The question of whether Fifth Third Bancorp can be used in its handling of a retirement plan for employees will be heard by the U.S. Supreme Court, it was reported on Friday. Two employees are alleging that bank officers breached their fiduciary duties when they mishandled matters prior to the recent housing meltdown. The Business Litigation to be heard by the Court will be in the form of a class action appeal.
The issue to be resolved dates back to 2008 when the plaintiffs allege that officers increased bank risks by continuing to issue additional sub-prime loans, a move that eventually would cause the bank’s stock to decline by 74 percent over a two-year period. The plaintiffs say the action should have resulted in a determination as to whether it was prudent to continue investing retirement plan funds in company stock. They further allege that the bank officers were aware of warnings by experts that foreclosures and delinquencies were rising in the real estate market.
The agreement of the Supreme Court pleased the U.S. Department of Justice, which had urged the Court to hear the case. Prior to that, the U.S. Court of Appeals for the 6th Circuit had reversed a lower court decision that the claims could not move forward. The case to be heard will center on whether the plaintiffs should have alleged the officers’ discretion was abused when company stock was put into the retirement plan.
Matters such as this are complex, and require a thorough understanding of business and commercial law to resolve disputes. Whether the bank officers acted improperly, resulting in a breach of their fiduciary duty, will be the pivotal determination in the ultimate decision.
Source: Reuters, “U.S. justices agree to hear bank’s class-action appeal“, Lawrence Hurley, December 13, 2013