ins. Co. In the current 2014-15 term, the Supreme Court already issued one ERISA decision in M&G Polymers USA, LLC v. Tackett, and will issue another ERISA decision soon in Tibble v. Edison Int’l. Although these four cases have received much attention within the ERISA community, each year there are hundreds of other decisions issued by federal appellate and district courts that also impact a plan sponsor’s daily administration of welfare and retirement plans. In fact, many of these district court and appellate decisions are interpreting issues raised or addressed in these Supreme Court opinions. This article will address a few of these cases, which may not have received a lot of attention by the press, but could have long-lasting impacts on plan administration and litigation in future years.

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The Directed Trustee in the Post-Dudenhoeffer World

by Joseph K. Urwitz | Jan 22, 2015 | Employee Stock Ownership Plans (ESOPs), Fiduciary and Investment Issues, Retirement Plans

Court cases challenging the actions of Employee Retirement Income Security Act fiduciaries have continued unabated since the scandal of Enron in 2002. Since then, a large number of cases are in the “stock drop” area, which encompasses cases relating to employer securities investments when the stock price drops severely. The litigation has focused on whether a presumption of prudence exists that protects fiduciaries holding employer securities investments on behalf of a retirement plan. In June 2014, the U.S. Supreme Court ruled in the case of Fifth Third Bancorp v. Dudenhoeffer that ERISA doesn’t provide a presumption of prudence to protect fiduciaries of plans investing in employer securities. Now that the Dudenhoeffer decision resolves the presumption issue, it is reasonable to expect that ERISA cases may return to focus on the fiduciary duties of a directed license.

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Supreme Court Rejects “Presumption of Prudence,” Adopts New Pleading Standards in Fifth Third Bancorp v. Dudenhoeffer

by Wilber H. Boies, PC, Chris C. Scheithauer and Stephen Pavlick | Jul 15, 2014 | Employee Stock Ownership Plans (ESOPs), Retirement Plans

In a highly anticipated decision, the Supreme Court recently ruled that ESOP fiduciaries are not entitled to a presumption of prudence under ERISA in connection with their decisions to buy, hold or sell the employer’s securities. While the elimination of this presumption is a loss for ESOP fiduciaries, the decision imposes additional burdens on plaintiffs that will make it easier for plan sponsors and fiduciaries to defend so-called “stock-drop” cases. It also requires plan sponsors to reevaluate plan language requiring that certain funds be invested in employer securities and to reconsider hiring an independent fiduciary to manage the employer stock fund.

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Supreme Court Takes Case About Company Stock Funds and Presumption of Prudence

by Wilber H. Boies, PC and Chris C. Scheithauer | Jan 9, 2014 | Benefit Controversies, Employee Stock Ownership Plans (ESOPs), Retirement Plans

The Supreme Court of the United States granted certiorari in Fifth Third Bancorp v. Dudenhoeffer, suggesting that the Supreme Court will resolve the current division among U.S. circuit courts regarding the application of the “presumption of prudence” in employer stock cases.

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