Amgen Inc. v. Harris

Background

Former employees of Amgen and its subsidiary sued the people who ran their retirement plans after Amgen stock lost value. The plans included an Amgen common stock fund and were treated like employee stock-ownership plans. The employees filed a class action in 2007, claiming the plan managers breached duties under the Employee Retirement Income Security Act of 1974 (ERISA), including the duty of prudence. The district court dismissed the complaint and the Ninth Circuit reversed; the Supreme Court previously vacated and remanded for reconsideration under its Fifth Third decision.

Reasoning

The core question was whether the complaint plausibly alleged that a prudent plan manager could not have concluded an alternative action would do more harm than good. The Court relied on Fifth Third, which requires plaintiffs to allege a specific alternative that would be consistent with securities laws and that a prudent fiduciary would likely view as more helpful than harmful. The Supreme Court found the Ninth Circuit did not apply that standard correctly. After examining the complaint, the Court concluded it lacked sufficient factual allegations to meet the Fifth Third test, so the Ninth Circuit’s judgment was reversed and the case was sent back for further proceedings.

Real world impact

The ruling raises the factual showing required when employees sue over employer stock in retirement plans: complaints must now include specific, plausible facts about alternative actions and their likely effects. The decision is not a final merits ruling on liability; the Supreme Court left it to the district court to decide whether the plaintiffs may amend their complaint to try to meet the required standard.