Amicus Briefs Support Fifth Third Bank Focus Governments Brief
The amicus briefs filed in support of Fifth Third at the U.S. Supreme Court in the Dudenhoefer case take aim primarily at the brief filed by the U.S. Solicitor General in support of jurisdiction.
The brief from the Chamber of Commerce (along with other groups like the ERISA Industry Committee) focuses on how “ordinary measures of prudence” do not apply to employer stock funds because they are, by definition and as recognized in ERISA, undiversified. This argument takes aim not only at the government’s brief, but also (albeit without acknowledgment) criticizes the position taken by Judge Posner in Summers (453 F3d 404). Posner asserted that the “the excessive risk imposed on employee-shareholders by the rise in the debt-equity ratio” upon the decline of the share price could state a valid claim, but this brief focuses on how traditional prudence analysis is unworkable with an ESOP.
The Moench presumption occupies a middle ground – there is a presumption of prudence, it applies at the motion to dismiss stage, but it can be overcome if the allegations are sufficient. It’s a “middle” ground but weighted toward defendants. The Sixth Circuit’s standard that is directly at issue in this case applies a presumption of prudence, but in a much more plaintiff-friendly manner – it’s a middle ground but weighted toward plaintiffs. The Solicitor’s jurisdictional brief, in contrast, took an absolute position – there should be no presumption. The ESOP Association’s amicus brief in support of Fifth Third takes the opposite absolute position – that the Supreme Court should conclude as a matter of law that the duty of prudence “does not require ESOP fiduciaries to act in response to price swings of the publicly traded employer stock held by the plan.” The brief asks the Court to adopt Moench in the alternative but primarily seeks to eliminate liability altogether and conclude that fiduciaries are not required to act in response to changes in the price of publicly-traded employer stock.
The brief of the Securities Industry, and the brief of KeyCorp, hit many of the same notes. The most notable amicus brief, however, may have been the brief from Delta Air Lines, which focused upon a concession from the Solicitor’s brief – that a plaintiff “cannot state a claim merely because the company or industry was suffering financial difficulties.” Delta asserts that this concession paints the government into a corner – in light of that concession, it’s unclear “how fiduciaries and companies will be protected against such litigation going forward” unless the presumption applies.
Here’s the link to the briefs from the ABA’s Supreme Court page –