589 U.S. 49
U.S.2020Background
- Plaintiffs are participants in an IBM Employee Stock Ownership Plan (ESOP) who alleged fiduciaries breached ERISA duty of prudence by failing to act on inside information about IBM stock.
- The question presented concerned pleading an alternative action a prudent fiduciary could have taken that would not be more likely to harm the fund than help it, per Fifth Third Bancorp v. Dudenhoeffer.
- Petitioners (ESOP fiduciaries) argued ERISA imposes no duty on ESOP fiduciaries to act on inside information.
- The United States (supporting via amicus) argued ERISA cannot impose a duty to disclose inside information beyond what securities laws require because of potential conflicts with insider-trading and disclosure regimes enforced by the SEC.
- The Second Circuit had not addressed those two central arguments; the Supreme Court vacated and remanded for the Second Circuit to consider waiver and the merits in the first instance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ERISA fiduciaries can be required to act on inside information (duty under ERISA) | Plaintiffs: Fiduciaries had a duty to act on inside info and failed to allege a permissible alternative properly | Petitioners: ERISA imposes no duty on ESOP fiduciaries to act on inside information | Court: Did not decide; vacated and remanded for the Second Circuit to address these arguments first |
| Whether ERISA can require disclosures beyond securities-law obligations | Plaintiffs: Fiduciaries should have caused corrective disclosure to protect the fund | US/Defendants: Requiring disclosure beyond securities law would conflict with securities-law requirements and objectives | Court: Did not decide; remanded so the Second Circuit can consider conflict argument and SEC views |
| Whether a plaintiff can satisfy Dudenhoeffer’s "more harm than good" standard with generalized allegations that harm of inevitable disclosure increases over time | Plaintiffs: Alleged that delay made harm inevitable and thus satisfied standard | Defendants: Such generalized allegations are insufficient; potential market harm could outweigh benefits | Court: Did not resolve; left to Second Circuit on remand |
| Whether alternative actions that would have required defendants to act in a non‑fiduciary (corporate officer) capacity can ground ERISA liability | Plaintiffs: Alternative action could include prompting corporate disclosures | Defendants/Justice Gorsuch: ERISA liability should not be premised on actions available only in a different (non‑fiduciary) corporate capacity | Court: Did not decide; remanded for lower courts to consider (concurring opinions highlighted this issue) |
Key Cases Cited
- Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409 (2014) (sets pleading standard for ERISA duty of prudence claims based on inside information)
- F. Hoffmann-La Roche Ltd. v. Empagran S. A., 542 U.S. 155 (2004) (Court of review should not address issues not decided below)
- Wood v. Milyard, 566 U.S. 463 (2012) (appellate courts ordinarily decline issues not preserved below)
- Cutter v. Wilkinson, 544 U.S. 709 (2005) (courts of review defer to lower courts on first view)
- Pegram v. Herdrich, 530 U.S. 211 (2000) (distinguishes actions taken in fiduciary capacity from nonfiduciary corporate acts)
- Retirement Plans Comm. of IBM v. Jander, 910 F.3d 620 (2d Cir. 2018) (below-court decision remanded by this Court)