After Dudenhoeffer, Stock-Drop Case Dismissed

In one of the first stock-drop cases to be decided after the Supreme Court's ruling in Dudenhoeffer v. Fifth Third, a district court dismissed a stock-drop case against UBS. In In re UBS ERISA Litig., No. 1:08-cv-06696-RJS (S.D.N.Y. Sept. 29), the court held that the plaintiff had claimed only indirect harm from the plan fiduciary's decision to continue holding UBS shares during which the price declined 69%. To prove standing, the plaintiff would have needed to show that the alleged fiduciary breaches caused her to suffer an individual loss.

The judge noted that the Dudenhoeffer ruling, which ended the so-called Moench presumption, had "little impact" on this case because the court had found that the Moench presumption did not apply, since the plan in question was not required or encouraged to hold company stock.

In a footnote of his opinion, judge Richard J. Sullivan noted, however, that "It could be argued that the Supreme Court's decision in Dudenhoeffer has, if anything, raised the bar for plaintiffs seeking to bring a claim based on a breach of the duty of prudence," referring to the deference the Supreme Court allowed fiduciaries to give to the impact of public information on stock price.