In Slaymon v. SLM Corp., 2012 WL 6684564 (2d Cir. Dec. 26, 2012), the Second Circuit Court of Appeals affirmed dismissal of an employer-stock class action in a summary order. Plaintiffs were employees of SLM Corp. (also known as Sallie Mae) who alleged that the fiduciaries of two Sallie Mae retirement plans breached fiduciary duties by offering company stock as a plan investment option, at a time the company adopted less conservative student-lending practices and increased its exposure to “subprime” borrowers. The district court dismissed. In affirming, the Second Circuit noted that the plans’ terms called for investment in Sallie Mae stock, which triggered a presumption of prudence. The court concluded that an 85% decline in share price did not suffice to establish the “dire circumstances” needed to rebut that presumption, in spite of additional allegations regarding a failed acquisition attempt. In affirming the dismissal of various disclosure claims, the court noted that plan fiduciaries typically have no duty to disclose investment information beyond ERISA’s affirmative requirements, and held that a general warning regarding the risks of undiversified stock investments satisfied these requirements. The court also held that participants of one plan lacked constitutional standing to pursue claims on behalf of the other plan, despite some overlap among the plans’ fiduciaries. The court noted that a favorable ruling against one plan’s fiduciaries would not guarantee a similar result to participants of the other plan, and thus would afford no relief.
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