In Harris v. Amgen, No. 10-56014 (9th Cir. June 4, 2013), the plaintiffs, who were current and former employees of Amgen, Inc., and an Amgen subsidiary, were appealing the dismissal of their ERISA class action case by the district court. The plaintiffs had alleged that the defendants had breached their fiduciary duty under ERISA with respect to two employer-sponsored retirement plans (the “Plans”), both employee stock ownership plans which were individual account plans. They claimed that the breach resulted from the defendants continuing to offer for investment, by the Plans’ accounts, a fund holding employer stock, when they knew or should have known that the stock was being sold at an artificially inflated price due to material omissions and misrepresentations, as well as illegal off-label sales, and the price of the stock later fell.
The Ninth Circuit Court of Appeals (the “Court”) reversed the dismissal. It held, among other things, that (1) the Moench Presumption of prudence (adopted by the Court for the Ninth Circuit in Quan v. Computer Sciences Corp.), which could apply when a plan offers investment in an employer stock fund, did not apply here since the terms of the Plans did not require or encourage the defendant fiduciaries to invest the Plans primarily in employer stock, but merely permitted such investment, and (2) in the absence of the Moench Presumption, the plaintiffs sufficiently alleged violation of defendants’ fiduciary duties regarding the Plans.