Fifth Third Bancorp v. Dudenhoeffer (12-751)

argument 12-751

Fifth Third Bancorp v. Dudenhoeffer

Supreme Court of the United States 1h 1m 8 speakers 8 chapters transcribed 4 days ago official recording ↗

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What is the central legal issue in Fifth Third Bancorp v. Dudenhoeffer?

John G. Roberts 0:00

We'll hear argument this morning in case twelve and twelve seven fifty one Fifth Third Bank Corp versus Dudenhofer. Mr Long?

Shawn A. Womack 0:10

Mr. Chief Justice, and may it please the court. A fiduciary's decision to do exactly what an employee stock ownership plan is designed to do. А вот та план реквиера. By continuing to offer employer stock as an investment option. is presumptively prudent. Statutory language, trust law, Congressional policy and practical considerations all support this result.

Samuel A. Alito 0:41

You you want us to say that we have sort of a coach class trustee. We're all traveling in coach class when we have a An ESO P. Oh. Once once we go down that route, how how how do we define what the duties of the trustee are?

Shawn A. Womack 0:57

Well uh w we we're not asking for a coach class trustee. I mean we're we're saying to look at the statutory definition of the duty of prudence in section eleven oh four A one B, which says that the duty of prudence must take into account Uh the character and aims of the enterprise. So when we talk about Aesops, we're talking about a uh pension plan of a very specific kind. It is designed. The deficit

Elena Kagan 1:30

does this plan didn't require you to invest solely in employer stock. Did it The this is and to go above the ten percent. But it didn't require you. to buy only employer stock. Did it? Well

Shawn A. Womack 1:50

Well, ERISA, the statute реquires that an ESOP invest primarily in employer stock this particular plan like many plans requires that all of the assets in the ESAP be invested in employer stock except the amount that needs to be in cash for short term uh management requirements. So so

Elena Kagan 2:14

Congress both but you point to the part of your plan that did that because I looked at it and I didn't see the plan requiring a hundred percent investment. If

Shawn A. Womack 2:24

Elena Kagan 2:24

Your Honor,

Shawn A. Womack 2:25

if you look at page seven thirty five of the joint appendix, um you'll find uh in in uh part three point three it states, however, in all events the fifth third uh stock fund as described shall be an investment option. А не афюк о сев тримьон то севен три сев. It says uh that the fund shall be invested primarily in fifth third stock. It says it may also be invested in short term liquid investments. to the extent the administrator determines they're desirable to accommodate expected short run liquidity needs. But then it says the trustee shall have no discretionary authority to sell fifth third bank corp shares or refrain from acquiring additional fifth third bank corp shares with funds not held for short run uh liquidity needs.

Elena Kagan 3:24

Shawn A. Womack 3:24

we think use

Elena Kagan 3:25

the word primarily. There's an allegation here. that you should have stopped buying stock. Once You understood. that there was a serious condition in the company, that you breached your duty of loyalty, not of prudence. What do you do with that allegation?

Shawn A. Womack 3:44

Well, our what what we say is that these duties again uh were not asking for coach class duties. These are uh first class, if you will, duties, but they have to be understood in the context of this special kind of plan with special purposes. The the purpose of an ESOP is to own company stock, to give the employees a piece of the rock, an ownership interest in the company. And so when the when the issue is, as you're as you're posing it, Justice Sotomayor, at what point does a duty of prudence or a duty of loyalty either one? require the trustee

Elena Kagan 4:27

It doesn't say you have to it says primarily. doesn't say you have to continue buying. Well again, I mean I I qu

Shawn A. Womack 4:35

I quoted the language I as we read the plan and I think the government agrees with us on this. The the instructions of the plan are to invest all the money in fifth third stock except as needed for um short term cash requirements. Now there is the duty of prudence, and we're not asking for a second class duty. But we think in this context, given this special kind of plan, what that duty means is Can the first thing I've done?

Sonia Sotomayor 5:05

Presumption written into this statute. It is An exception. From the diversification requirements, and if you're an Aesop. The whole object is to buy the company's stock and so you don't need to diversify.