Fisher v. JP Morgan Chase & Co.
U.S.Sup.Ct.(2d Cir.) Nov. 13, 2012
The plaintiff’s ERISA claims in this action involved allegations that (1) the employer and director defendants negligently permitted plan participants to purchase and hold shares of JP Morgan common stock when it was imprudent to do so; (2) defendants failed to disclose and negligently misrepresented material facts to Plan participants; and (3) JP Morgan and the director defendants failed to appoint appropriate fiduciaries, monitor those fiduciaries, and supply them with the information necessary to fulfill their duties.
The participants alleged that defendants negligently permitted plan participants to purchase and hold shares of the employer’s common stock when it was imprudent to do so and failed to disclose and negligently misrepresented material facts to plan participants. The appellate court determined that the participants’ prudence claim failed because (1) the presumption of prudence applied to the negligence claim since the presumption applied to all eligible individual account plans and employee stock ownership plans, and the plan’s terms did not grant the fiduciaries unfettered discretion whether to offer the employer’s stock, and (2) the participants did not sufficiently allege that defendants knew or should have known that the employer was in a dire situation since, even when the stock was at its lowest price, it still retained significant value and, throughout the class period, the employer remained a viable company. In addition, defendants did not breach their fiduciary duty of loyalty. The employees’ sought review by the U.S. Supreme Court which was denied without comment.
In their appeal, the employees’ argued that the “Moench presumption of prudence” is too lenient with plan administrators who invest employee funds in a company’s own stock and that the presumption waters down the duty of prudence as it pertains to employer stock, “unnecessarily and improperly imperiling billions of dollars of retirement savings of American employees and retirees.” The plan participants argued that the Moench presumption, had been interpreted in different ways by the circuit courts and thus presented a conflict between the circuits. The brief also pointed to a dissent from both a dissenting judge in the Second Circuit’s Citigroup ruling and an amicus brief filed in that same case by the U.S. Department of Labor, questioning the applicability of the Moench presumption.
The refusal to hear the case lets stand the Second Circuit ruling that an employer’s retirement plan administrators do not have a fiduciary duty under the Employee Retirement Income Security Act to know whether their own stock is a risky investment or to avoid it altogether, if it is.