Nothing in federal benefits law requires corporate insiders to make public disclosures beyond those required by securities law, the Labor Department and the Securities and Exchange Commission told the Second Circuit in letters that doubled down on their earlier position.
The agencies’ letters, filed Monday, come five months after the U.S. Supreme Court ordered the Second Circuit to reconsider a dispute involving a 7% drop in the International Business Machines Corp. stock held by the company’s 401(k) plan. The Supreme Court sent the Employee Retirement Income Security Act lawsuit back for more analysis after finding that the agencies and the IBM defendants were pressing arguments involving federal securities law that weren’t first considered in the Second Circuit.
The case seeks to hold IBM corporate insiders liable under ERISA for a drop in stock price that plan participants say might have been mitigated if the insiders serving as plan fiduciaries promptly disclosed the company’s struggles. The Second Circuit allowed the case to move forward in 2018, and the agencies argued to the Supreme Court, in a brief filed by U.S. Solicitor General Noel J. Francisco, that ERISA doesn’t impose a public disclosure duty on corporate insiders beyond what’s already imposed by federal securities law.
In March, the Second Circuit invited the parties and the agencies to file new briefs in light of the Supreme Court’s ruling. In response, both the DOL and the SEC resubmitted their earlier Supreme Court brief, along with short letters reiterating their position.
The DOL’s letter also responded to points made by Justices Neil M. Gorsuch and Elena Kagan in their separate concurring opinions.
In response to Justice Gorsuch—who queried whether ERISA plaintiffs could use the statute to hold plan fiduciaries liable for actions taken in a nonfiduciary capacity—the DOL said that information obtained in a corporate capacity can “give rise to or affect ERISA fiduciary obligations.”
And in response to Justice Kagan—who suggested that the agencies’ position is contrary to the Supreme Court’s 2014 ruling in Fifth Third Bancorp v. Dudenhoeffer—the agencies said that while ERISA doesn’t impose additional disclosure requirements on plan fiduciaries, it may “require various other actions.”
The case is Jander v. Ret. Plans Comm. of IBM, 2d Cir., No. 17-3518, amicus briefs 6/1/20.