This morning the U.S. Supreme Court handed down a decision that has widespread impact on the Obama Administration’s labor agenda, as well as the NLRB’s recent attempts to grossly expand its authority. NLRB v. Noel Canning, No. 12-1281 (U.S. June 26, 2014) The Court held that the President’s “recess appointments” to the NLRB in January 2012 were not recess appointments at all, and therefore exceeded the scope of Presidential power. The Court, in short, held that a recess of a mere three days, while the Senate was actually still in session, did not entitle the President to unilaterally appoint new members to the NLRB. Because the appointments were unconstitutional, the NLRB lacked a necessary quorum to render decisions, and therefore their decisions were void. The result is to invalidate hundreds of NLRB decisions, many of which are among the most controversial in Board history. The NLRB will now have to go back to the drawing board and reconsider these cases, hopefully with a more balanced and employer-friendly view in light of the recent business-side appointments to the Board. We will issue a far more detailed analysis of the decision in the form of a Client Alert within the next day.
By Bill Wright
The U.S. Supreme Court ruled in Fifth Third Bancorp et al. v. Dudenhoeffer, No. 12-751 (U.S. June 25, 2014), that no special presumption of prudence applies to the decision by ESOP fiduciaries to buy and hold stock of the sponsoring employer. But what the Supreme Court shot down with one hand, they reinstated through common sense. Although ESOP fiduciaries don’t get the benefit of any special presumption of prudence, they don’t have a duty to diversify holdings (after all, the ESOP exists to hold employer stock) and plaintiffs have a steep climb to allege the fiduciaries breached their duty of prudence. Alleging that the fiduciaries should violate SEC rules on insider trading is never enough; and, almost always, alleging that the fiduciaries traded in the employer’s stock at the market price is not enough, even if publicly available information could lead an investor to believe the stock was overpriced. Apparently fiduciaries don’t have to be clairvoyant and predict stock market bubbles before they burst.