As noted in our earlier blog post, the U.S. Supreme Court’s 2014 decision Fifth Third Bancorp v. Dudenhoeffer made clear that participants bringing stock-drop cases are subject to heightened pleading standards to help “divide the plausible sheep from the meritless goats.”

In its first substantive ruling in a post-Dudenhoeffer stock-drop case, the U.S. Supreme Court yesterday held that the Ninth Circuit had failed to hold the plaintiffs in Amgen Inc. v. Harris to these high standards.  In the Supreme Court’s view, the Ninth Circuit in Harris failed to assess a factor that the Dudenhoeffer decision specifically instructed lower courts to consider: whether the complaint “plausibly alleged” that a prudent fiduciary in the same position “could not have concluded” that removing the company stock fund from the plan’s investment lineup “would do more harm than good.”  The court remanded the case for the district court to determine whether to allow the plaintiffs to amend their complaint.

The Harris decision reinforces the requirement that a stock-drop complaint should be dismissed unless the complaint alleges specific facts addressing each factor laid out in the Dudenhoeffer decision.  As a result, it will continue to be difficult for plaintiffs to bring stock-drop suits that can survive a motion to dismiss.

Covington & Burling LLP and Keating Muething & Klekamp PLL represented the employer, Fifth Third Bancorp, in the U.S. Supreme Court.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Michael J. Francese Michael J. Francese

As a partner in Covington’s employee benefits practice group, Mike Francese focuses on counseling clients in matters arising under their employee benefit plans and executive compensation arrangements with respect to ERISA, the Internal Revenue Code, and related federal and state laws.  He also…

As a partner in Covington’s employee benefits practice group, Mike Francese focuses on counseling clients in matters arising under their employee benefit plans and executive compensation arrangements with respect to ERISA, the Internal Revenue Code, and related federal and state laws.  He also represents clients before agencies and courts on both the federal and state level, and consults with them in connection with mergers, acquisitions, and other corporate transactions.

Mike’s practice covers a broad spectrum of employee benefit plans and programs, as well as a variety of executive compensation arrangements, such as:

  • tax-qualified defined benefit and defined contribution plans, including traditional and hybrid pension plans, 401(k) plans, profit-sharing plans, and ESOPs;
  • non-qualified deferred compensation arrangements, including top-hat plans, 457(f) arrangements for employees of non-profit employers, and other types of nonqualified deferred compensation arrangements;
  • equity-based compensation arrangements, including stock options, restricted stock, and phantom equity awards;
  • health and welfare plans, including cafeteria, medical, disability, and severance plans and arrangements; and
  • executive employment and consulting agreements, including change in control, and parachute payment arrangements.