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Friday, August 8, 2014
by Jacklyn Wille
Supreme Court's recent decision in Fifth Third Bancorp v. Dudenhoeffer
accomplished something rare: It gave both employees and employers a reason to
In a July
28 webinar sponsored by the Practising Law Institute, the attorneys who argued
the case before the Supreme Court said that Dudenhoeffer, 2014 BL 175777,
contained victories for both fiduciaries of company stock plans and the
employees who invest in those plans.
because the ruling—which invalidated the pro-fiduciary presumption of prudence
that had been used to shield employers from liability for declining stock
price—also articulated a number of new obstacles for participants challenging
fiduciaries' actions in the face of such declines, the attorneys said.
webinar was entitled Fifth Third Bancorp v. Dudenhoeffer: Supreme Court
Eschews Moench Presumption, but Recognizes Limitations on Stock-Drop
Litigation Under ERISA.
Full, Half Empty
Long, a partner with Covington &
Burling LLP in Washington who argued on behalf of Fifth Third Bancorp,
said that the decision invalidating the presumption of prudence wasn't a total
loss for sponsors of employee stock ownership plans.
longer have a presumption of prudence, but we have a series of other obstacles
that plaintiffs would have to surmount in order to survive a motion to dismiss
in an ESOP case involving a publicly traded stock,” Long said.
Mann, who argued on behalf of the ESOP participants and is a professor at
Columbia Law School in New York, agreed that the ruling was a mixed bag,
calling it “glass half full, glass half empty.”
being on opposite sides of the issue, both Long and Mann identified ways in
which the ruling could be seen as a victory for their respective positions.
view, Dudenhoeffer is actually “slightly more protective of some
fiduciaries in certain respects.” In particular, Long said that stock-drop
plaintiffs no longer are able to defeat a plan's motion to dismiss by
demonstrating that the sponsoring company was in dire financial circumstances.
Before Dudenhoeffer, that option was available to them, he said.
Mann expressed optimism about the ability of plan participants to pursue
stock-drop claims in the wake of Dudenhoeffer.
this case, you lost,” Mann said. “It didn't really matter what the information
was, what the fiduciaries knew, or what they did or didn't do—you lost.”
that, pre-Dudenhoeffer, participants in many plans had difficulty
demonstrating that their company was in dire financial circumstances. For
example, the potential for a government bailouts made it unlikely that large national
banks would find themselves in dire financial straits, he said.
from a story that ran in Pension & Benefits Daily (07/29/2014).
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