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Dividing the Plausible Sheep from the Meritless Goats: The Fate of Stock Drop Litigation, 29 Elder L.J. 393 (2022)
No full textThe Employee Retirement Income Security Act of 1974 (“ERISA”) provides federal oversight over employee benefit plans, specifically employee stock ownership plans (“ESOPs”) in which participants\u27 and beneficiaries\u27 retirement savings are in the form of employer stock. It imposes stringent fiduciary duties, especially for individuals or entities that purchase, hold, and sell plan assets, including the duties of prudence, loyalty, and diversification of plan assets. In encouraging the formation of ESOPs, Congress exempts them from the fiduciary duty of diversification and the fiduciary duty of prudence to the extent it requires diversification. As the value of publicly traded employer stock held within an ESOP can fluctuate with the market, federal courts have grappled with the question as to whether ESOP fiduciaries can be held liable under ERISA, regarding its duty of prudence, for investing solely or primarily in employer stock when the statute and the terms of the ESOP provide that the primary purpose of the plan is to invest in employer stock. The Third Circuit in 1995 in the case of Moench v. Robertson afforded the ESOP fiduciary to the “presumption” at the pleading stage, that it satisfied ERISA\u27s fiduciary duties absent a showing of extraordinary changed circumstances that demonstrate investing in employer stock was no longer prudent. The majority of circuit courts adopted the Moench presumption in stock drop litigation, where plaintiffs sued the ESOP fiduciary for purchasing or for failing to sell employer stock that had dropped significantly in value. In 2014, the Supreme Court in the Fifth Third Bancorp v. Dudenhoeffer decision negated the use of such a presumption. Instead, it set forth a two-part pleading requirement to be used in stock drop litigation in order to withstand a motion to dismiss: (1) in the case of a claim for breach of fiduciary duty of prudence based on publicly available information, the plaintiffs must allege “special circumstances” as to why the ESOP fiduciary should not relied on the stock\u27s market price as being reliable or (2) if instead the claim was based on non-public inside information, the plaintiffs must allege an alternative course of action, consistent with securities law, that a prudent ESOP fiduciary should have taken after it concluded that it would not have done more harm than good to the plan\u27s fund. In subsequent litigation, this two-part pleading standard has proven to be too high a hurdle for the plaintiffs\u27 bar. The 2018 case Jander v. Retirement Plans Committee of IBM, however, provided a ray of hope for the plaintiffs\u27 bar in surviving a motion of dismiss based on the fiduciary\u27s insider information. The plaintiffs survived a motion to dismiss by alleging in that a prudent fiduciary could not have concluded that an earlier disclosure of IBM\u27s “undisclosed troubles” in one of its businesses would do more harm than good, as the disclosure was inevitable and the decrease in the value of the employer stock would continue over time. Because most other circuits have rejected the use of this “inevitable” theory to satisfy the Dudenhoffer standard, the U.S. Supreme Court granted certiorari in Jander. The Supreme Court, however, declined to comment on the arguments raised by the defendants and the federal government in its amicus brief as the Second Circuit had not addressed them. Instead, it simply remanded the case back to the Second Circuit, which, in turn, affirmed its prior holding. Thus, the Supreme Court\u27s “more harm than good” Dudenhoeffer standard continues to be a major hurdle for plaintiffs in stock drop litigation. This Article traces the history of stock drop litigation and offers recommendations for ESOP fiduciaries to avoid future litigation
Recent Developments in International Litigation, 57 Tort Trial & Ins. Prac. L.J. 411 (2022)
No full textDuty to Impair: Failure to Adopt the Federal Rules of Evidence Allows the VA to Rely on Incompetent Examiners and Inadequate Medical Examinations, 90 UMKC L. Rev. 511 (2022)
No full textRacial Capitalism: Complexities With Enforcing Corporate Commitments to End Racial Injustice, 55 UIC L. Rev. 519 (2022)
No full textIt\u27s a Pirate\u27s Life for Me: Stealing Scripts Instead of Jewels, 22 UIC Rev. Intell. Prop. L. 112 (2022)
No full textTransitions Unexplored: A Proposal for Professional Identity Formation Following the First Year, 29 Clinical L. Rev. 1 (2022)
No full textLike students in other professional fields, law students experience significant transitions during their education. These transitions consist of intense learning periods associated with major change as students develop their professional identities. These challenges and experiences allow students to develop and internalize the skills needed to be a successful lawyer. Law schools are in a unique position to create and reinforce structures to help students navigate these transitions and maximize professional identity formation. This paper will detail some of these transitional challenges and provide recommendations for law schools to further support students during transitions--most notably during the summer following their 1L year. Summer employment is a key transition point and a crucial opportunity for professional development and growth. The challenge for law schools is that summer employment falls outside their curriculum and oversight. But even when such transformational experiences occur outside of the traditional curriculum, law schools can still utilize effective pedagogy for professional identity formation to help students maximize their development and internalization of professional values. Experiential learning, and externship pedagogy in particular, uniquely aligns with professional identity formation. By implementing common externship pedagogical tools, such as goal setting, reflection, and skills assessment, law schools can help students develop professional identity in real-world practice settings, particularly over the summer after 1L year. This article proposes that law schools implement professional identity formation programs comprised of key externship pedagogical tools and provides suggestions for creating stakeholder buy-in for such programs
