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No Duty under ERISA to Disclose Nonpublic Information Affecting Plan Sponsor

No Duty under ERISA to Disclose Nonpublic Information Affecting Plan Sponsor's Stock

ERISA and Life Insurance News
(June 6, 2013)

Plaintiffs brought a putative class action, asserting that the fiduciaries of an Eligible Individual Account Plan breached a duty under ERISA by failing to disclose material, negative, nonpublic financial information about the plan sponsor, where the plan sponsor’s stock was an investment option. Plaintiffs also alleged that the fiduciaries breached a duty by continuing to invest in the sponsor’s stock when it was imprudent to do so.

The district court denied the fiduciaries’ motion to dismiss the disclosure claim, concluding that plaintiffs had sufficiently alleged an obligation to disclose such information. The district court dismissed the prudence claim on the grounds that it was a “veiled diversification” claim and was barred by 29 U.S.C. § 1104(a) (2). The district court certified both issues for interlocutory appeal.

The Eleventh Circuit noted that its decision in Lanfear v. Home Depot, Inc., 679 F.3d 1267 (11th Cir. 2012), resolved both questions. First, the court concluded in Lanfear “that ERISA does not impose a duty to provide plan participants with nonpublic information affecting the value of the company’s stock.” Second, the court in that case also concluded that a prudence claim “was not a veiled diversification claim, and thus does not fall within the § 404(a)(2) exemption.”

As a result, the Eleventh Circuit reversed the district court’s order in both respects.

Click here to view the full June 2013 Edition of the ERISA and Life Insurance News.

H. Sanders Carter
T (404) 962-1015
F (404) 962-1220
Kenton J. Coppage
T (404) 962-1065
F (404) 962-1256
Dorothy H. Cornwell
T (404) 962-1096
F (404) 962-1246

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