Attorneys representing Secretary of Labor Hilda Solis argue a Georgia court’s decision in Lanfear v. Home Depot Inc. misinterprets ERISA in three respects:
- It immunizes plan fiduciaries from liability for imprudent investments in employer stock by mischaracterizing prudence claims related to such investments as claims about diversification.
- The decision alternatively relies on a presumption of prudence, established in Moench v. Robertson, which has no basis in ERISA’s language or purposes and which presents a novel question in this Court.
- The decision permits fiduciaries to evade the trust-law duty, recognized in Varity Corp. v. Howe, to communicate truthful material information to plan participants and beneficiaries.
A district court in Georgia found Home Depot’s defined contribution plan was an eligible individual account pension investing in company stock so it was not covered by the diversification mandate in ERISA (see Home Depot Cleared in Stock Drop Suit). Participants claimed it was no longer prudent to continue offering the company stock after its share price fell 16% when Home Depot announced its executives had been backdating stock options for 19 years. The participants also claimed the company misclassified nondefective merchandise for vendor credits.
Solis has been stepping up against cases that use the Moench “presumption of prudence” standard (see DoL Blasts 9th Circuit for Prudence Presumption Endorsement and Solis Argues for Stock Drop Case Law Change).The Amicus Brief is here.