Ninth Circuit Adopts Moench Presumption in Favor of Fiduciaries


In Quan v. Computer Sciences Corporation, No. 09-56190, D.C. No. 2:08-cv-02398-SJO-JWJ, September 30, 2010, the Ninth Circuit has made clear it will apply the so-called Moench presumption in favor of fiduciaries who manage employer stock investments for 401(k) plans and ESOPs.

Quan involved a fact pattern fairly common among employer-stock drop cases. Computer Sciences Corporation ("CSC") made substantial errors in running its stock option program and in the related tax accounting for the stock option plans. When these problems came to light, the price of CSC's publicly traded stock suffered a 12% drop in one day. It appears that the stock price recovered fairly quickly after these events.

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