Fifth Third Bancorp v. Dudenhoeffer (2013)
- Docket
- 12-751
- Decided
- 2013-01-01
Summary
Question: Did the U.S. Court of Appeals for the Sixth Circuit err by holding that the respondents were not required to plausibly allege that Fifth Third abused its discretion by remaining invested in the employer stock in order to overcome the presumption that the decision to invest in the stock was reasonable? Conclusion: No. Justice Stephen Breyer delivered the opinion for the unanimous Court. The Court held that the presumption of prudence found by the lower courts is not included in ERISA's language; instead, the presumption is a court-made response to the different fiduciary duties of an ESOP fiduciary rather than fiduciaries of other eligible retirement plans under ERISA. Unlike other plans, ESOP plans prioritize buying a company's own stock, as opposed to diversifying retirement funds across a number of different investments. For non-ESOP retirement funds, normal prudence requires fiduciaries to spread the investment risk out across multiple investments, which is a prudential standard that cannot be applied to ESOP. Therefore, some courts had held that ESOP fiduciaries were entitled to a presumption of prudence regarding their choice of whether to purchase their own company stock or not. The Supreme Court, however, held that these differing requirements did not amount to a presumption of prudence for ESOP fiduciaries. Instead, the Court found that ESOP fiduciaries have the same fiduciary duty as non-ESOP fiduciaries, except as it applies to diversification of investments. The Court remanded the case back to the district court, instructing the lower court to analyze Fifth Third's motion to dismiss under the pleading standards set forth in Ashcroft v. Iqbal and Bell Atlantic Corp. v. Twombly , requiring a plaintiff's pleadings contain enough facts to give rise to a plausible entitlement to relief.