Dudenhoeffer v. Fifth Third Bancorp
757 F. Supp. 2d 753
S.D. Ohio2010Background
- Plaintiffs are former Fifth Third Bancorp employees and participants in the Master Profit Sharing Plan who invested in Fifth Third stock through the Plan.
- Plaintiffs allege four counts under ERISA: breach of fiduciary duty for maintaining imprudent investment in Fifth Third stock, failure to monitor, conflicts of interest, and failure to correct breaches.
- The Plan is a defined contribution/401(k) with an ESOP-like Fifth Third Stock Fund that invests primarily in Fifth Third common stock.
- Defendants moved to dismiss under Rule 12(b)(6), arguing the Fifth Third Stock Fund is an ESOP and the presumption of prudence applies, barring the claims.
- The court resolves threshold ESOP status and analyzes whether the pleadings overcome the presumption of prudence under Kuper v. Iovenko and related authorities.
- The court grants the motion to dismiss, with prejudice, and denies leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the Fifth Third Stock Fund an ESOP? | Dudenhoeffer argues ESOP status not clear in pleadings. | Fifth Third contends Fund is an ESOP under 29 U.S.C. § 1107(d)(6)(A). | Yes; court finds Fifth Third Stock Fund is an ESOP. |
| May the Kuper presumption of prudence be applied at pleading stage? | Presumption should not bar claims at the pleading stage. | Presumption applies to ESOP fiduciaries and forecloses breach claims absent overcome. | Kuper presumption may be applied at pleading stage. |
| Do plaintiffs overcome the presumption of prudence to plead breach of fiduciary duty regarding retaining Fifth Third stock? | Allegations show imprudence and failure to diversify/divest. | Plaintiffs fail to plead facts showing imprudence given Fifth Third's ongoing viability and contrary public signals. | No; complaint fails to overcome presumption of prudence. |
| Are misstatements/omissions in SEC filings actionable under ERISA as fiduciary communications? | SEC filings incorporated by reference into plan documents were fiduciary disclosures. | Public SEC statements and filings are not fiduciary acts, and incorporation is insufficient to make them fiduciary statements. | Count I fails to state a misstatement/omission claim; GRANTED. |
| Do Counts II–IV survive if Count I fails? | Counts II–IV rely on the same underlying breach and should proceed. | Without a primary breach, derivative claims fail. | Counts II–IV are dismissed. |
Key Cases Cited
- Kuper v. Iovenko, 66 F.3d 1447 (6th Cir.1995) (presumption of prudence for ESOP fiduciaries; overcome with different investment decision)
- Moench v. Robertson, 62 F.3d 553 (3d Cir.1995) (presumption of prudence for company stock in ESOP/ERISA context)
- Edgar v. Avaya, Inc., 503 F.3d 340 (3d Cir.2007) (illustrates need to show dire financial situation to rebut presumption)
- Kirschbaum v. Reliant Energy, Inc., 526 F.3d 243 (5th Cir.2008) (insufficient to rebut prudence absent going concern threat)
- Wright v. Oregon Metallurgical Corp., 360 F.3d 1090 (9th Cir.2004) (mere stock fluctuations do not overcome presumption of prudence)
- Sprague v. General Motors Corp., 133 F.3d 388 (6th Cir.1998) (fiduciaries do not have broad disclosure beyond ERISA requirements)
- Varity Corp. v. Howe, 516 U.S. 489 (1996) (fiduciaries must connect statements to ERISA plan to act in fiduciary capacity)
- Berlin v. Michigan Bell Tel. Co., 858 F.2d 1154 (6th Cir.1988) (business decisions by ERISA employer broadly not governed by ERISA fiduciary standards)