[JURIST] The US Supreme Court [official website] heard oral arguments [day call, PDF] Wednesday on the requirements to allege breach of fiduciary duties over an employee stock ownership plan (ESOP). In Fifth Third Bancorp v. Dudenhoeffer [transcript, PDF], the court will determine the scope of the fiduciary duties that the trustees of an ESOP owe to the beneficiaries. As part of the benefits Fifth Third [corporate website] offers to employees, they are able to contribute to an ESOP that invests in Fifth Third stock and other funds. In a two-year period, Fifth Third’s stock decreased, causing John Dudenhoeffer and others to argue that the trust managers had failed to represent their best interest by continuing to allow employee investment into the company. The court must decide whether ESOP beneficiaries must plausibly allege in their complaint that the fiduciaries of the ESOP had abused their discretion by remaining invested in employer stock in order to overcome the presumption that their decision to invest in the stock was reasonable, as required by the Employee Retirement Income Security Act (ERISA) [materials; JURIST backgrounder].
The District Court for the Southern District of Ohio [official website] dismissed the complaint for failing to state a plausible claim, but the US Court of Appeals for the Sixth Circuit [official website] reversed [opinion] that decision and remanded of the complaint back to the lower court to consider the allegations. Fifth Third Bancorp filed a petition for certiorari [text]. The Supreme Court granted [SCOTUSblog backgrounder] the petition in December.