The 9th Circuit has adopted the so-called “Moench” approach of several other circuits, that there is a rebuttable presumption that employee retirement Plan “fiduciaries acted consistently with ERISA in their decisions to invest plan assets in employer stock”, and that the relevant standard for review is abuse of discretion. Thus there is “a substantial shield to fiduciaries when plan terms require or encourage the fiduciary to invest primarily in employer stock.” The 9th Circuit opinion states that under the abuse-of-discretion standard for review of Plan trustees’ employer-stock investments, plaintiffs must make allegations that “clearly implicate . . . the company’s viability as a going concern” or “show a precipitous decline in the employer’s stock . . . combined with evidence that the company is on the brink of collapse or is undergoing serious mismanagement” – not just that the Plan or trustees may be liable whenever the stock price fluctuates, or fails to lavishly prosper in a given timeframe.
Accordingly the 9th Circuit, under its new standard, affirms dismissal of an employee class action against the employer’s 401(k) Plan and its trustees. (Quan v. Computer Sciences Corp., 9th Circuit No. 09-56190, September 30, 2010)