“As for those who might contemplate future service as plan fiduciaries, all I can say is: Good luck.” 

That was the sentiment expressed in a blistering dissent by Fourth Circuit Judge J. Harvie Wilkinson in the latest ruling in a lawsuit challenging the decision by the fiduicaries of the RJR 401(k) plan to liquidate two stock funds that previously had been available to plan participants wishing to invest in Nabisco stock. Tatum v. RJR Pension Inv. Committee et al., No. 13-1360, 2014 WL 3805677 (4th Cir. Aug. 4, 2014). In a split decision, the panel ruled that, because plaintiff-participant Richard Tatum had proved that the plan fiduciaries acted imprudently by liquidating the stock fund without the benefit of a proper investigation, the burden of proof shifted to defendants to show that a prudent fiduciary would have made the same decision.  In so ruling, the Court reversed the lower court decision, which had found in favor of defendants after a bench trial upon finding that they had demonstrated that a prudent fiduciary could have made the same decision.

The Fourth Circuit’s decision makes a number of significant statements and rulings on the burdens of proof related to loss causation, the meaning of “objective prudence,” and the standards for reviewing decisions pertaining to stock funds in the wake of the Supreme Court’s ruling in Fifth Third v. Dudenhoeffer.  Some of the Court’s pronouncements are difficult to reconcile with existing case law.  If not set aside on en banc or Supreme Court review and if adopted elsewhere, the decision could substantially impact the future conduct of fiduciary breach litigation, as well as plan practices in administering stock funds.