Cliffs Natural Resources prevails in ERISA stock-drop putative federal class action
Clients Cliffs Natural Resources Inc.
Jones Day prevailed in a class action alleging breaches of fiduciary duty under ERISA on behalf of Cliffs Natural Resources Inc. and certain of its current and former officers and employees. On April 7, 2017, the U.S. Court of Appeals for the Sixth Circuit affirmed dismissal of a lawsuit that alleged the defendants violated their duties of prudence and loyalty to 401(k) plan participants by allowing participants to invest portions of their 401(k) accounts in Cliffs stock despite a downturn in market prices for iron ore, Cliffs' main product, and difficulties in developing a major new mine in Canada. The officer defendants were also alleged to have breached their duty to monitor the retirement-plan administrators. The plaintiffs alleged that when Cliffs suffered a prolonged decline in its stock price, their 401(k) accounts lost substantial value.
In its published decision, the Sixth Circuit for the first time applied the pleading standards announced by the Supreme Court in Dudenhoeffer v. Fifth Third Bancorp, 134 S.Ct. 2459 (2014). The Sixth Circuit agreed with Jones Day's arguments that, among other things, the defendants were entitled to rely on the market price of the publicly-traded Cliffs stock and that the plaintiffs had failed to identify any non-public information that rendered such reliance imprudent.
Saumer v. Cliffs Natural Resources Inc., No. 1:15-CV-954 (N.D. Ohio), aff'd, 853 F.3d 855 (6th Cir. 2017)