Fourth Circuit’s Decision on Removal of Reynolds Stock

The Fourth Circuit affirms the district court’s decision concluding that the fiduciaries’ decision to remove Reynolds stock did not cause the losses because a prudent fiduciary would have made the same divestment decision at the same time.

Document Excerpt

The “would have” standard does not demand such an impossible feat. Having a standard in which the fiduciary is held liable regardless of whether an outcome is foreseeable is akin to having no standard at all, eliminating the purpose of the loss causation analysis. Neither ERISA nor the efficient market theory requires that fiduciaries shoulder such burden or absorb such risk. As the Supreme Court explained in Fifth Third, a fiduciary cannot be required to predict the future. See 134 S. Ct. at 2472. For this very reason, our previous opinion left open the possibility that, when the district court applied the correct, more rigorous “would have” standard, the court would find that RJR had met its burden. Given the substantial record evidence supporting the district court’s holding, we cannot conclude that the district court erred.


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