Supreme Courtroom Denies Coping with Pleading Requirements in Inventory-Drop Litigation – IBM Pension Plan Committee v Jander Advantages Regulation Replace | Verrill
On November 9, 2020, the Supreme Court declined to examine an appeal by the second-tier appeals court in relation to IBM’s retirement benefit plans against Jander, leaving unresolved questions about the specificity of the pleading standard “More harm than good” requires stock drop litigation against ERISA plan trustees. The November ruling marked the second time that year that the court refused to examine the merits of the Second Circuit’s decision. We have summarized the first Supreme Court decision and its background here.
As explained in our previous post, the Supreme Court sent the case back to the Second Circuit in January 2020 after concluding that the Trustees of the IBM Plan and the Federal Government (on behalf of the SEC and the Department of Labor) were in Arguments made primarily had not been raised in the lower courts. Specifically, the IBM Plan Trustees claimed that ERISA’s ESOP trustees were not required to respond to inside information, and the federal government claimed that ERISA’s obligation to disclose inside information would violate the Securities Act. Because those arguments concerned the interaction between the duties of plan trustees under ERISA and the duties of corporate insiders under the securities laws, and the Court had previously indicated that the SEC’s views are relevant to the interpretation of ERISA’s duty of care in this regard could (in fifth) Third Bancorp v. Dudenhoeffer, discussed here), the case was referred back so that the Second Circuit could decide whether these arguments should be heard.
While in custody, the Second Circuit came to the conclusion that the additional arguments put forward by the IBM trustees and the federal government were partly examined beforehand and partly forfeited because they were not properly brought up. Accordingly, the judgment overturned by the Supreme Court was resumed unchanged in June. The IBM trustees again moved the Supreme Court to review, and that petition was denied last month.
The Supreme Court’s recent disposition towards Jander should come as no surprise. The January 2020 pre-trial detention made it clear that the Court is unwilling to address issues related to the overlapping duties of insider trustees under ERISA and the securities laws submitted at the time. It was unlikely that the Tribunal would rule otherwise if it referred the same subjects a second time in the same file. For the time being, the standard pleading “more harm than good” will remain a plaintiff-friendly outlier in ERISA litigation over the case of shares in the second circuit.