894 F.3d 214
5th Cir.2018Background
- Idearc spun off from Verizon in Nov. 2006, carried heavy debt and suffered steep revenue and stock-price declines through Mar. 2009; filed Chapter 11 on Mar. 31, 2009.
- The Plan was a defined-contribution eligible individual account plan that allowed participant investments in preselected funds, including Idearc stock; matching contributions were invested per participants’ selections.
- Kopp (plan participant) alleges defendants (company officers, committees, and directors) knew nonpublicly that Idearc’s financial condition was deteriorating and took steps to conceal adverse information, yet kept Idearc stock as a Plan option during Nov. 2006–Mar. 2009.
- The Employee Benefits Committee barred new purchases of Idearc stock and briefly scheduled an automatic liquidation in Nov. 2008, later canceled; defendants acted largely by written consent without formal meetings.
- Procedural history: consolidated suits, multiple dismissals, vacatur/remand after Supreme Court granted certiorari in light of Dudenhoeffer; after amendment, district court dismissed the Third Amended Complaint for failure to state a claim, and the Fifth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Substantive duty of prudence based on public info | Kopp: public signs of insolvency made Idearc stock imprudent; fiduciaries should have removed it | Defs: under Dudenhoeffer, fiduciaries may rely on market price absent "special circumstances" making price unreliable | Court: Dismissed—public-information pleading implausible under Dudenhoeffer absent special circumstances |
| Substantive duty of prudence based on alleged insider fraud | Kopp: defendants’ alleged fraud made market price unreliable; fiduciaries knew nonpublic bad facts | Defs: alleged fraud was nonpublic; plaintiff did not pursue nonpublic-info theory on appeal | Court: Dismissed—plaintiff did not press nonpublic-information claim on appeal; fraud not a Dudenhoeffer "special circumstance" here |
| Procedural duty (monitoring) under Tibble | Kopp: defendants failed to monitor/consider alternatives and therefore breached a continuing duty to remove imprudent investments | Defs: procedural failures alone insufficient; liability requires that different monitoring would have prevented losses | Court: Dismissed—plaintiff failed to plausibly plead an alternative action that would have averted plan losses |
| Duty of loyalty / conflict of interest | Kopp: defendants had self-interest tied to company stock and engaged in a scheme to hide bad news to benefit themselves | Defs: alleged conduct is equally consistent with protecting plan holdings; mere potential conflict is insufficient | Court: Dismissed—allegations do not plausibly infer disloyal, self-serving motives |
Key Cases Cited
- Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459 (2014) (public-information rule: fiduciaries may generally rely on market price absent special circumstances)
- Tibble v. Edison International, 135 S. Ct. 1823 (2015) (continuing duty to monitor plan investments)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard under Rule 12(b)(6))
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must be more than labels and conclusions)
- Singh v. RadioShack Corp., 882 F.3d 137 (5th Cir. 2018) (applying Dudenhoeffer and analyzing special-circumstance and risk/value issues)
- Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987) (ERISA’s purpose to protect plan participants)
- Bussian v. RJR Nabisco, Inc., 223 F.3d 286 (5th Cir. 2000) (characterizing ERISA’s duty of loyalty as the highest known to the law)