In re Schering-Plough Corporation ERISA Litigation

Summary

The United States Court of Appeals for the Third Circuit held that former participants in a defined contribution ERISA plan could bring a derivative action under 29 U.S.C. §§ 1109 and 1132(a)(2) on behalf of the plan. The court concluded that alleged losses resulting from fiduciary breaches affecting the value of employer stock held by the plan constituted losses to the plan, even though the losses were reflected in individual participant accounts. The court reversed the District Court’s dismissal and remanded for further proceedings.

Holdings

1. Participants may seek monetary relief on behalf of an ERISA plan under 29 U.S.C. §§ 1109 and 1132(a)(2) even when the alleged fiduciary violations affected only a subset of the plan's participants, so long as the relief sought is payment to the plan for losses to the plan.
2. The existence of individualized participant accounts and participant-directed investment elections does not preclude the plan from owning aggregated assets held in trust or from suffering losses recoverable under § 1109.
3. The Savings Plan was not an employee stock ownership plan because it was designed to provide savings and investment opportunities rather than to invest primarily in employer securities; therefore, the Moench ESOP presumption did not resolve the issue presented.

Questions Presented

1. Whether participants in a defined-contribution ERISA plan may bring a derivative action under 29 U.S.C. §§ 1109 and 1132(a)(2) to recover losses sustained by the plan when the alleged fiduciary violations affected only a subset of participants.
2. Whether the Savings Plan's individualized participant accounts and investment choices meant that the alleged losses were individual participant losses rather than losses to the plan.
3. Whether the Savings Plan was an employee stock ownership plan subject to the Moench presumption.
4. Whether the complaint's alleged ambiguity concerning the class definition required dismissal at the pleading stage.

Disposition

reversed_and_remanded