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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
An ESOP participant did not plead sufficient facts to show a connection between his employer's misconduct regarding its products and alleged imprudent investments in the ESOP holding the company's stock, the U.S. Court of Appeals in St. Louis (CA-8) has ruled in Brown v. Medtronic, Inc. (CA-8). In so ruling, the court did not adopt the Moench presumption, already adopted by several other appellate courts, that an ESOP's investment in company stock is entitled to a rebuttable presumption of prudence.
Fiduciary breaches alleged
The plaintiff, an ESOP participant, alleged class action claims under ERISA relating to purported breaches of fiduciary duties associated with information disclosures/nondisclosures surrounding two of his company's products --Infuse brand bone graft material (Infuse) and Sprint Fidelis-brand lead wires for implantable defibrillators and pacemakers (Fidelis). The ESOP participant claimed that the company, several of its directors, a retirement plan committee, and various fiduciaries breached their fiduciary duties by (1) failing to adequately disclose the information, (2) making a disclosure that deceptively downplayed the information, and (3) imprudently continuing to invest in company stock after receipt of the adverse determination. The district court ruled that the ESOP participant lacked constitutional standing and the Eighth Circuit affirmed, on slightly different grounds, holding that the plaintiff lacked constitutional standing to bring Infuse-related claims and, while possessing standing to bring Fidelis-related claims, failed to state a claim under federal rules of civil procedure.
According to the Eighth Circuit, it did not find enough of a connection between the conduct of the company regarding Infuse or Fidelis and any possible imprudence in the ESOP's holding the company's stock. As to the Infuse-related claims, the court found no injury fairly traceable to any of the alleged breaches of duty related to Infuse because negative information regarding Infuse-related business practices did not reach the public until months after the plaintiff had completely liquidated his ESOP account. As for the Fidelis-related claim, the appellate court found that the plaintiff articulated a traceable and redressable injury sufficient to show standing. This is based on a large stock price drop, the timing of the plaintiff's sales, and an allegation that the stock price drop was due, at least in part, to the market's response to the company's alleged wrongdoing. However, the court continued, the plaintiff's Fidelis-related claim could not survive the company's motion to dismiss.
Moench presumption not adopted
Although the company urged the court to adopt the Moench presumption, the court noted that the Eighth Circuit had not yet adopted the presumption, though the Fifth, Sixth, and Ninth Circuits have done so, and decided that it need not reach the question of whether it should be adopted in this case. Even without adopting the Moench presumption, the Eighth circuit concluded, the plaintiff did not state a plausible claim with regard to his Fidelis allegations.
For more information, visit http://www.wolterskluwerlb.com/rbcs.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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