Ninth Circuit Dismisses HP Stock Drop Case

On Jan. 9, 2018, in an unpublished opinion, the U.S. Court of Appeals for the Ninth Circuit dismissed a class action suit filed against Hewlett-Packard (HP). As background, the plaintiffs in Laffen v. Hewlett-Packard Co. alleged that HP fiduciaries had breached their fiduciary duties by allowing plan participants to buy and hold HP stock that was artificially inflated. The plaintiffs specifically alleged that HP should have discontinued offering HP stock in the plan or should have at least warned participants of the risks associated with investing in HP stock. After the case was dismissed by the district court, the plaintiffs appealed that decision to the Ninth Circuit.

The Ninth Circuit followed suit and dismissed the case, holding that the plaintiffs failed to prove their argument that HP stock was artificially inflated. Additionally, the Ninth Circuit relied upon the precedent set by the Supreme Court in Fifth Third Bancorp v. Dudenhoeffer in finding that a prudent fiduciary in the same circumstances as HP could have viewed the discontinuance of offering HP stock as likely to cause more harm than good.

So ultimately, the Ninth Circuit dismissed the case because the plaintiffs failed to allege an alternative action that HP could have taken (other than discontinuing HP stock as an investment option).

Although this case was unpublished (and, therefore, cannot serve as precedent), employers can take solace in the fact that the bar for plaintiffs to succeed in these stock drop cases is still high.

Laffen V. Hewlett-Packard Co. »