Business Regulation – Page 9 – Marquette University Law School Faculty Blog

US Supreme Court Review: Two Employee Benefit Cases (Dudenhoeffer and Hobby Lobby)

Post author:Paul M. Secunda
Post published:August 28, 2014
Post category:Business Regulation Corporate Law Health Care Labor & Employment Law Public U.S. Supreme Court

(This is another post in our series, Looking Back at the U.S. Supreme Court’s 2013 Term.) This blog post is the third of three on labor and employment law cases by the United States Supreme Court in the last Term. This post focuses on two employee benefit law/ERISA cases: Fifth Third Bancorp v. Dudenhoeffer and Burwell v. Hobby Lobby Stores, Inc. First, a disclosure: Along with six other law professors, I co-wrote an Amicus Curiae brief in support of the Dudenhoeffer plaintiffs.

Dudenhoeffer involves so-called ERISA stock-drop litigation, which has been rampant in the federal courts for a couple of decades now. The basic formula of these cases is that, as part of the employer-sponsored retirement plan (whether an employee stock ownership plan (ESOP) or a participant-directed 401(k) plan), the employer offers its own stock as either the entire pension plan investment or part of the pension plan investment. When the company goes south and its stock price falls, plan fiduciaries find themselves in a difficult position as far as whether to sell the stock or to hold on to it. This is especially so when the plan fiduciary has conflicting duties as an officer of the company and as a fiduciary of the plan. As a corporate officer, not only is the person supposed to act in the best interests of shareholders to maximize the value of the company, but securities law forbids them to trade stock based on non-public material information. As a fiduciary to the ESOP or 401(k) plan, ERISA gives that same person an obligation to act in the best interest and with the same care as a prudent fiduciary would when making decisions about that employee benefit plan. And in case you are wondering, ERISA Section 408(c)(3) gives employers the ability to assign the same person both officer and plan fiduciary roles or set up so-called “dual-role fiduciaries.”

Chevron and the Hobby Lobby Decision

Post author:Michael P. Waxman
Post published:July 2, 2014
Post category:Business Regulation Public Religion & Law U.S. Supreme Court

The majority opinion in the Supreme Court’s decision in the Hobby Lobby case is founded on the Religious Freedom Restoration Act (RFRA) and the restrictions it places on the Secretary of Health and Human Services (HHS) when she regulates and enforces the Affordable Care Act (ACA). While the issues raised by Justice Ruth Bader Ginsburg’s dissenting opinion as to the battle of interests protected by the Constitution are significant, an important practical legal issue that was not addressed in the Hobby Lobby case is the power of HHS to interpret the meaning of the ACA. Considering the majority’s reliance on two terms that go undefined by the Court — “sincere religious belief” and “closely held corporation” [see page 29 of the slip opinion and footnote 28] — and the fact that none of the other Hobby Lobby opinions address the meaning of these terms, it is essential that these terms be defined as they fit into the ACA context.

The Court’s failure to address how HHS might interpret the meaning of these terms is reasonable considering that HHS has not acted to interpret the meaning of a “sincere religious belief” or a “closely held corporation” in the context of the ACA. In fact, the majority states explicitly that courts will be able to separate those with “sincere religious beliefs” from those who do not. However, despite the majority’s reference to the ability, and impliedly the power, of courts to interpret the terms “sincere religious beliefs” and “closely held corporations,” terms such as these have been regularly interpreted by federal agencies as they apply to the statutes these agencies enforce.

Protecting the Public from (Certain) Emerging Growth Companies

Post author:Christopher Flowers
Post published:November 26, 2013
Post category:Business Regulation Corporate Law Public

Part one of this blog post concluded that Fantex’s IPO represents an unintended consequence of the 2012 JOBS Act. The costs imposed on startups attempting to go public are significant, and the burden of complying with mandatory disclosure laws can deter even the most-attractive startups from commencing an IPO. The JOBS Act is intended to decrease the burden on startups attempting to raise necessary capital by reducing the financial disclosure requirements normally imposed on public companies.

One way the Act reduces disclosure is through the status of “emerging growth company.” Most notably, an emerging growth company is defined as an entity with less than $1 billion in annual revenue. By falling within this broad definition, a startup may take advantage of reduced disclosure requirements for up to five years.

Based on this $1 billion threshold, the definition of emerging growth company is broad enough to encompass companies either experiencing an accelerated growth rate or with high-growth potential. Unfortunately, Fantex also falls within this broad definition of emerging growth company, as noted in its prospectus. Therefore, the real question is whether the definition is too broad so that companies with little, or no, demonstrated growth are being granted the same access to the investing public as companies that are actually growing.