Retirement Plan Committee of IBM v. Jander

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Supreme Court of the United States
Retirement Plans Committee of IBM v. Jander
Term: 2019
Important Dates
Argument: November 6, 2019
Decided: January 14, 2020
Outcome
Vacated and remanded
Vote
NA
Majority
Per curiam


Retirement Plan Committee of IBM v. Jander is a case argued before the Supreme Court of the United States on November 6, 2019, during the court's October 2019-2020 term. The case came on a writ of certiorari to the United States Court of Appeals for the 2nd Circuit.[1]

On January 14, 2020, the court vacated the ruling of the 2nd Circuit and remanded the case for a determination on whether to consider two arguments raised in the briefs at the Supreme Court but not in the lower court proceedings.[1][2] Click here for more information.

HIGHLIGHTS
  • The case: Larry Jander invested in IBM's retirement plan. After IBM sold its microelectronics business at a loss and shares fell, Jander alleged the IBM retirement plan committee violated their fiduciary duty of prudence to the pensioner under the Employee Retirement Income Security Act (ERISA). The U.S. District Court dismissed Jander's claim. On appeal, the 2nd Circuit reversed and remanded the case. The retirement committee petitioned the U.S. Supreme Court to hear the case, arguing the 2nd Circuit "subverted [a] pleading standard" established in Fifth Third Bancorp v. Dudenhoeffer.[3]
  • The issue: Whether Fifth Third Bancorp v. Dudenhoeffer’s "more harm than good" pleading standard can be satisfied by generalized allegations that the harm of an inevitable disclosure of an alleged fraud generally increases over time.[1]
  • The outcome: The court vacated the ruling of the 2nd Circuit and remanded the case.[2]


    • You can review the lower court's opinion here.

    Timeline

    The following timeline details key events in this case:

    • January 14, 2020: The U.S. Supreme Court vacated the ruling of the 2nd Circuit and remanded the case.
    • November 6, 2019: Oral argument
    • June 3, 2019: The U.S. Supreme Court agreed to hear the case.
    • March 4, 2019: The Retirement Plans Committee of IBM filed a petition with the U.S. Supreme Court.
    • December 10, 2018: The 2nd Circuit reversed and remanded the ruling from the Southern District of New York.[1]

    Background

    Larry Jander, Richard Waksman, and other unnamed plaintiffs (referred to collectively as Jander) invested in IBM's employee stock option plan (ESOP) as a retirement plan.[3]

    On October 20, 2014, IBM announced the sale of the microelectronics business to GlobalFoundries Inc. In the announcement, IBM said it would pay $1.5 billion to GlobalFoundries and would take a $4.7 billion pre-tax charge. IBM's stock then fell by more than $12 per share.[3]

    Jander alleged that IBM:

    • began trying to find buyers for its microelectronics business in 2013.
    • did not publicly disclose an expected $700 million in annual losses and continued to value the business at $2 billion.

    Jander also alleged that IBM's retirement plan committee continued to invest in IBM common stock despite knowledge of the undisclosed microelectronics business losses. Jander accused the committee of violating their fiduciary duty of prudence to the pensioner under the Employee Retirement Income Security Act (ERISA). Under the ERISA, a retirement plan fiduciary must discharge his or her duties with "care, skill, prudence, and diligence."[3][4]

    The United States District Court for the Southern District of New York dismissed the case but allowed Jander to file an amended complaint. Jander filed a second complaint and the district court again dismissed the case. Jander appealed to the United States Court of Appeals for the 2nd Circuit. The 2nd Circuit reversed and remanded the case.[3]

    The retirement committee petitioned the U.S. Supreme Court for a writ of certiorari on March 4, 2019. The retirement committee argued the 2nd Circuit "subverted [a] pleading standard" established in Fifth Third Bancorp v. Dudenhoeffer. In Fifth Third, SCOTUS unanimously held that to state a claim under the ERISA, a plaintiff must "plausibly allege[] that a prudent fiduciary ... could not have concluded that [an alternative action] would do more harm than good to the fund."[5]

    Questions presented

    The petitioner presented the following questions to the court:

    Questions presented:
    • Whether Fifth Third’s "more harm than good" pleading standard can be satisfied by generalized allegations that the harm of an inevitable disclosure of an alleged fraud generally increases over time.[5]

    Outcome

    In a per curiam decision, the court vacated the judgment of the 2nd Circuit and remanded the case for a determination on whether to consider two arguments raised in the briefs at the Supreme Court but not in the lower court proceedings.[1][2] A per curiam decision is issued collectively by the court. The authorship is not indicated. Click here for more information.

    Opinion

    In its opinion, the court wrote:[2]

    “ The question presented in this case concerned what it takes to plausibly allege an alternative action “that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.” ... It asked whether Dudenhoeffer’s “‘more harm than good’ pleading standard can be satisfied by generalized allegations that the harm of an inevitable disclosure of an alleged fraud generally increases over time.” ... In their briefing on the merits, however, the petitioners (fiduciaries of the ESOP at issue here) and the Government (presenting the views of the Securities and Exchange Commission as well as the Department of Labor), focused their arguments primarily upon other matters. The petitioners argued that ERISA imposes no duty on an ESOP fiduciary to act on inside information. And the Government argued that an ERISA-based duty to disclose inside information that is not otherwise required to be disclosed by the securities laws would “conflict” at least with “objectives of” the “complex insider trading and corporate disclosure requirements imposed by the federal securities laws . . . .”


