In Re American Express Co. Erisa Litigation
762 F. Supp. 2d 614
S.D.N.Y.2010Background
- ERISA fiduciary breach claims regarding the Plan’s Company Stock Fund, which is invested primarily in American Express stock, and a 10% cap adopted July 1, 2007.
- The Plan mandates the inclusion of the Company Stock Fund; participants may allocate contributions among funds, including the Stock Fund.
- Plan amendments and disclosures limited investors to 10% in the Stock Fund after July 1, 2007; the SMM and plan documents reflect these limits.
- Investment Committee and other fiduciaries are tasked with fund selection and monitoring, but the Stock Fund was a plan-mandated investment option.
- Plaintiffs allege the Fund was imprudent and that fiduciaries failed to warn or reallocate assets; defendants move to dismiss Rule 12(b)(6).
- Court applies Moench prudence presumption and settlor doctrine to determine fiduciary status and potential liability, ultimately dismissing Counts I–V.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did defendants owe fiduciary duties regarding the Stock Fund under plan documents? | Plaintiffs contend fiduciaries could/should reduce Stock Fund exposure. | Plan requires Stock Fund; defendants had no discretion to remove it. | No fiduciary duty to remove/limit the Stock Fund existed. |
| Are defendants ERISA fiduciaries with discretionary authority over the Stock Fund? | All defendants acted as fiduciaries through discretionary control. | Plan-settlor design and explicit restrictions limit discretion over stock option. | No discretionary fiduciary authority over establishment/maintenance of Stock Fund. |
| Can Moench presume prudence be overcome at Rule 12(b)(6) stage? | Prudence presumption can be overcome with circumstances of imminent collapse. | Presumption applies and stock decline alone isn’t enough. | Presumption not overcome; Counts I–II dismissed. |
| Did the plaintiffs state a claim for failure to inform about Stock Fund risks? | ERISA disclosure duties extend beyond 1021-31; omissions misled participants. | No affirmative disclosure duty beyond statutory requirements; no misrepresentations shown. | Count III dismissed. |
| Did plaintiffs state a claim for failure to monitor or provide information? | Monitoring fiduciaries breached by not supervising others or sharing nonpublic info. | No underlying imprudence or breach; co-fiduciary liability not shown. | Counts IV and V dismissed. |
Key Cases Cited
- Moench v. Robertson, 62 F.3d 553 (3d Cir.1995) (presumption of prudence for ESOP fiduciaries investing in employer stock)
- Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73 (Supreme Court 1995) (settlor function; plan design decisions not fiduciary acts)
- Hughes Aircraft Co. v. Jacobson, 525 U.S. 432 (Supreme Court 1999) (settlor vs. fiduciary distinctions in plan administration)
- Varity Corp. v. Howe, 516 U.S. 489 (Supreme Court 1996) (affirmative misrepresentation vs. general disclosure duties)
- In re Lehman Bros. Secs. & ERISA Litig., 683 F.Supp.2d 294 (S.D.N.Y.2010) (stock decline alone not enough to show abuse of prudence)
- In re Polaroid ERISA Litig., 362 F.Supp.2d 461 (S.D.N.Y.2005) (non-disclosure claims involve substantial factual showing)
- In re WorldCom, Inc. ERISA Litig., 263 F.Supp.2d 745 (S.D.N.Y.2003) (stock decline and fiduciary duties analysis under ERISA)
- In re Morgan Stanley ERISA Litig., 696 F.Supp.2d 345 (S.D.N.Y.2009) (plan documents and fiduciary duties; discuss prudent oversight)