Business Roundtable, the Securities Industry and Financial Markets Association, and the U.S. Chamber of Commerce filed an amicus brief on August 13, 2019, asking the U.S. Supreme Court to reverse the decision of the U.S. Court of Appeals for the Second Circuit in Retirement Plans Committee of IBM v. Jander.
In 2015, plaintiffs, former employees of IBM Corp. who participated in the company’s ERISA plan, sued the fiduciaries of IBM’s retirement plan under ERISA. Plaintiffs claimed that the defendants breached their fiduciary duties in administering their employee stock ownership plan (ESOP), which invests primarily in IBM stock. Plaintiffs sued after the price of the company’s stock dropped, alleging that defendants knew certain adverse information about the company and failed to disclose that information or to prevent participants from buying company stock.
Although the district court dismissed the case for failing to state a claim, the Second Circuit reversed and held that the case could go forward.
In Fifth Third Bancorp v. Dudenhoeffer (2014), the Supreme Court considered a similar claim against an ESOP. The Court in Fifth Third recognized that plaintiffs can easily assert a breach of fiduciary duty when the price of a company’s stock drops, and so courts must take steps to “divide the plausible sheep from the meritless goats.” What is required, the Court explained, is “careful, context-sensitive scrutiny of a complaint’s allegations.”
As the Business Roundtable amicus brief argues, reversal is warranted because the Second Circuit failed to carefully scrutinize the plaintiff’s allegations as required by Fifth Third. The amicus brief encourages the Court to offer concrete and helpful guidance so district courts can weed out meritless claims.
See brief here.