FIFTH THIRD BANCORP v. DUDENHOEFFER
John Dudenhoeffer and Alireza Partivopanah are former employees of Fifth Third Bank and are participants in the Fifth Third Bancorp Master Profit Sharing Plan (the Plan), which is a defined contribution retirement fund for employees with Fifth Third as a trustee. Participants make voluntary contributions to the Plan from their salaries and direct the Plan to purchase stocks for their individual accounts from options they select. During the time period in question, a large amount of the Plan’s assets were invested in Fifth Third stock. Also during this period, Fifth Third switched from being a conservative lender to a subprime lender and the portfolio became increasingly vulnerable to risk, which it failed to disclose. The price of the stock declined drastically and caused the Plan to lose tens of millions of dollars. The respondents sued Fifth Third and argued that Fifth Third violated the Employee Retirement Income Security Act (ERISA) by continuing to invest in the stock despite its decline, which was a breach of fiduciary duty. The federal district court held that the plaintiffs failed to state a claim for which relief could be granted and granted the defendants’ motion to dismiss. The U.S. Court of Appeals for the Sixth Circuit reversed and held that the plaintiffs plausibly stated a claim with the requisite causal connection.
Did the U.S. Court of Appeals for the Sixth Circuit err by holding that the respondents were not required to plausibly allege that Fifth Third abused its discretion by remaining invested in the employer stock in order to overcome the presumption that the decision to invest in the stock was reasonable?