In Re Citigroup ERISA Litigation
662 F.3d 128
| 2d Cir. | 2011Background
- ERISA plaintiffs (Citigroup/Citibank employees) alleged the Citigroup Stock Fund in two employee plans was imprudently kept as an investment option during a period of substantial subprime exposure and stock decline.
- Plans required the Stock Fund to be maintained and allowed investments in Citigroup stock as a primary plan asset, with limited diversification comparable to ESOP/EIAP structures.
- District Court dismissed the complaint for lack of fiduciary breach, applying a presumption of prudence under Moench for ESOP/EIAP holdings.
- Second Circuit majority adopts Moench presumption for ESOPs/EIAPs here, reviewing continued stock option offerings for abuse of discretion rather than strict prudence, and holds misstatements by plan fiduciaries insufficient without knowing falsity.
- Plaintiffs appeal: Moench presumption should not apply; pleading should proceed under plenary ERISA prudence review, and communications claims should survive.
- Judge Straub dissents in part, arguing Moench deferential review is inappropriate and urging plenary review and reversible misrepresentation and disclosure claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard of review for ESOP/EIAP fiduciaries’ investment decisions. | Moench presumption should not apply; plenary review. | Moench presumption properly balances ERISA values. | Moench presumption adopted by majority; abuse-of-discretion review. |
| Duty to disclose material information to plan participants. | fiduciaries have affirmative disclosure duties about material risks | no general duty to disclose nonpublic investment forecasts | No disclosure duty found under ERISA by majority; liability rejected for Communications Claim. |
| Misrepresentations by Citigroup/Prince. | Citigroup/Prince acted as fiduciaries when communicating about plan benefits | they were not plan fiduciaries for those communications; Administration Committee knew/should have known misstatements | Citigroup/Prince not fiduciaries for statements; Administration Committee failure to know not proven; dismissal affirmed on majority view. |
| Remaining Counts (monitoring, co-fiduciary, loyalty) | overlaps with I/II claims; should proceed on remand | dependent on I/II outcomes | Counts III, IV, VI affirmed dismissed; Counts II, IV, VI remanded per dissenting views. |
Key Cases Cited
- Moench v. Robertson, 62 F.3d 553 (3d Cir.1995) (establishes Moench presumption for ESOP fiduciaries)
- Edgar v. Avaya, Inc., 503 F.3d 340 (3d Cir.2007) (applies Moench presumption to EIAPs/ESOPs)
- Kirschbaum v. Reliant Energy, Inc., 526 F.3d 243 (5th Cir.2008) (Moench presumption applied to ESOP/ EIAP contexts)
- Kuper v. Iovenko, 66 F.3d 1447 (6th Cir.1995) (abuse-of-discretion framework for ESOP fiduciaries)
- Quan v. Computer Scis. Corp., 623 F.3d 870 (9th Cir.2010) (expands Moench presumption to maintain balance between ERISA values)
- Varity Corp. v. Howe, 516 U.S. 489 (Supreme Court) (fiduciary misrepresentation about future plan benefits as plan administration)