Coulter, et al. v. Morgan Stanley & Co. Inc., et al., No. 13-2504 (2d Cir. 2014)Annotate this Case
Plaintiffs, a class of individuals who participated in the Morgan Stanley 401(k) Plan and the Morgan Stanley Employee Stock Ownership Plan, filed suit alleging violations of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 et seq. In January 2007 and 2008, Morgan Stanley elected to make its employer contributions to the Plans in the form of Company Stock instead of cash. After the stock price plunged in conjunction with the broader economic downturn, plaintiffs sought to recover for losses the Plans suffered as a result of the drop in stock price. The Moench "presumption of prudence" is a pleading standard that presumes plan fiduciaries act in "compliance with ERISA when [a plan] fiduciary invests assets in the employer's stock." The district court found that the Moench presumption of prudence applied to defendants' conduct and that plaintiffs failed to rebut this presumption. The court affirmed the district court's motion to dismiss on the district court's alternative ground because the challenged conduct, even if it negatively impacted the Plans, did not occur in the performance of a fiduciary function and therefore could not trigger fiduciary liability under ERISA. Absent fiduciary liability, plaintiffs' secondary claims also failed.