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Document Type

Comments

Abstract

On July 27, 2020, in Allen v. Wells Fargo & Co., the U.S. Court of Appeals for the Eighth Circuit held that plaintiffs who bring an imprudence claim under the Employment Retirement Income Security Act against a fiduciary of an employee stock ownership plan (ESOP) alleging that the fiduciary failed to act on negative inside information do not meet their pleading burden. In doing so, the Eighth Circuit agreed with three other federal circuit courts that an imprudence claim predicated on an ESOP fiduciary’s failure to disclose negative information is insufficient to survive a motion to dismiss. Only the Second Circuit has held that plaintiffs can survive a motion to dismiss when offering early disclosure as a possible alternative action the fiduciary could have taken. This Comment argues that the Eighth Circuit’s holding is correct because it best protects ESOP plan managers and takes account of ESOP’s unique structure.

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