The ruling makes the 9th Circuit the latest appeals court to side against plaintiffs in stock drop litigation, once again showing the impact of tough pleading standards set by the Supreme Court in 2014.
The plaintiffs’ plea to the Supreme Court questions the precedents set by Fifth Third v. Dudenhoeffer—a 2014 high court ruling that significantly raised the pleading standards for ERISA stock-drop lawsuits.
Since an influential Supreme Court ruling known as Dudenhoeffer, plaintiffs have struggled to defeat dismissal motions in so-call stock-drop lawsuits, but a new panel ruling in the 4th Circuit bucks that trend.
The case has effectively been kicked back to the 2nd Circuit for a ruling on arguments the Supreme Court feels should be aired before a lower court.
As a general rule, “Doe pleading” is disfavored in federal court. However, the practice is not entirely forbidden, particularly where the identities of alleged defendants are unknown.
The affirmation once again shows how influential has been the Supreme Court’s 2014 decision known as Fifth Third v. Dudenhoeffer. It also presents an interpretation of how Fifth Third interacts with another significant SCOTUS decision known as Tibble v. Edison.
Plaintiffs allege plan fiduciaries should have known the company’s stock price was artificially inflated—and that fiduciaries breached their duties of prudence and loyalty by continuing to offer J&J stock in the retirement plan.