U.S. Court of Appeals for the Sixth Circuit

Case Status


Docket Number

No. 11-1497


Case Updates

Sixth Circuit addresses Moench presumption in ERISA stock-drop litigation

July 23, 2012

The Sixth Circuit overturned a district court’s dismissal of an ERISA stock-drop lawsuit, and reaffirmed the Circuit’s prior ruling that a presumption that a plan fiduciary’s investment decisions are reasonable does not apply at the motion to dismiss stage.

U.S. Chamber files amicus brief

August 17, 2011

NCLC urged the Sixth Circuit to hold that the so-called “Moench presumption” applies to all “eligible individual account plans” (EIAPs) that provide for investment in employer stock, and not just to “employee stock ownership plans” (ESOPs), a subset of EIAPs. In this case, participants in the defendant bank's 401(k) plan alleged that the company breached its fiduciary duties by maintaining investments in certain stocks after those stock values had dropped. The lower court adopted the “Moench presumption,” first articulated by the Third Circuit in Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995), which presumes the prudence of a fiduciary's investment of ERISA retirement plan assets and places the burden on the plaintiff to show that the fiduciary abused its discretion.

In its brief, NCLC explained that applying the Moench presumption to participant-directed plans that offer employer stock as an investment option avoids placing the fiduciary in an untenable position of having to ignore the plan’s requirement to follow a participant’s investment direction. According to NCLC, the Moench presumption will help courts weed out frivolous “stock drop” lawsuits which often lead to expensive discovery and immense pressure to settle even unmeritorious lawsuits.

Case Documents