Document Type

Case Comment


In Dudenhoeffer, the Court focused on the Employee Stock Ownership Plan (ESOP) as a retirement benefit plan. However, this is only one function of ESOPs. Viewed in terms of both the original intent of Congress and contemporary corporate finance, the ESOPs are designed to meet several goals, including the alignment of employee and employer interests to facilitate a wider base of capital ownership including the average employee. As the Court has lost sight of these fundamental goals, it has drifted into the fallacy of interpreting ESOPs principally as employee retirement accounts. This has led the Court to apply ERISA fiduciary obligations to the ESOP fiduciaries without regard for the special statutory status of ESOPs. This creates difficulties for plan fiduciaries in seeking to fulfill the underlying purposes of the fund while at the same time complying with the heightened duties imposed upon them by ERISA. Courts have consistently maintained that they are to enforce ERISA fiduciary standards with “uncompromising rigidity” which, when coupled with the recent ruling in Dudenhoeffer, results in significant concern for ESOP settlors and plan fiduciaries who desire to continue to use these investment vehicles for any of the myriad other purposes for which they have heretofore been employed (with apparent congressional blessing).



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