U.S. Supreme Court: No Presumption of Prudence for ESOP Fiduciaries, Court Details Pleading Requirements for Breach of Prudence Claims
Client Memorandum

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On June 25, 2014, in Fifth Third Bancorp et al. v. Dudenhoeffer et al., the U.S. Supreme Court unanimously overturned the presumption of prudence that has been applied in “stock drop” cases brought under the Employee Retirement Income Security Act of 1974 (“ERISA”) for nearly two decades.  The Court held that fiduciaries of employee stock ownership plans (“ESOP”) are subject to the same duty of prudence that applies to ERISA fiduciaries in general, except that ESOP fiduciaries do not need to diversify the fund’s assets.  The Court also described pleading requirements for plaintiffs bringing breach of prudence claims.