Amicus Briefs Support Plaintiffs Fifth Third Case Filed AARP, AFL-CIO, Law School Professors, And US Solicitor General

The amicus briefs filed in support of the plaintiffs (Dudenhoeffer, and the other Respondents) focus the changed circumstances of the pension plan landscape since ERISA was enacted in 1974, and practical examples of the impact a presumption would have on litigation going forward.

The brief of the AARP starts by noting what the U.S. Supreme Court already noted in 2008 in LaRue – that an employee’s primary pension benefit is now provided through a defined contribution plan, not a DB plan. Those DC plans have concentrations of employer stock that the AARP criticizes, citing social science research and investment research studies (as well as the Enron case) that reflect poorly on the financial literacy of 401(k) plan participants. The AARP therefore asserts that applying a presumption that only excepts “extraordinary circumstances” shields fiduciaries until it is too late to save an employee’s investment in employer stock. “By the time the employee could overcome the Moench presumption, the company has collapsed causing real damage to employees’ lives” (p.15).
The amicus brief of Delta challenged the US Solicitor’s brief (when jurisdiction was before the Court), arguing that upon the Solicitor’s concession that “mere stock drops” were not enough to satisfy Rule 8(a), companies would, in fact, be sued for mere stock drops unless a presumption applied. The Solicitor’s brief on the merits as amicus responds by pointing out that Rule 8(a) already applies to weed out implausible claims that only allege that the stock dropped; in this case, the allegation that the fiduciaries knew or should have known that the stock price was artificially inflated and did not take action is sufficient to state a claim. Applying the presumption urged by the Petitioners and Delta would be “virtually insurmountable” (p.15).

The AFL-CIO’s brief takes issue with the fact that the fiduciaries were insiders; if those insiders were prevented by securities laws from acting on inside information to benefit the plan “that is just another way of saying that the Petitioners were personally disabled from fully exercising their authority to responsibly manage plan assets” and should have brought in an independent trustee (p.16). And the brief of law school professors who teach employee benefits law urges the Court to remember that it is protecting retirement savings, and not fostering employee ownership, that ERISA is most concerned about. The professors do not think that a presumption should apply to ESOPs that are contained within the 401(k) plans of publicly-traded companies, and also ask the Court to consider whether ESOPs are beneficial at all, citing Judge Posner’s stinging rebuke of ESOPs in the Summers case (p.15).

Unlike the Respondents’ brief, the amicus briefs also take try to identify when (if at all) a presumption may apply. Here’s the link to the ABA’s web site with the briefs –

http://www.americanbar.org/publications/preview_home/12-751.html