The Supreme Court ruled against Fifth Third Bancorp (FITB) in a lawsuit filed by employees claiming the bank mismanaged their retirement investments.
The class-action lawsuit (Fifth Third Bancorp v. Dudenhoeffer) alleged that the bank's retirement fund managers invested in company stock while it was losing value, violating their duty to protect the employees' interests. It alleges that investment managers continued to invest their money in company stock knowing the share price was bound to decline further as the borrower default rate on subprime loans increased.
The two issues at hand, according to the Supreme Court filing are: whether management fulfilled its fiduciary duty requirement to be prudent when investing in the bank's employee stock ownership plan as required under the Employee Retirement Income Security Act; and whether retirement plan fund managers can be liable "for material misstatements " under ERISA and related Securities and Exchange Commission requirements.
The Supreme Court unanimously decided to send the case to an appeals court for review.