The U.S. Supreme Court’s decision in July in Fifth Third Bancorp v. Dudenhoeffer has opened the door for a resurgence in litigation against the officers, directors, and 401(k) plan fiduciaries of public companies that make available a Company Stock Fund investment option in their 401(k) plans or maintain an employee stock ownership plan (ESOP). Securities fraud class actions against officers and directors almost always follow a significant drop in a company’s stock price. A little over a decade ago, the plaintiffs’ class action bar began suing ERISA plan fiduciaries, which nearly always included officers and directors, for breach of their fiduciary duty of prudence in investing such plans when the company’s stock price declined. Eventually, all but one of the federal appellate courts adopted the so-called “Moench presumption” (essentially, a presumption of prudence) in favor of the plan fiduciaries and these sorts of case foundered. Dudenhoeffer expressly rejects the Moench presumption, opening the way for plaintiffs to restart their earlier lawsuits and begin new ones. That said, the decision also provides meaningful guideposts for how companies might effectively inoculate against such claims.
Similar to The Supreme Court’s Decision in Dudenhoeffer: If You Offer a Company Stock Fund Investment Option in Your 401(k) Plan, You Will be Sued, Eventually
Similar to The Supreme Court’s Decision in Dudenhoeffer: If You Offer a Company Stock Fund Investment Option in Your 401(k) Plan, You Will be Sued, Eventually (20)