It's been an unusually busy day on First Street, with the court granting certiorari in two cases after yesterday's conference, and with a minor surprise in the ongoing nationwide litigation over Aereo, a service that streams local broadcast channels over the internet to subscribers.
The two new cases, Fifth Third Bancorp v. Dudenhoefer and Loughrin v. United States both involve banks, but that's where the similarities end. The former case asks whether a bank has a fiduciary duty to divest stock in itself from employees' stock plans when it knows or should know that it is engaging in risky (subprime lending) business practices. In the latter case, the Court will decide whether the government has to prove that a defendant who passed stolen checks at Target had the intent to defraud the bank or financial institution specifically.
As for the Aereo surprise, after the television providers petitioned for certiorari, and numerous high-profile amici curiae chimed in (including the National Football League), Aereo filed its response: bring it on.
Fifth Third Bancorp v. Dudenhoefer: Sell Yourself?
The question, granted by the Court, is a doozy:
"Whether the Sixth Circuit erred by holding that respondents were not required to plausibly allege in their complaint that the fiduciaries of an employee stock ownership plan abused their discretion by remaining invested in employer stock, in order to overcome the presumption that their decision to invest in employer stock was reasonable, as required by the Employee Retirement Income Security Act of 1974 ... and every other circuit to address the issue."
In plain English, the bank knew it was making bad business decisions, but kept employees' funds invested in the bank's stock. ERISA, by default, presumes that such decisions are reasonable. The employees failed to allege an abuse of discretion, but were they required to?
The Sixth Circuit relied on an important inclusion -- SEC filings with misleading information -- in the information provided to employees. The employees argued that because the misleading SEC paperwork was not required by ERISA, including it breached the fiduciary duty. The Sixth Circuit agreed:
"[W]hether the fiduciary states information in the [plan information] itself or incorporates by reference another document containing that information is of no moment. To hold otherwise would authorize fiduciaries to convey misleading or patently untrue information through documents incorporated by reference, all while safely insulated from ERISA's governing reach. Such a result ... would create a loophole in ERISA large enough to devour all its protections.
Loughrin v. United States: I Ripped Off the Retailer, Not the Bank!
Loughrin stole checks and used them to purchase goods at Target, intending to return the goods for cash. He intended to defraud the store, not the banks.
He was charged with violations of 18 U.S.C. § 1344 (1) and (2). After the trial judge ruled that the former provision required proof of targeting the financial institution directly, and the latter provision didn't, he was convicted of the latter charge.
The Tenth Circuit upheld his conviction, holding that it sufficed that he intended to defraud anyone, not necessarily the banks directly.
Aereo: Bring it.
Facing a "war of attrition" against CBS, NBC, Fox, and ABC, as well as powerful amici, including the NFL, Aereo declined to back down in a war it has so far won, and in its response to the networks' petiton for cert, it declined to oppose. In a statement published by The Hollywood Reporter, Aereo CEO Chet Kanojia stated,
"While the law is clear and the Second Circuit Court of Appeals and two different federal courts have ruled in favor of Aereo, broadcasters appear determined to keep litigating the same issues against Aereo in every jurisdiction that we enter. We want this resolved on the merits rather than through a wasteful war of attrition."
The move makes sense: while Aereo has prevailed so far, a competitor lost a similar battle in California. Fighting the battle once, in the Supreme Court, beats circuit-by-circuit battles and possible circuit splits.