[JURIST] The US Supreme Court [official website] ruled [opinion, PDF] unanimously Wednesday in Fifth Third Bancorp v. Dudenhoeffer [SCOTUSblog backgrounder] that employees of Fifth Third Bank [corporate website] can proceed with a lawsuit for breach of fiduciary duties over an employee stock ownership plan (ESOP). As part of the benefits Fifth Third 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 was asked to 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]. Justice Stephen Breyer wrote for the court: “We hold that no such presumption applies. Instead, ESOP fiduciaries are subject to the same duty of prudence that applies to ERISA fiduciaries in general, except that they need not diversify the fund’s assets.”
The court heard arguments in the case in April after granting certiorari [JURIST reports]. The case will now be remanded to the lower courts to apply the correct standard.