    The 2nd Circuit “did not address the[se] argument[s], and, for that reason, neither shall we.” F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U. S. 155, 175 (2004) (citation omitted); see Cutter v. Wilkinson, 544 U. S. 709, 718, n. 7 (2005) (“[W]e are a court of review, not of first view”). See also 910 F. 3d 620 (CA2 2018). Nevertheless, in light of our statement in Dudenhoeffer that the views of the “U.S. Securities and Exchange Commission” might “well be relevant” to discerning the content of ERISA’s duty of prudence in this context, 573 U. S., at 429, we believe that the Court of Appeals should have an opportunity to decide whether to entertain these arguments in the first instance. For this reason we vacate the judgment below and remand the case, leaving it to the Second Circuit whether to determine their merits, taking such action as it deems appropriate.[6]

    		”

    Concurring opinion

    Justices Ginsburg, Kagan

    Justice Elena Kagan filed a concurring opinion, joined by Justice Ruth Bader Ginsburg.

    In their concurring opinion, Justices Ginsburg and Kagan wrote:[2]

    “ First, the Court of Appeals may of course determine that under its usual rules of waiver or forfeiture, it will not consider those arguments. The per curiam is clear that the 2nd Circuit is to “decide whether to entertain” the arguments in the first instance. Ante, at 3. If the arguments were not properly preserved, sound judicial practice points toward declining to address them. ... That is so, contrary to Justice Gorsuch's suggestion, whether or not the issue will come back in the future. ...


    Second, if the Court of Appeals chooses to address the merits of either argument, the opening question must be whether it is consistent with this Court’s decision in Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409 (2014). I cannot see how. The petitioners argue that ERISA “imposes no duty on an ESOP fiduciary to act on insider information.” Ante, at 3. But Dudenhoeffer makes clear that an ESOP fiduciary at times has such a duty; the decision sets out exactly what a plaintiff must allege to state a claim that the fiduciary breached his duty of prudence by “failing to act on inside information.” ... For its part, the Government argues that (absent extraordinary circumstances) an ESOP fiduciary has only the duty to disclose inside information that the federal securities laws already impose. ... But Dudenhoeffer characterizes the relationship between ERISA’s duty of prudence and the securities laws differently. It recognizes that a fiduciary can have no obligation to take actions “violat[ing] the securities laws” or “conflict[ing]” with their “requirements” or “objectives.” ... At the same time, the decision explains that when an action does not so conflict, it might fall within an ESOP fiduciary’s duty—even if the securities laws do not require it. ... The question in that conflict-free zone is whether a prudent fiduciary would think the action more likely to help than to harm the fund. ... The Government candidly acknowledges that its approach would mostly wipe out that central aspect of the Dudenhoeffer standard. ... That too does not accord with the decision.[6]

    		”

    Justice Gorsuch

    Justice Neil Gorsuch also filed a concurring opinion.

    In his concurring opinion, Justice Gorsuch wrote:[2]

    “ The gist of respondents’ sole surviving claim is that certain ERISA fiduciaries should have used their positions as corporate insiders to cause the company to make an SEC-regulated disclosure. But merely stating the theory suggests a likely flaw: In ordering up a special disclosure, the defendants necessarily would be acting in their capacities as corporate officers, not ERISA fiduciaries. Run-of-the-mill ERISA fiduciaries cannot, after all, order corporate disclosures on behalf of their portfolio companies. Nor do even all corporate insiders have that authority. These defendants (allegedly) had the opportunity to make a corrective disclosure only because of the positions they happened to hold within the organization. So while respondents are correct to note that insider fiduciaries are subject to the “same duty of prudence that applies to ERISA fiduciaries in general,” ... at bottom they seek to impose an even higher duty on fiduciaries who have the authority to make or order SEC-regulated disclosures on behalf of the corporation. Because ERISA fiduciaries are liable only for actions taken while “acting as a fiduciary,” it would be odd to hold the same fiduciaries liable for “alternative action[s they] could have taken” only in some other capacity. ...


    Despite its promise, this argument seemingly wasn’t considered by lower courts before the case arrived in our Court. In these circumstances, I agree with the Court’s per curiam that the better course is to remand the case to allow the lower courts to address these matters in the first instance.[6]

    		”


    Text of the opinion

    Read the full opinion here.[2]


    Audio



    Transcript

    See also

    External links

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 1.4 SCOTUSblog, "Retirement Plans Committee of IBM v. Jander," accessed June 5, 2019
    2. ↑ 2.0 2.1 2.2 2.3 2.4 2.5 2.6 Supreme Court of the United States, "Retirement Plans Committee of IBM v. Jander," decided January 14, 2020
    3. ↑ 3.0 3.1 3.2 3.3 3.4 United States Court of Appeals for the 2nd Circuit, Jander v. Retirement Plans Committee of IBM, decided December 10, 2018
    4. ↑ Legal Information Institute, "29 U.S. Code § 1104. Fiduciary duties," accessed June 5, 2019
    5. ↑ 5.0 5.1 Supreme Court of the United States, "Petition for a writ of certiorari: Retirement Plans Committee of IBM v. Larry Jander," filed March 4, 2019
    6. ↑ 6.0 6.1 6.2 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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