For nearly two decades, some courts presumed that it was prudent to invest a retirement plan’s assets in an Employer Stock Option Plan (ESOP), i.e., a benefit plan invested in the employer’s own company stock. Recently, however, the U.S. Supreme Court decided in Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459 (2014), that there is no statutory basis for excluding fiduciaries of ESOPs from ERISA’s generally applicable duty of prudence. After discarding the “presumption of prudence” for ESOPs, the Court addressed pleading standards in such cases, holding that in order to plead that a fiduciary violated his or her duty of prudence, a plaintiff must “plausibly allege that a prudent fiduciary in the defendant’s position could not have concluded” that stopping purchases of the employer’s stock “would do more harm than good” to the retirement fund in question.
After Dudenhoeffer was decided, the Whitley Defendants argued that the Plaintiffs’ claims must be dismissed unless the Plaintiffs could plausibly allege—and subsequently prove—that no prudent fiduciary could have concluded that stopping purchases of BP stock would have caused more harm than good to the underlying fund. In sum, the Defendants’ proposed standard would force the Plaintiffs to undertake the practically … Read More