On November 9, 2020, the Supreme Court declined to consider an appeal from the Second Circuit Court of Appeals in Retirement Plans Committee of IBM v. Jander, leaving unresolved for now questions about the specificity required by the “more harm than good” pleading standard in stock drop litigation against ERISA plan fiduciaries. The November ruling was the second time this year the Court refused to consider the merits of the Second Circuit’s decision. We summarized the first Supreme Court decision and its background here.
As explained in our earlier post, in January 2020 the Supreme Court sent the case back to the Second Circuit after concluding that the IBM plan fiduciaries and the federal government (on behalf of the SEC and the Department of Labor) had primarily advanced arguments that were not raised in the lower courts. Specifically, the IBM plan fiduciaries asserted that ESOP fiduciaries have no duty under ERISA to act on insider information, and the federal government asserted that the existence of a duty to disclose insider information under ERISA would contravene securities laws. Because these arguments concerned the interaction between the duties of plan fiduciaries under ERISA and the duties of corporate insiders under the securities laws, and the Court had previously indicated that the SEC’s views could be relevant to construing ERISA’s duty of prudence in this context (in Fifth Third Bancorp v. Dudenhoeffer, discussed here), the case was remanded for the Second Circuit to decide whether to hear these arguments.
On remand, the Second Circuit concluded that the IBM fiduciaries’ and federal government’s additional arguments were in part previously considered and in part forfeited because not properly raised. Accordingly, the ruling that had been vacated by the Supreme Court was reinstated in June without change. The IBM fiduciaries again petitioned the Supreme Court for review, and it was this petition that was denied last month.
The Supreme Court’s most recent disposition of Jander should not be surprising. The January 2020 remand clearly signaled the Court’s reluctance to address issues concerning the intersecting duties of insider-fiduciaries under ERISA and the securities laws on the record presented then. It was unlikely the Court would decide differently when presented a second time with the same issues on the same record. For now, the “more harm than good” pleading standard in ERISA stock drop litigation in the Second Circuit will remain a plaintiff-friendly outlier.