Ret. Plans Comm. of IBM v. Jander
The Court sidestepped the legal question it had agreed to hear and instead sent an ERISA retirement-plan lawsuit back to a lower court, because both sides spent most of their Supreme Court briefs arguing points the lower court had never addressed.
The decision resolves nothing on the merits — it only gives the Second Circuit a chance to weigh new arguments about whether retirement plan managers can ever be held responsible for failing to make corporate disclosures while serving as company insiders.
“we believe that the Court of Appeals should have an opportunity to decide whether to entertain these arguments in the first instance. For this reason we vacate the judgment below and remand the case, leaving it to the Second Circuit whether to determine their merits”
The Court's rationale for vacating and remanding without deciding the merits of any of the arguments raised.
How it got here: The Second Circuit ruled for the plan participants; the fiduciaries asked the Supreme Court to hear the case and the Court agreed.
The Case in Depth
What happened
Employees whose retirement savings were invested in company stock through an Employee Stock Ownership Plan sued the plan's fiduciaries under the federal retirement-benefits law ERISA. They claimed the fiduciaries knew — from their positions as corporate insiders — that the stock was overvalued and should have either stopped buying more shares for the plan or caused the company to disclose the bad news publicly, preventing further losses to plan participants.
The question before the Court
When retirement plan managers are sued for failing to act on inside information about their employer's stock, what kind of allegations are enough to keep a lawsuit going?
The Court's answer
The Court did not answer the question it agreed to hear. Instead, it vacated the lower court's ruling and sent the case back to the Second Circuit without deciding anything on the merits.
Both sides devoted most of their Supreme Court briefs to legal theories the lower court had never addressed — including a sweeping argument that ERISA imposes no duty on plan managers to act on inside information at all, and a government argument that any such duty would conflict with federal securities law. Because those arguments had not been considered below, the Court declined to rule on them first, and instead left it to the Second Circuit to decide whether to take them up.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Workers whose retirement savings are invested heavily in their employer's stock through Employee Stock Ownership Plans remain in legal limbo: it is still unsettled how much — if anything — plan managers must do when they possess inside information suggesting the stock is overvalued. The case returns to a lower court, and a definitive answer could take years more.
What changes now
The case returns to the Second Circuit, which must first decide whether the new arguments were properly preserved; if they were not, the court may refuse to address them on forfeiture or waiver grounds. If it chooses to reach the merits, it will confront unsettled questions about how ERISA's duty of prudence interacts with federal securities law. No matter what the Second Circuit does, further appeals are likely, meaning final resolution of the underlying legal questions could be years away.
What this does not decide
The Court did not decide: (1) whether general "inevitable disclosure" allegations satisfy Dudenhoeffer's pleading standard — the question it originally agreed to hear; (2) whether ERISA imposes any duty on ESOP fiduciaries to act on inside information; or (3) whether an ERISA-based disclosure duty would conflict with federal securities laws.
Concurrences and dissents
Concurrence — Justice Kagan
Justice Kagan agreed with the remand but stressed that the Second Circuit is fully entitled to decline the new arguments if they were not properly preserved below — and that sound practice ordinarily calls for doing exactly that. She also argued that both new arguments (the fiduciaries' and the government's) are already foreclosed by Dudenhoeffer, as is Justice Gorsuch's argument about non-fiduciary capacities, making any extended re-examination on remand inconsistent with settled precedent.
Concurrence — Justice Gorsuch
Justice Gorsuch agreed with the remand chiefly to resolve what he saw as a significant unaddressed question: whether ERISA can hold fiduciaries responsible for actions — like ordering a corporate disclosure — they could only have taken wearing their corporate-officer hats, not their fiduciary hats. He read Dudenhoeffer as not foreclosing that question, disagreeing with Justice Kagan, and urged the lower courts to address it promptly rather than allow forfeiture arguments to delay an answer.
How the Court got there
The legal reasoning, step by step
- The Court had previously ruled in a 2014 case, Fifth Third Bancorp v. Dudenhoeffer, that to sue an Employee Stock Ownership Plan fiduciary for failing to act on inside information, a plaintiff must plausibly allege a specific alternative action the fiduciary could have taken that a prudent manager would not have seen as more likely to hurt the fund than to help it. That framework — the 'more harm than good' pleading standard — set the legal backdrop for this case.
- The specific question the Court agreed to hear was whether general allegations that the harm from an undisclosed fraud inevitably grows over time are enough to satisfy Dudenhoeffer's pleading standard. A straightforward answer seemed possible from the briefing stage.
- In their Supreme Court briefs, however, the fiduciaries argued something more sweeping: that ERISA imposes no duty at all on ESOP fiduciaries to act on inside information. The government, representing the Securities and Exchange Commission and the Department of Labor, argued separately that any ERISA-based duty to disclose inside information would conflict with the objectives of federal securities laws.
- Neither of those arguments had been addressed by the Second Circuit below. The Supreme Court treats itself as a court that reviews decisions already made by lower courts, not one that decides legal questions for the first time — a principle the Court applied here to decline ruling on either argument.
- Because Dudenhoeffer itself had flagged that the SEC's views on the relationship between ERISA duties and securities laws 'may well be relevant,' the Court concluded the Second Circuit should have the first opportunity to decide whether to take up these arguments at all, and — if so — how to resolve them.
Doctrinal impact
Cases affected by this decision
Reaffirms Fifth Third Bancorp v. Dudenhoeffer (573 U.S. 409)
Confirmed as the governing framework for ERISA insider-information claims; its pleading standard remains in force.