## Facts

- Participants in Enron-sponsored retirement plans (including a savings plan, an ESOP, and a cash balance plan) sued on behalf of a putative class and derivatively on behalf of the plans after Enron’s collapse.
- Plaintiffs alleged plan fiduciaries and related actors caused or allowed excessive investment in Enron stock and failed to protect participants from concentrated employer-stock risk.
- Plaintiffs alleged Enron’s stock price was artificially inflated by undisclosed transactions and misleading financial reporting, and that fiduciaries knew or should have known Enron stock was imprudent.
- Plaintiffs alleged plan participants were restricted from selling or diversifying during certain periods, while insiders allegedly benefited from compensation, fees, and stock sales.
- Plaintiffs asserted ERISA claims for breach of fiduciary duties (prudence, loyalty, disclosure, monitoring) and co-fiduciary liability, naming plan committees, Enron, and numerous officers and directors, among others.
- Defendants moved to dismiss under Rule 12(b)(6), arguing (among other grounds) lack of fiduciary status, non-fiduciary (corporate/settlor) conduct, and improper repackaging of securities-fraud theories.

## Issues

1. Whether the complaint adequately alleged each defendant’s ERISA fiduciary status “to the extent” of the challenged conduct.
2. Whether plaintiffs stated plausible ERISA claims for imprudent retention/encouragement of employer stock in plan accounts and related failures of monitoring and loyalty.
3. Whether allegedly misleading statements or omissions about the employer’s financial condition, when incorporated into plan materials or made to participants, can support ERISA fiduciary-breach claims.
4. Whether plaintiffs adequately pleaded co-fiduciary liability under ERISA § 405 based on knowing participation, failure to remedy, or enabling another fiduciary’s breach.
5. Whether ERISA claims should be dismissed as duplicative of, or conflicting with, federal securities-law theories where similar misstatements were alleged.

## Decision

- The court granted the motions to dismiss in part and denied them in part.
- ERISA claims were permitted to proceed against certain defendants where the complaint plausibly alleged fiduciary status and conduct undertaken in a fiduciary capacity, including plan-level decisionmaking and plan-related communications.
- Claims were dismissed against certain defendants where the allegations did not plausibly connect the challenged acts to discretionary control over plan management, plan assets, or plan administration.
- The court allowed prudence and loyalty claims to proceed at the pleading stage where plaintiffs alleged fiduciaries continued employer-stock investment despite serious adverse information.
- The court allowed some misrepresentation/non-disclosure theories to proceed where statements were tied to plan communications and alleged to be materially misleading.
- The court allowed some co-fiduciary and failure-to-monitor claims to proceed where specific facts supported knowledge, control, or participation, but dismissed conclusory “knowing participation” allegations.

## Legal Principles

- ERISA fiduciary status is functional and transaction-specific; a person is a fiduciary only “to the extent” the person exercises discretionary authority or control over plan management, plan assets, or plan administration.
- Plan design and similar settlor decisions are not fiduciary acts; liability requires conduct taken in a fiduciary capacity.
- Fiduciaries of employer-stock plans remain subject to ERISA’s duties of prudence and loyalty and may be required to consider whether continued investment in employer securities remains prudent under materially changed circumstances.
- When fiduciaries communicate with plan participants about plan investments, they must not make materially misleading statements and may have a duty to correct or disclose material information in plan-related communications, within the limits of fiduciary capacity.
- Co-fiduciary liability under ERISA § 405 may attach for knowing participation in another fiduciary’s breach, failure to remedy known breaches, or enabling breaches through a fiduciary’s own failures; conclusory allegations are insufficient.
- The possibility that the same conduct could implicate securities laws does not, by itself, foreclose ERISA remedies where plan fiduciary duties and plan-related conduct are plausibly alleged.

## Conclusion

The court narrowed the ERISA case at the pleading stage by applying ERISA’s functional fiduciary test and dismissing claims lacking a fiduciary-capacity link, while allowing prudence, loyalty, disclosure, monitoring, and certain co-fiduciary theories to proceed against defendants plausibly alleged to have exercised discretionary authority over plan investments or plan communications.


In re Enron Corp. Sec., Derivative & ERISA Litig., 284 F. Supp. 2d 511 (S.D. Tex. 2003)