Linda White v. Marshall & Ilsley Corporation
714 F.3d 980
| 7th Cir. | 2013Background
- This Seventh Circuit case affirms a district court ruling dismissing ERISA prudence claims against fiduciaries for offering an ESOP stock option during a 2008-2009 market decline.
- The M&M/M I Bank Plan included a M&M Stock Fund invested entirely in M&M stock (ESOP), mandatory to offer under the Plan documents.
- Plan documents stated no matter how dire, fiduciaries could not shift investments away from M&M stock in the M&M Stock Fund.
- During the class period, M&M stock fell about 54% (adjusted for spin-offs); by 2010 it traded around $21.43 after adjustments.
- Plaintiffs alleged fiduciaries breached ERISA §1104 by continuing to offer the stock option despite its poor performance and risks.
- Court applies the Moench presumption of prudence for ESOP fiduciaries and holds plaintiffs must overcome this presumption to survive dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Moench presumption applies to ESOP fiduciaries here | Plaintiffs argue presumption should not apply or should be easily overcome. | M&I Bank relies on Moench presumption to shield fiduciaries who follow plan terms. | Moench presumption applies; presumption defends prudence under plan terms. |
| Whether plaintiffs overcome the presumption with dire-circumstances evidence | Plaintiffs contend stock decline and dire conditions defeat prudence. | Defendants assert circumstances were not dire; market-wide decline does not defeat prudence. | Plaintiffs failed to show dire circumstances or excessive risk necessary to overcome presumption. |
| Whether Plan documents requiring stock-for-all-circumstances overrides prudence | Plan required continuing to offer M&M stock despite downturns. | Plan language supports offering stock; prudence does not require removal. | Plan language consistent with ERISA allowed continued offering; no breach shown. |
| Whether availability of other investment options mitigates liability | Presence of 22 funds imposes risk or misaligned incentives by not diversifying. | Diversification is limited in ESOP but other options reduce risk; fiduciaries acted prudently. | Availability of other options weighs against liability; not sufficient to prove imprudence. |
| Whether the court should relax Moench standard or treat it as evidentiary | Moench should not bear such weight; standard should be easier to meet. | Moench is proper and should be applied at pleading stage to dismiss frivolous claims. | Moench presumption is a substantive legal standard of liability and governs pleading stage dismissals. |
Key Cases Cited
- Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995) (establishes the Moench presumption for ESOP fiduciaries)
- Howell v. Motorola, Inc., 633 F.3d 552 (7th Cir. 2011) (affirmed prudence where ESOP stock was one option among many)
- Summers v. State Street Bank & Trust Co., 453 F.3d 404 (7th Cir. 2006) (upheld prudence where ESOP stock declined but risk was not excessive)
- In re Citigroup ERISA Litigation, 662 F.3d 128 (2d Cir. 2011) (adopts Moench presumption in ESOP prudence challenges)
- Lanfear v. Home Depot, Inc., 679 F.3d 1267 (11th Cir. 2012) (Moench presumption applies at pleading stage; standard of review)