On Monday, the US Supreme Court agreed to review the Second Circuit’s decision in Jander v. Retirement Plans Committee of IBM, a “stock drop” lawsuit against IBM’s benefit plan fiduciaries. The Second Circuit’s decision marked one of the few times a federal court permitted a “stock drop” lawsuit to survive dismissal since the Supreme Court’s decisions in Fifth Third Bank v. Dudenhoeffer (2012) and Harris v. Amgen (2016). (more…)
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.
by John A. Litwinski and Chris C. Scheithauer
Recently, the U.S. Court of Appeals for the Sixth Circuit held that a 401(k) plan participant who sued under the Employee Retirement Income Security Act (ERISA) for losses in connection with a company stock fund that suffered a drop must show losses on a “net basis” during the class period to have constitutional standing. This decision has great significance in addressing plaintiffs’ standing and class certification in so-called ERISA “stock-drop” cases, often filed after a company’s stock price falls.
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