Previously in stock-drop cases, courts used a presumption of prudence standard, presuminginvestment of company stock in company pension plans to have been prudent and therefore valid, despite problems with the stock. But a recent Supreme Court case ruled that the managers of company stock funds enjoy no special presumption of prudence. Discuss the potential impact of this ruling
Previously, the presumption of prudence standard absolved managers of company stock funds from liability for losses, even if there were problems with the company stock. But in a recent case brought by an ESOP against a bank for stock price losses because of the bank's involvement in subprime mortgages, the Supreme Court held that the managers of company stock funds enjoyed no special presumption of prudence, and have the same fiduciary duties under ERISA as do the manager of other benefit plans. However, they did not have a duty to diversify plan holdings. Further, the court ruled than where a stock is publicly traded, allegations that a fiduciary should have recognized from publicly available information alone that the market was over-or undervaluing the stock are implausible, generally, at least in the absence of special circumstances. Moreover, a plaintiff must plausibly allege an alternative action that the defendant could have taken. Given the specifics of this ruling, even if the presumption of prudence standard is gone, the window has been opened only narrowly.
Chapter 14
UNIONS & COLLECTIVE BARGAINING
Test Bank Questions, 5e
MULTIPLE CHOICE QUESTIONS
You might also like to view...
Hard-sell closing methods that involve manipulating the customer have fallen out of favor in the last few decades
Indicate whether the statement is true or false
The United States and Argentina have signed the Convention on Contracts for the International Sale of Goods (CISG). Oxtron, Inc, a U.S. company, and Leer, an Argentinean company, have entered into a contract under which Oxtron is to ship medical devices to Leer. The contract does not include a choice of law provision. The contract will be governed by
a. the CISG. b. the ICC. c. the domestic contract law of Argentina. d. the domestic contract law of the United States.
Once parties have initiated litigation in the United States, they cannot agree to have the dispute arbitrated
Indicate whether the statement is true or false
Automobile insurance rates are likely to differ for all of the following reasons except some cars
A) are more popular than others. B) cost more to repair after accidents. C) are more common theft targets. D) are higher priced.