Washington may have been snowbound, but the U.S. Supreme Court managed to remand two ERISA cases back to the appellate courts.
Amgen v. Harris
In the first case, though it has previously rejected a “presumption of prudence,” the high court has rejected the determination of an appellate court that an employer stock holding constituted a fiduciary breach.
It was the second time the nation’s highest court had considered the case of Amgen Inc., et al, v. Steve Harris, et al. The first time it vacated the determination of the Ninth Circuit, and remanded in light of the Supreme Court’s decision in Fifth Third Bancorp v. Dudenhoeffer, which outlined the standards for stating a claim for breach of the duty of prudence against fiduciaries who manage employee stock ownership plans (ESOPs), including the rejection of the so-called “presumption of prudence” that had led to the outright dismissal of a number of these so-called “stock drop” claims.
On remand, the Ninth Circuit reiterated its conclusion that the complaint states such a claim. However, the Supreme Court didn’t see it that way, reversing and remanding that decision.
The Case
The plaintiffs had alleged that Amgen violated ERISA by not withdrawing the company stock option in the plan when its executives knew or should have known that the stock’s price was inflated. Amgen’s stock price plunged by a third after safety concerns about its anemia drugs Epogen and Aranes became public, although the plaintiffs alleged that the company had the results of damning clinical trials since the late 1990s and early 2000s.
While the district court initially rejected the claims in light of the "presumption of prudence," a three-judge panel of the Ninth Circuit reversed after finding that the presumption does not shield Amgen because the company’s pension plans did not require or encourage employees to invest in company stock. However, with its determination in the Fifth Third case in mind, the Supreme Court later vacated the Amgen holding and ordered the Ninth Circuit to take another look.
The Ninth Circuit did so in 2014, but found no reason to affirm dismissal of the investors' case, finding that the fiduciaries violated securities laws by not disclosing the information, and thus found it “quite plausible” that stopping further investments in the stock would not harm the participants. Unfortunately, at least from the perspective of the Supreme Court’s most recent assessment, the Ninth Circuit did not go on to consider whether a prudent fiduciary “could not have concluded” that the alternative action would do more harm than good.
Supreme Remand
However, on January 25, in a four-page unsigned opinion, the Supreme Court summarily reversed for Amgen again, saying, “the Ninth Circuit failed to properly evaluate the complaint” and maintaining that the Court “…has not found sufficient facts and allegations to state a claim for breach of the duty of prudence.” That said, the Court noted that “…the stockholders are the masters of their complaint,” leaving it to “the District Court in the first instance whether the stockholders may amend it in order to adequately plead a claim for breach of the duty of prudence guided by the standards provided in Fifth Third.”
Elem vs. Airtran Airways Inc.
The second case remanded was Elem vs. Airtran Airways Inc., a case involving the definition of equitable relief when there are benefit overpayments. In Elem, lower courts granted and affirmed summary judgment for the plan, but the Supreme Court vacated the judgment and remanded the case to the Eleventh U.S. Circuit Court of Appeals, following its January 20 decision in Montanile vs. Board of Trustees of National Elevator Industry Health Benefit Plan, an 8-1 decision that restricted the ability of plan fiduciaries to pursue recoveries of benefit overpayments.
