Among the many lawsuits Boeing confronted following the disclosure of problems with the 737 Max was a class action brought by participants in the Boeing Voluntary Investment Plan who invested in the Boeing ESOP.  The plaintiffs alleged that the Boeing defendants breached their ERISA fiduciary duties by concealing problems with the 737 Max, which allegedly caused Boeing’s stock price to be artificially inflated and ultimately to decline once the problems with the 737 Max were made public.

The Boeing defendants succeeded in their motion to dismiss the participant’s claims.   Burke v. The Boeing Company, No. 19-cv-2203, 2020 WL 6681338 (N.D. Ill. Nov. 12, 2020).  The district court first concluded that the defendants had no fiduciary responsibility over the ESOP.  In so ruling, the court determined that the investment committee had delegated all fiduciary responsibilities related to the ESOP to an independent fiduciary and that no defendant in the action had fiduciary responsibilities related to the ESOP.

The court next concluded that, even if defendants were ESOP fiduciaries, the plaintiffs failed to satisfy the rigorous pleading standard set forth in Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409 (2014).  The court determined that the plaintiffs failed to plausibly plead that a prudent fiduciary could not conclude that public disclosure of the problems with the 737 Max would do more harm than good to the ESOP.  Given the fact that the 737 Max was subject to “ongoing, fast-paced, and highly publicized investigations” during the class period, a prudent fiduciary could plausibly believe that public disclosure of the problems would do more harm than good.  The court also criticized the Second Circuit’s decision in Jander v. Retirement Plans Committee of IBM, 910 F.3d 620 (2d Cir. 2018) because it was “neither the best application of the Dudenhoeffer pleading standard nor the generally accepted approach.”

Proskauer’s Perspective:  The Boeing decision is notable for at least two reasons.  First, the district court’s conclusion confirms that a plan sponsor or fiduciary ought to be able to effectively delegate all fiduciary responsibilities concerning a company stock fund to an independent fiduciary so they will not be responsible for alleged fiduciary-breach claims following a stock drop.  Second, the district court’s express criticism of the Second Circuit’s decision against IBM could help limit exposure from claims based on a new proliferation of company stock fund suits.

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Photo of Russell Hirschhorn Russell Hirschhorn

“Russell has strong subject matter expertise.”

“Russ is extremely responsive and practical. He listens to the client perspective and is hands on and engaged, while also delegating work as appropriate.” 

-Chambers USA

Russell L. Hirschhorn is co-head of Proskauer’s premier ERISA Litigation Group…

“Russell has strong subject matter expertise.”

“Russ is extremely responsive and practical. He listens to the client perspective and is hands on and engaged, while also delegating work as appropriate.” 

-Chambers USA

Russell L. Hirschhorn is co-head of Proskauer’s premier ERISA Litigation Group, which is a significant component of the firm’s ERISA Practice Center and globally renowned Labor and Employment Law Department.  Russell’s practice focuses on employee benefits issues arising under the Employee Retirement Income Security Act of 1974 (ERISA), including class action and complex litigation, U.S. Department of Labor and Internal Revenue Service investigations, and counseling clients on best practices to avoid litigation.

Russell has more than two decades of experience representing plan sponsors, fiduciaries, trustees, and service providers across the country.  His work on behalf of clients has included all types of plans, including 401(k) plans, 403(b) plans, defined benefit plans, employee stock ownership plans, executive compensation plans, health and welfare plans, multiemployer plans, multiple employer plans, and severance plans.  And, it has included the full gamut of claims arising under ERISA, including excessive investment and plan administration fees and investment underperformance claims; cash balance plan litigation; claims for benefits; company stock fund cases; claims for delinquent contributions; ERISA § 510 claims; ERISA statutory claims; ESOP litigation; executive compensation claims; independent contractor claims; independent fiduciary representations; multiemployer fund litigation; plan service provider claims; recoupment of plan overpayments; retiree benefits claims; severance plan claims; and withdrawal liability claims.

Deeply dedicated to pro bono work, Russell has been recognized on several occasions for his commitment to pro bono work including by President George W. Bush in receiving the U.S. President’s Volunteer Service Award.  His pro bono work has included serving as lead litigation counsel in several impact litigations: on behalf of social security recipients whose benefits were unlawfully suspended based on an outstanding warrant, deaf and hard of hearing prisoners in Louisiana prisons seeking disability accommodations, and Swartzentruber Amish in upstate New York to obtain religious exemptions from certain building code requirements. Russell also was a principal drafter of several amicus briefs for the Innocence Project, a legal non-profit committed to exonerating wrongly convicted people.