U.S. Court of Appeal Rules Plan Sponsor did not have Fiduciary Liability due to Third-Party Fund Management
December 08, 2022
Diane Burke et al, participants of the Boeing Co. Voluntary Investment Plan and its employee stock ownership plan, alleged that Boeing knew for years that its 737 MAX aircraft had major safety problems — and misled holders of company stock regarding the true value of their stock holdings.
So, although the company entered into an independent fiduciary agreement with Newport Trust Co., the plaintiffs believed there was a breach of the fiduciary duty of prudence and a failure to monitor investments under ERISA.
After the U.S. District Court dismissed the claims in November 2020, the plaintiffs appealed, and in August, 2022, the U.S. Court of Appeals dismissed the case again.
There were two main reasons for the Appeals Court’s decision:
- First, the Independent Fiduciary Agreement clearly delegated all decisions to allow the Plan and employees to continue to hold employer stock to Newport (so Boeing was not a functional fiduciary under ERISA)
- Second, the court found that there is no stand-alone fiduciary duty under ERISA to disclose non-public information about the employer’s business to Plan participants or the general public.
To read the full case, click on more information below.
