Rinehart ex rel. Buzzo v. Lehman Bros. Holdings Inc.
817 F.3d 56
2d Cir.2016Background
- Lehman Brothers filed for bankruptcy in 2008; ESOP investments were entirely Lehman stock.
- Plaintiffs allege ERISA fiduciaries breached the duty of prudence by keeping Lehman stock as an investment amid rising risk.
- Fifth Third Bancorp v. Dudenhoeffer rejected a special prudence presumption for ESOP fiduciaries.
- District Court dismissed under Rule 12(b)(6); Fifth Third guided the analysis post-remand.
- This Court affirmed the dismissal, holding no plausible claim under the standards post-Fifth Third.
- The decision discusses public-information prudence, nonpublic-information investigation, and monitoring duties as applied to the plan fiduciaries.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Fifth Third abrogated Moench for ESOP fiduciaries. | Plaintiffs rely on Fifth Third to require plausible alternatives to keep or divest. | Defendants argue no special presumption applies and public information suffices. | No; Fifth Third abrogates Moench and requires plausible alternatives. |
| Whether public-information claims remain plausible after Fifth Third. | Plaintiffs contend public information can show imprudence in market value or risk. | Court should not consider implausible allegations or reliance on market price as imprudent. | Plaintiffs fail to plausibly plead imprudence from public information. |
| Whether SEC short-sale orders constitute ‘special circumstances’ invalidating reliance on market price. | SEC orders created unusual market conditions affecting reliability of price. | Orders describe conditional effects and do not show persistent special circumstances. | Not sufficiently pleaded; special-circumstances theory discarded. |
| Whether Counts III–IV (investigation and monitoring claims) state a plausible claim post-Fifth Third. | Failure to investigate and monitoring could reveal nonpublic risks. | Lacked specific investigation lines and viable nonpublic information. | Counts III–IV not plausibly pled under the Fifth Third framework. |
Key Cases Cited
- Moench v. Robertson, 62 F.3d 553 (3d Cir.1995) (ESOP presumption of prudence rejected by Fifth Third later)
- In re Citigroup ERISA Litig., 662 F.3d 128 (2d Cir.2011) (adopted Moench presumption; prudence standard applied)
- Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459 (U.S.2014) (rejected special presumption; uniform prudence standard; divestment allowed not required)
- Amgen Inc. v. Harris, 136 S. Ct. 758 (U.S.2016) (remand on prudence; requires plausible alternative actions with harm vs. benefit)
- Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398 (U.S.2014) (information efficiency; market price as unbiased value)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S.2009) (pleading standard; not all conclusions accepted as facts)
- Rinehart v. Akers, 722 F.3d 137 (2d Cir.2013) (pre-Fifth Third framework; pleading on fiduciary duty sufficiency)