Dennis Smith v. Delta Airlines Inc.
619 F. App'x 874
11th Cir.2015Background
- Delta sponsored a defined-contribution plan offering Delta stock as an investment option; participants, including Dennis Smith, lost money when Delta stock declined (2000–2004).
- Smith, a former employee, filed a class-action amended ERISA complaint (2005) alleging fiduciaries breached duties of prudence, monitoring, disclosure, and loyalty by continuing to offer/hold Delta stock despite poor performance and competitive concerns.
- District court dismissed the amended complaint for failure to state a claim; the Eleventh Circuit remanded for application of Lanfear v. Home Depot and the district court again dismissed.
- The Eleventh Circuit affirmed; the Supreme Court granted certiorari, vacated, and remanded in light of Fifth Third Bancorp v. Dudenhoeffer, directing reconsideration under that decision.
- On remand the Eleventh Circuit concluded Fifth Third did not change the outcome because Smith alleged no special circumstances (e.g., fraud, insider information, or accounting manipulation) that would make market-price reliance implausible.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether fiduciaries breached ERISA duty of prudence by maintaining Delta stock in plan | Smith: fiduciaries imprudently continued to invest in/retain Delta stock despite poor performance and risk to plan participants | Delta: absent special circumstances, fiduciaries may rely on market price and are not required to predict future stock decline; ESOP exemption limits diversification claims | Court: Dismissal affirmed — no special circumstances alleged; Fifth Third permits market-price reliance and does not alter outcome |
Key Cases Cited
- Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459 (2014) (ESOP fiduciaries owe ordinary ERISA prudence duty; presumption of prudence inappropriate; market-price reliance generally plausible)
- Lanfear v. Home Depot, Inc., 679 F.3d 1267 (11th Cir. 2012) (discusses presumption-of-prudence framework for ESOP cases)
- Summers v. State Street Bank & Trust Co., 453 F.3d 404 (7th Cir. 2006) (market price is usually the best available estimate of a stock’s value)
- Smith v. Delta Air Lines, 563 F. App’x 681 (11th Cir. 2014) (prior Eleventh Circuit disposition affirming dismissal)