492 F. App'x 598
6th Cir.2012Background
- Griffin and Gardner filed a putative ERISA class action alleging fiduciary breaches in offering Flagstar stock as a Plan investment option.
- The Plan was a defined contribution plan allowing participants to allocate contributions among investment options including Flagstar stock during a class period beginning December 31, 2006.
- Flagstar stock declined dramatically amid repeated losses, downgrades, and negative analyses, with contemporaneous news highlighting Flagstar’s precarious financial position.
- The district court dismissed the complaint under Rule 12(b)(6), applying a presumption of prudence and finding pleading standards unmet.
- The Sixth Circuit reversed in Pfeil v. State Street, holding the prudence presumption is evidentiary and not applicable at the pleading stage, and addressed safe harbor issues.
- On appeal, the court held the pleading raised a plausible claim that continuing to offer Flagstar stock breached the duty of prudence and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of the prudence presumption at pleading | Griffin argues the presumption controls dismissal rules at pleading. | Flagstar argues Kuper applies and justifies dismissal. | Presumption not applicable at pleading stage. |
| ERISA safe harbor applicability when participants control investments | Pfeil shows safe harbor may shield fiduciaries. | Safe harbor immunizes fiduciaries despite participant control. | Safe harbor not available to shield prudence claim. |
| Pleading standards to state a plausible prudence claim | Allegations show a plausible breach by continuing to offer Flagstar stock. | Allegations are insufficient to show imprudence under Twombly/Iqbal. | Plaintiff plausibly alleged a breach of the duty of prudence; dismissal reversed. |
Key Cases Cited
- Pfeil v. State Street Bank & Trust Co., 671 F.3d 585 (6th Cir. 2012) (prudence presumption is evidentiary, not pleading-stage)
- Kuper v. Iovenko, 66 F.3d 1447 (6th Cir. 1995) (presumption of prudence at issue in earlier cases)
- Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995) (presumption of prudence in employer stock funds (older framework))
- Twombly v. Bell Atlantic Corp., 550 U.S. 544 (U.S. 2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (expanded the plausibility standard)