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No Presumption of Prudence in Stock Drop Cases, but ESOP Fiduciaries Provided Some Comfort

The U.S. Supreme Court held that ESOP fiduciaries are not entitled to a special “presumption of prudence” when investing plan assets in employer stock.  The Court stated, however, that it is generally prudent to assume that a major stock market provides the best estimate of a stock’s value, in the absence of special circumstances.  In addition, the Court stated that, to state a claim for breach of the duty of prudence on the basis of inside information, a plaintiff must plausibly allege an alternative action that the defendant could have taken that (1) would have been consistent with securities laws, and (2) a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than help it. Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. ____ (2014). The decision can be found here.

The lawyers of our Employee Benefits and Executive Compensation Practice Group are readily able to assist companies on a nationwide basis with implementing sophisticated benefit plans and providing answers to their most challenging compensation issues. Additionally, our lawyers are well aware of the daily employee benefits challenges facing companies of all sizes and are capable of helping in-house lawyers and human resources personnel with the day-to-day advice and guidance necessary to properly administer employee benefits plans.

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