The brief, filed in the 6th U.S. Circuit Court of Appeals says that the presumption of prudence does not apply or is rebutted whenever a fiduciary knowingly pays an inflated price for employer stock. Solis agreed with the district court’s decision that a plaintiff rebuts the presumption of prudence by showing that a prudent fiduciary would not invest in the stock under the prevailing circumstances, and plaintiffs are not required to plead additional allegations that the sponsoring employer was on the verge of a “drastic, extreme or impending collapse.
In addition, according to the brief, presumption is an evidentiary presumption, and as such, the district court also correctly concluded that the presumption did not provide grounds for dismissal at the pleading stage.
Solis also agreed with the district court’s holding that because “ERISA fiduciaries are liable for making misrepresentations in plan documents, they should also be prohibited from incorporating into plan documents other documents [including SEC filings] that make material misrepresentations about the company and then disseminating those misrepresentations to plan participants.”
The district court, however, dismissed the case last year ruling that neither of the plaintiffs who brought the suit had suffered injury from their holding of KeyCorp stock in their plan accounts and, therefore lacked standing to sue (see KeyCorp Stock Drop Case Dismissed).
The Secretary filed a separate amicus brief on January 12, 2011, in support of the plaintiff-appellant with respect to those issues.The current amicus brief is here.