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Ninth Circuit: Incorporation of SEC Filings by Reference in SPDs Is Fiduciary Act
Practical Law Legal Update 8-546-9125 (Approx. 4 pages)
Ninth Circuit: Incorporation of SEC Filings by Reference in SPDs Is Fiduciary Act
by Practical Law Employee Benefits & Executive Compensation
| Published on 25 Oct 2013 • USA (National/Federal) |
A three-judge panel of the US Court of Appeals for the Ninth Circuit reissued its opinion in Harris v. Amgen, adding that the incorporation of SEC filings by reference in a summary plan description (SPD) qualifies as an act performed in a fiduciary capacity under the Employee Retirement Income Security Act (ERISA).
On October 23, 2013, a three-judge panel of the US Court of Appeals for the Ninth Circuit reissued its opinion in Harris v. Amgen, adding that the incorporation of SEC filings by reference in a summary plan description (SPD) qualifies as an act performed in a fiduciary capacity under ERISA.
In Amgen, originally issued on June 4, 2013, the Ninth Circuit reversed a district court's ruling that the defendants (biotechnology company Amgen, Inc. and its subsidiary) were entitled to a "presumption of prudence" regarding their decision to continue offering an Amgen stock fund as a plan investment option under their eligible individual account plans (EIAPs) after they became aware of the stock's artificial price inflation. The Ninth Circuit previously held that:
- The presumption of prudence under Moench v. Robertson does not apply to the plan fiduciaries' decision to continue offering the stock because the terms of the EIAPs did not require or encourage the fiduciaries to offer or continue the Amgen stock fund as a plan investment option.
- The plaintiffs sufficiently alleged that the defendants violated their fiduciary duty of care and loyalty under ERISA.
- Amgen was a plan fiduciary because it did not clearly and exclusively delegate its fiduciary authority to any other party.
The revised decision, which leaves the reversal and the court's other holdings intact, addresses the defendants' argument that Amgen's statements, which were made to the Securities and Exchange Commission (SEC) in documents required by the federal securities laws and incorporated by reference into the SPDs for the EIAPs, were not made in a fiduciary capacity and should therefore not be considered in an ERISA breach of fiduciary duty case.
In a matter of first impression for the Ninth Circuit, the court rejected the defendants' argument, holding that the preparation and distribution of SPDs, including the explicit incorporation by reference of SEC filings, are fiduciary acts. In doing so, the Ninth Circuit aligned itself with the Sixth Circuit, which reasoned in Dudenhoefer v. Fifth Third Bancorp that the SPD is a fiduciary communication to plan participants and that the selection of information to include in the SPD is therefore a fiduciary activity.
The Ninth Circuit concluded that, due to their inclusion by reference in the SPDs, the statements made in Amgen's SEC filings may be used to show:
- The defendants knew or should have known that the price of Amgen shares was artificially inflated.
- That plaintiffs presumptively and detrimentally relied on the defendants' statements under the fraud-on-the-market theory.
In conjunction with the issuance of the revised opinion, the Ninth Circuit panel denied the defendants' petitions for rehearing and rehearing en banc.
Court documents: