Article on the Duty to Inform After Dudenhoeffer

Remy Grosbard recently published an Article entitled, The Duty to Inform in the Post-Dudenhoeffer World of ERISA, 117 Colum. L. Rev. 79 (2017). Provided below is an abstract of the Article:

The Supreme Court’s 2014 decision in Fifth Third Bancorp v. Dudenhoeffer rejected a long-held presumption in the U.S. circuit courts that fiduciaries of employee stock ownership plans (ESOPs) act prudently in investing in company stock. Instead, the Supreme Court held, ESOP fiduciaries should be subject to the same duty of prudence as all ERISA fiduciaries, leaving ESOP fiduciaries vulnerable to plaintiffs testing the new standard.

To reduce the likelihood of suit from employees invested in employer stock, companies attempt to insulate themselves from liability by appointing independent fiduciaries. One way that plaintiffs, who may have suffered serious losses from downturns in their employer’s stock, can still successfully assert breach-of-fiduciary-duty claims is by alleging that appointing fiduciaries have a duty to inform appointed fiduciaries of material nonpublic information that would adversely affect stock price.

This Note considers this claim and argues that courts should refrain from creating a per se rule against the duty to inform. Instead, courts should uphold such claims when securities laws would independently require disclosure. Principles of trust law, guidance from the Department of Labor, and the Supreme Court’s holding in Dudenhoeffer support this proposal.