589 U.S. 49
SCOTUS2020Background
- Plaintiffs are participants in an ESOP who alleged fiduciaries failed to act on inside information (by causing corrective SEC disclosure) and thus breached ERISA duty of prudence.
- The question centers on what pleading suffices to allege an alternative action that a prudent fiduciary would not view as more likely to harm than help the fund, per Fifth Third Bancorp v. Dudenhoeffer.
- Petitioners (ESOP fiduciaries) argued ERISA imposes no duty to act on inside information; the Government (on behalf of SEC & DOL views) argued ERISA disclosure duties cannot extend beyond what securities laws require because of potential conflicts.
- The Second Circuit did not address those arguments below; the Supreme Court therefore reviewed whether to remand for the Second Circuit to consider them in the first instance.
- The Supreme Court vacated and remanded the Second Circuit judgment so that it may decide whether to entertain and resolve the arguments (including waiver/forfeiture and merits issues).
- Separate concurrences (Kagan, joined by Ginsburg; Gorsuch) emphasized procedural deferment to the court of appeals and highlighted distinct legal issues: relationship between ERISA and securities law duties, and whether fiduciaries acting only as corporate officers can be charged under ERISA for actions taken in a non‑fiduciary capacity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ERISA fiduciaries can be sued for failing to act on inside information | Fiduciaries had a duty to act (e.g., cause corrective SEC disclosure) to protect the ESOP | Fiduciaries argue ERISA imposes no duty to act on inside information | Remanded — Second Circuit to decide whether to entertain/resolve the argument in the first instance |
| Whether ERISA duty can require disclosures beyond securities‑law obligations | Plaintiffs say fiduciaries could be required to disclose to protect the fund | Government argues ERISA duties that would require disclosure not mandated by securities laws would conflict with securities law objectives | Remanded — Court of Appeals should consider conflict and SEC views if presented |
| Pleading standard from Dudenhoeffer: what constitutes an alternative action not more likely to harm than help | Plaintiffs relied on generalized allegations about inevitable disclosure timing to satisfy the standard | Defendants contended generalized allegations insufficient; compliance/conflict with securities laws matters | Vacated judgment; lower court to apply Dudenhoeffer framework and assess pleadings on remand |
| Whether ERISA can impose liability for actions the fiduciary could have taken only in a corporate/officer capacity | Plaintiffs argue insider fiduciaries who had authority should be liable for failing to cause disclosures | Defendants (and Justice Gorsuch) argue ERISA liability should be limited to actions taken ‘‘as fiduciary’’ — not acts only available in officer role | Remanded — Second Circuit to address; concurrence urged that this is a distinct legal question the lower courts should resolve first |
Key Cases Cited
- Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409 (2014) (sets pleading standard for ESOP fiduciary breach claims based on inside information)
- F. Hoffmann‑La Roche Ltd. v. Empagran S. A., 542 U.S. 155 (2004) (court of review should not decide issues not addressed below)
- Cutter v. Wilkinson, 544 U.S. 709 (2005) (same principle on reviewing lower‑court omissions)
- Wood v. Milyard, 566 U.S. 463 (2012) (appellate courts ordinarily abstain from issues not preserved)
- Pegram v. Herdrich, 530 U.S. 211 (2000) (distinction between actions taken "as a fiduciary" and other capacities)
- Webster v. Fall, 266 U.S. 507 (1925) (matters not argued or decided are not precedential)