By Lawrence Hurley
WASHINGTON Dec 13 The U.S. Supreme Court on Friday agreed to weigh whether Fifth Third Bancorp can be sued for having put company stock in its employee retirement plan ahead of the housing downturn.
The court will consider a lawsuit filed by two employees, John Dudenhoeffer and Alireza Partovipanah, who alleged that the bank and officers in charge, including its president and CEO, Kevin Kabat, violated their fiduciary duties.
The plaintiffs said in the 2008 lawsuit that the bank, which they claim took risks by issuing an increasing number of subprime loans, should have made a determination about whether it was still prudent to invest in company stock.
The bank would have known that experts were warning that real estate delinquencies and foreclosures were on the rise, the plaintiffs allege.
The bank's stock price subsequently declined 74 percent between July 2007 and September 2009.
The legal question before the high court is whether the plaintiffs were required to allege that the bank's fiduciary officers had abused their discretion by continuing to put company stock in the retirement plan.
The bank says the Employee Retirement Income Security Act presumes that such investments are reasonable.
A federal judge in Cincinnati said the claims could not go forward but the 6th U.S. Circuit Court of Appeals revived the case in a September 2012 ruling.
The U.S. Justice Department urged the court to hear the case.
A ruling is expected before the end of June.
The case is Fifth Third Bancorp v. Dudenhoeffer, U.S. Supreme Court, No. 12-751.