So we've now had the oral argument before the Supreme Court in the potentially critical Dudenhoeffer case (Fifth Third Bancorp v. Dudenhoeffer, U.S., No. 12-751, argued 4/2/14). See Attorneys Make Predictions on Fee Litigation, Questions of Constitutional Standing. If the Court decides that the Moench presumption has no basis in ERISA, and does not replace it with another analysis that supports a fiduciary decision to acquire and hold stock, there could be some difficult issues for ESOPs and other eligible individual account plans invested in stock. Putting aside for the moment the oddity that the substance of the oral argument had almost nothing to do with the case being argued, I think that it is possible to discern hostility on the part of the Court for a presumption that does not expressly emerge from ERISA's statutory language.
I have argued here, that a possible alternative analysis focuses on Section 404(a)(1)(D), which requires that a fiduciary shall discharge the fiduciary's duties with respect to a plan "in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with" certain provisions of ERISA. As described in more detail in my earlier post cited above, I think one may well effectively get to what amounts to a presumption, but through the force of the statutory language, rather through a separate establishment of a presumption. Essentially, my argument is that, where a plan provision requires specified fiduciary conduct by dictating an investment in employer stock, then the plan must be and stay invested in the stock unless . . . it is affirmatively outside the range of prudence. To me, an effective presumption thus does flow from the provisions of the statute, at least for plans that mandate stock investment (as the Fifth Third plan arguably did).
I know that this particular construct for the analysis is not being widely espoused. The approach has been to look for a presumption that emerges from the overall statutory scheme - a la Moensch. Looking at the oral argument, it's not impossible to discern possible hostility on the part of the Court to a presumption that isn't expressly in the statutory language. I’m only suggesting that the Moench presumption, which requires the uncovering of a presumption that is not expressly legislated, may not be the only way to get to a result that may indeed be the right one under ERISA.
In this regard, I would submit that the groundwork for a line of reasoning focusing on Section 404(a)(1)(D) has been laid - MetLife, Kennedy, McCutchen and Himeshoff all emphasize the primacy of the plan document. To quote McCutchen, “The plan, in short, is at the center of ERISA.” Nevertheless, the Dudenhoeffer oral argument contains not even a single citation to the ERISA rule requiring a fiduciary to act in accordance with plan documents, and only a fleeting reference to the requirement in the ESOP that it be invested in employer stock.
Among the various possibilities for this omission are (i) the approach is being missed, maybe because Moensch has had the effect of steering the analysis towards the presumption theory, and (ii) given that virtually no one seems to be gravitating to the analysis I'm outlining, I've quite simply got it all wrong. Oh well, back to tilting at windmills . . .
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