Moench Presumption For Employer Stock-drop Cases Looks Like It’s Headed To The Us Supreme Court
Since Moench v. Robertson was decided in 1995, every Circuit that has addressed the issue of whether ERISA fiduciaries are entitled to a presumption of prudence for holding employer stock has concluded that a presumption was warranted. But there have been disagreements over when the presumption applies, what must be alleged to overcome the presumption and other differences in approach. And recently, the DOL has taken the position that the Moench presumption should not apply at all.
It now looks likely that the applicability of the Moench presumption will be decided by the U.S. Supreme Court. In Dudenhoeffer v. Fifth Third, the Sixth Circuit – the Circuit with the most plaintiff-friendly standard – held that the plaintiffs could proceed with their case because the Moench presumption was an evidentiary standard applied at summary judgment, not a pleading standard applied on a motion to dismiss. The defendant sought Supreme Court review, and in March the Supreme Court asked the U.S. Solicitor General’s office to provide an opinion whether the Court should hear the case. Last week, the Solicitor’s brief was filed – and recommended that the Court take the case to decide the applicability of the Moench presumption in cases about ESOPs or other ERISA plans with employer stock.
While not dispositive – the Supreme Court could decide against hearing the case, regardless of the opinion of the Solicitor’s office – it is likely that the Court will hear the case. If so, there are three possible outcomes: 1) that the presumption applies on a motion to dismiss (the position most circuits have adopted); 2) the presumption applies on summary judgment (the Sixth Circuit’s approach) – and if the presumption applies at all, the Court would likely also decide how the presumption can be overcome; or 3) that the presumption should not apply at all (the DOL’s position, and the position of the Solicitor in the brief). Option #1 is good for defendants; #2 is good for plaintiffs, and #3 (despite the protests in the Solicitor’s brief) is likely to open a VERY wide door for litigation and become another impediment to employee ownership.
I’ll keep this thread updated as the case proceeds through conference. Here’s the link to the brief –http://sblog.s3.amazonaws.com/wp-content/uploads/2013/11/12-751-Fifth-Third-Bancorp.pdf