Brown v. Medtronic, Inc.
628 F.3d 451
8th Cir.2010Background
- Brown, on behalf of himself and a class, sues Medtronic and fiduciaries under ERISA alleging fiduciary breaches related to Infuse and Fidelis product disclosures.
- District court dismissed for lack of constitutional standing; Brown appeals challenging standing and merits of claims.
- Infuse-related allegations stem from a 2008 Wall Street Journal article; Brown allegedly sold before the adverse information became public, arguing no cognizable injury.
- Fidelis-related allegations center on a February 2007 Hauser report and a October 2007 recall; Brown held and later sold Medtronic stock, arguing a price drop was caused by concealment and delayed response.
- Stock price movements: Fall 2007 recall caused a 10–12% drop; Fall 2008 market decline occurred later; Brown liquidated May–June 2008, after initial declines but before the later drop.
- The district court treated Brown as a net beneficiary due to overall price movements and held no standing; the appeal reexamines standing theory and the sufficiency of claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| What is the proper standing framework for ERISA fiduciary claims? | Brown argues abstract fiduciary violation suffices for standing. | Medtronic argues standing requires an identifiable net loss fairly traceable to the breach. | Standing requires net loss fairly traceable and redressable. |
| Infuse-related injuries give standing? | Infuse claims caused price inflation and injury even if disclosure occurred after sale. | Incurred losses must be traceable to the Infuse-related concealment; sales occurred before disclosure. | Infuse claims lack standing; no cognizable injury traceable to Infuse disclosures. |
| Fidelis-related injuries give standing? | Fall 2007 price drop tied to recall/concealment constitutes injury traceable to breaches. | General market declines and sales timing undermine traceability of injury to breaches. | Fidelis claims establish traceable and redressable injury sufficient for standing. |
| Do the pleadings state a cognizable claim under Rule 12(b)(6) for misrepresentation/imprudent investment? | Alleges deceptive disclosures and imprudent investment decisions based on concealed information. | Letter and conduct do not plausibly show misrepresentation or imprudence; Moench presumption is not required. | Claims fail under Rule 12(b)(6); pleadings do not show plausible misrepresentation or imprudence. |
| Do derivative claims survive without a viable underlying breach? | Allege breach of loyalty and improper monitoring of the plan committee. | Without a sufficiently pled underlying breach, derivative claims fail. | Derivative claims fail for lack of a pled underlying breach. |
Key Cases Cited
- Braden v. Wal-Mart Stores, Inc., 588 F.3d 585 (8th Cir. 2009) (standing requires injury in fact fairly traceable to challenged action, redressable)
- Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (U.S. 2005) (loss requires traceable injury; pure logic of loss in inflated prices)
- Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995) ( ESOP prudence presumption (discussed but not necessarily adopted))
- Donovan v. Bierwirth, 754 F.2d 1049 (2d Cir. 1985) (damages vs standing; foregone investment as damages discussion)
- Detroit Gen. Ret. Sys. v. Medtronic, Inc., 621 F.3d 800 (8th Cir. 2010) (contextual consideration of disclosure and fiduciary conduct)
- Schultz v. Windstream Commc'ns, Inc., 600 F.3d 948 (8th Cir. 2010) (standing/damages considerations in ERISA contexts)
- McCullough v. AEGON USA, Inc., 585 F.3d 1082 (8th Cir. 2009) (standing when benefits are overfunded; ERISA claims scope)