Raymond Pfeil v. State Street Bank and Trust Co
671 F.3d 585
| 6th Cir. | 2012Background
- ERISA ESOP plans invest heavily in GM stock; State Street as plan fiduciary had discretion under plan terms to divest if GM viability deteriorated.
- GM announced restructuring and substantial losses in 2008; public info suggested near-term bankruptcy risk.
- State Street suspended GM stock purchases in Nov 2008, but did not divest until Mar–Apr 2009; GM filed bankruptcy in 2009.
- Plaintiffs assert State Street breached duties by continuing to hold imprudent GM stock as plan assets.
- District court dismissed for lack of causation; court held participants could move funds to other options, insulating State Street.
- We reverse and remand for further proceedings addressing causation and the fiduciary duties under ERISA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Kuper/Moench presumption applies at pleadings stage | Plaintiffs overcame presumption based on alleged implausible prudence. | Presumption is an evidentiary standard, not a pleading hurdle. | Presumption not required to be overcome at pleadings stage. |
| Whether plaintiffs pleaded a plausible breach of fiduciary duty | State Street failed to divest when GM viability deteriorated. | Plan participants could choose other options; menu design is not purely fiduciary failure. | Plaintiffs plausibly pled breach by continuing imprudent GM stock. |
| Causation: did breach cause plan losses | Delay in divesting caused hundreds of millions in losses. | Causation uncertain due to participant choices and market factors. | Pleadings show causal link between breach and plan losses. |
| Whether ERISA §404(c) safe harbor applies | Safe harbor does not apply to selection/monitoring of plan options. | Safe harbor may shield participant-directed losses. | 404(c) not applicable at motion to dismiss; does not shield selection/monitoring duties. |
| Collateral estoppel applicability | Prior Young decision does not preclude current breaches. | Issues nearly identical to prior proceeding. | Not collaterally estopped; Young does not resolve class-period breaches. |
Key Cases Cited
- Kuper v. Iovenko, 66 F.3d 1447 (6th Cir. 1995) (fiduciary duties; presumption of reasonableness for ESOPs; abuse-of-discretion standard)
- Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995) (ESOP two-hat framework; presumption of prudence for employer stock)
- In re Citigroup ERISA Litig., 662 F.3d 128 (2d Cir. 2011) (presumption of reasonableness at pleadings/summary stage; dire-situation concept)
- Langbecker v. Elec. Data. Sys. Corp., 476 F.3d 299 (5th Cir. 2007) (rebuts safe harbor in some contexts; presumption factors)
- Kirschbaum v. Reliant Energy, Inc., 526 F.3d 243 (5th Cir. 2008) (dire circumstances; rebuttal standards in prudence review)
- Howell v. Motorola, Inc., 633 F.3d 552 (7th Cir. 2011) (menu-design duties; 404(c) cannot shield selection/monitoring)
- In re Unisys Sav. Plan Litig., 74 F.3d 420 (3d Cir. 1996) (ERISA fiduciary duties; safeguarding plan assets)
- Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002) (pleading standards; not all prima facie elements must be pleaded)