ESOPs Impacted by Landmark U.S. Supreme Court Case discusses LaRue v. DeWolff, Boberg & Assoc. Inc., No. 06-856 (Feb. 20, 2008) from an ESOP perspective. Most claims related to the company stock would apply to the plan as a whole and are not affected by this ruling. This post discusses three examples where a claim only affects one participant or a subset of participants:

1. Statutory Diversification – The post discusses what would happen if the diversification eligible participants thought the stock was undervalued and sued. Prior to LaRue, the case would have likely been dismissed. Now, it appears the participants would have a right to make a fiduciary claim under ERISA Section 502(a)(2), 29 U.S.C. Section 1132(a)(2) – Civil enforcement - Persons empowered to bring a civil action or a denial of benefit claim under ERISA Section 502(a)(1)(B), 29 U.S.C. Section 1132(a)(1)(B) – Civil enforcement - Persons empowered to bring a civil action.
   
2. Distributions – The same concept as #1 for the participants who received distributions in a given time period.
   
3. KSOPs – The same concept as #1 for the participants who invested in company stock.

The post also discusses publicly traded ESOPs:

"Much of the ERISA-related stock drop litigation since Enron has involved participants' claims that the company stock fund in the 401(k) plan was an imprudent investment choice and that the fiduciaries are liable to any participants who invested in the fund. Prior to LaRue, some of these cases were dismissed by courts because only some of the KSOP's participants chose to invest in the company stock fund. Since others elected not to invest in company stock, some courts said there was no loss to the "entire plan" but rather individual losses to affected participants. After LaRue, this sort of defense will no longer be available. The affected participants should be able to maintain their claims. Under Justice Roberts' concurrence, it is possible that participants will need to bring these claims under Section 502(a)(1)(B) as a benefit claim rather than as a 502(a)(2) fiduciary breach case….For ESOPs in publicly traded companies, the LaRue decision will allow many more plaintiffs to avoid an early stage dismissal of their case and increase the likelihood of getting to a trial on the merits of the underlying fiduciary claim."