Ret. Plans Comm. of IBM v. Jander
Headline: Vacates and remands a case about employee stock ownership plans (ESOPs) and inside information, letting the appeals court decide whether plan trustees must act or disclose and how securities laws limit that duty.
Holding: The Court vacated the lower-court judgment and remanded so the appeals court can decide whether ESOP fiduciaries must act or disclose based on inside information and whether securities laws limit that duty.
- Leaves open whether ESOP trustees must act on inside company information.
- Allows appeals court to decide if securities laws limit fiduciary disclosure duties.
- Could change rules for plan trustees and corporate insiders depending on the outcome.
Summary
Background
A group of fiduciaries who managed an employee stock ownership plan (ESOP) faced a lawsuit claiming they should have acted on inside information about their company. The petitioners (the fiduciaries) argued that ERISA does not require them to act on inside information. The Government urged that any ERISA duty to disclose should be limited by the federal securities laws.
Reasoning
The Supreme Court examined its prior decision in Fifth Third Bancorp v. Dudenhoeffer, which set a test for when an ESOP fiduciary might have to act on inside information. Because the Second Circuit had not addressed two key arguments raised to this Court—whether ERISA imposes no such duty and whether securities laws preclude extra ERISA-based disclosures—the Court vacated the lower-court judgment and sent the case back. The high court said the appeals court should decide in the first instance whether to consider those arguments and to resolve any related legal questions.
Real world impact
The ruling does not resolve who wins on the merits. Instead, it gives the Second Circuit the chance to decide whether ESOP trustees may be required to use inside information or to make special disclosures, and whether the securities laws bar such ERISA duties. The Supreme Court also noted the Securities and Exchange Commission’s views could be relevant.
Dissents or concurrances
Justice Kagan (joined by Justice Ginsburg) emphasized waiver rules and fidelity to Dudenhoeffer, while Justice Gorsuch argued the question whether fiduciaries acting as corporate officers can be held under ERISA needs prompt lower-court resolution.
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