Augsut 4, 2014 4th Circuit published opinion

Tatum v RJR Pension Investment Committee

Tatum brought a class action suit against Committee and the corporate sponsors of his retirement plan alleging losses from a divestment of Nabisco stock. The district court dismissed Committee and granted judgment to the corporate defendants after a bench trial finding a breach of procedural prudence under ERISA, but, no loss caused as a prudent investor could have made the divestment decision. The panel, 2-1, affirmed in part and reversed in part. The majority affirmed the finding of procedural imprudence as Committee, the plan fiduciary, did no investigation or analysis before divesting the Nabisco stock. The majority held that the district court used the wrong test and remanded for the use of the “would have” test which requires fiduciaries who have acted with procedural imprudence to prove that a reasonable fiduciary would have acted the same way. The majority reasoned this test has already been adopted by the 4th Circuit, it is consistent with other trust cases involving procedural imprudence and consistent with ERISA’s purpose. The majority reversed the dismissal of Committee as it is listed as the fiduciary in the plan documents and committees can be fiduciaries. The majority also noted its view that the dissent approach would effectively shield fiduciary imprudence. The dissent argued that the could have test was the test already adopted by the 4th Circuit, that actions to diversify are almost always reasonable and were reasonable here given eh fall in value of the Nabisco stock, the taint the stock faced as a former part of a tobacco company and eth unforeseeably of the rise in value due to a bidding war which occurred well after the divestiture. The dissent lamented that the majority approach now requires optimal decision-making instead of reasonableness and this will hurt beneficiaries in the long run.


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