January 25, 2017
A year ago, the U.S. Supreme Court issued a per curiam order in Amgen Inc. v. Harris 136 S. Ct. 758 (2016). The Amgen decision came in the wake of the Supreme Court’s determination that there is no special presumption of prudence for employee stock ownership plan fiduciaries. Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459, 2467 (2014). In Dudenhoeffer, the Supreme Court also defined what plaintiffs must plead to pass muster for a fiduciary breach claim under the Employee Retirement Income Security Act. Although very few circuit courts even had a chance to consider Dudenhoeffer, the Supreme Court followed less than two years later with a three-page admonishment of the Ninth Circuit’s purported application of that decision. Amgen, 136 S. Ct. 758.
Amgen warned practitioners and courts alike that complaints must be carefully pled and will be closely scrutinized at the motion to dismiss stage. In particular, the Supreme Court rejected the Ninth Circuit’s inference that, because a complaint adequately stated a claim under the federal securities laws, it also must state a claim for a fiduciary breach under ERISA. Despite some initial setbacks since Amgen was decided, plaintiffs are beginning to tackle this strict pleading requirement head-on. In the future, we expect complaints can survive motions to dismiss if they allege precisely why a prudent fiduciary could not have concluded that taking an alternative action (such as refraining from purchasing or disclosing the truth) would do more harm than good. This will entail relying on financial experts to demonstrate the amount of losses that could have been avoided had alternative actions been taken.