ERISA-Second Circuit Upholds Dismissal Of Plaintiffs’ Claim Of Fiduciary Breach In Management Of ESOP

In In Re: Lehman Bros. ERISA Litig., Docket No. 11-4232-cv (2nd Cir. 2013), the plaintiffs claimed (among other things) that the defendants, who were members of Lehman’s Employee Benefit Plans Committee, breached their fiduciary duty to prudently manage the company’s employee stock ownership plan (“ESOP”) by failing to “eliminate or curtail” plaintiffs’ investment in Lehman stock. The district court dismissed the plaintiffs’ claim, and the plaintiffs appeal.

In analyzing the case, the Second Circuit Court of Appeals (the “Court”) ruled that the plaintiffs had not rebutted the Moench presumption (a presumption that ESOP fiduciaries act prudently when retaining the investment in company stock) because they failed to allege facts sufficient to show that the defendants knew or should have known that Lehman was in a “dire situation,” based on public information. As such, the Court affirmed the district court’s dismissal of the case.

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