Week Seventeen

Week of April 24, 2017 through April 28, 2017

Patrick Booker v. South Carolina Department of Corrections (Gregory 4/28/2017): The Fourth Circuit held that an inmate’s right to freedom from retaliation for participating in an inmate grievance system is a clearly established right for purposes of avoiding a qualified immunity defense pleaded by prison employees. The court vacated the District Court of South Carolina’s order granting summary judgment in favor of prison employees and remanded the case for further proceedings. Full Opinion

Richard Tatum v. RJR Pension Investment (Motz 4/28/2017): The Fourth Circuit held that a trial court does not commit legal error by considering evidence related to prudent investment decisions to determine the propriety of a hypothetical prudent fiduciary’s divestment decisions. The court affirmed the Middle District of North Carolina’s order finding the breach of fiduciary duty did not cause the loss since a prudent fiduciary would have made the same divestment decision at the same time and in the same manner. Full Opinion

Meridian Investments, Inc. v. Federal Home Loan Mortgage (Duncan 4/28/2017): The Fourth Circuit held Freddie Mac was a private corporation and not a government instrumentality. Therefore, the dispute at issue was between two private parties upon which a five-year statute of limitations applied instead of a six-year statute of limitations that applies to contract actions between a private party and the United States. The court affirmed the Eastern District of Virginia’s order finding Plaintiff’s claims were barred by the Virginia five-year statute of limitations on contract actions. Full Opinion

Marcus Robinson v. Edward Thomas (Agee 4/27/2017): The Fourth Circuit held that a trial court does not abuse its discretion when it abstains from exercising jurisdiction to decide a double jeopardy claim when exceptional circumstances do not exist and a petitioner still has adequate state court remedies. The court affirmed the Eastern District of North Carolina order abstaining from exercising jurisdiction. Full Opinion

Daniel Castendet-Lewis v. Jefferson Sessions III (King 4/25/2017): The Fourth Circuit held that a removal order requiring the removal of a legal alien to his country of citizenship may not be canceled after the physical removal of that alien for purposes of avoiding appellate review. Furthermore, the court held that a Virginia burglary offense is not an aggravated felony. The court, therefore, granted the alien’s petition for review, vacated the Department of Homeland Security’s order for his removal, and remanded for further proceedings. Full Opinion

US v. Cornell Robinson (Wilkinson 4/25/2017): The Fourth Circuit held that the appellant’s various convictions related to carjacking were proper, finding that a carjacker’s threat of “do you want to die” was sufficient for a rational fact finder to conclude the carjacker intended to cause death or serious harm for the purposes of a carjacking charge. Additionally, the court held a combined charge for actual possession of a handgun by a felon and constructive possession of a handgun by a felon does not constitute duplicity as prohibited by the Sixth Amendment. The court affirmed the appellant’s convictions, which arose from the District Court of Maryland. Full Opinion

US v. Lamar Lee (Gregory 4/25/2017): The Fourth Circuit held that a trial court does not err by concluding that an unlawful wounding conviction qualifies as a crime of violence. Therefore, the court affirmed the Eastern District of Virginia’s order denying a motion under 28 U.S.C. § 2255. Full Opinion

US v. David May (Floyd 4/25/2017): The Fourth Circuit held that a plea under FRCP 11(c)(1)(C) that may have been implicitly based upon sentencing guidelines is not entitled to relief when an ingredient of the sentencing range implicitly considered is subsequently lowered. The court affirmed the order of the Western District of Virginia. Full Opinion

Balfour Beatty Infrastructure v. Mayor and City Council (Harris 4/25/2017): The Fourth Circuit held that a construction company is not excused from exhausting its administrative remedies prior to suing in federal court when the construction company has failed to show administrative proceedings would be biased against it. The court affirmed the District of Maryland’s order. Full Opinion

US v. Philip Swaby (Gregory 4/24/2017): The Fourth Circuit held that an alien at risk of deportation for a crime receives ineffective assistance of council, which is not remedied by a plea colloquy, when he accepts a plea upon advice of his attorney who mistakenly believed an element of the crime to which the alien pleaded was not a deportable offense, and the judge only gives generic warnings that the plea could result in deportation. Moreover, the court found that an alien in such a position would have been able to accept a different plea that did not constitute admission to a deportable offense. Therefore, the court held that the alien’s Sixth Amendment rights were violated, reversed the District of Maryland’s denial of habeas relief, vacated the alien’s convictions, and remanded for further proceedings. Full Opinion


Highlight Case

Richard Tatum v. RJR Pension Investment, No. 16-1293

Decided April 28, 2017

The Fourth Circuit held that a trial court does not commit legal error by considering evidence related to prudent investment decisions to determine the propriety of a hypothetical prudent fiduciary’s divestment decisions. Relying upon that determination, the court further held that despite a breach of the fiduciary duty owed to employees of the RJ Reynolds Tobacco Company who have their retirement investments controlled by the RJR Pension Investment Committee, the employees were not harmed since a prudent fiduciary would have divested from RJR Nabisco as well.

This case came before the Fourth Circuit on six separate occasions on different but related grounds. In 1999, RJR Nabisco decided to separate its food business (Nabisco) from its tobacco business (RJR Tobacco) to protect the food business from impending tobacco litigation. However, immediately after the separation and for several months thereafter, the value of Nabisco stock decreased dramatically. Moreover, the stock value fell again, notwithstanding the separation, after RJR Tobacco experienced a significant adverse verdict in tobacco litigation. From the date of the separation until January 31, 2000, the value of Nabisco Group Holdings’ common stock fell by 60% and the price of Nabisco common stock fell by almost 30%.

Employees of RJR had for years been allowed to participate in an ERISA covered retirement plan, which would hold company stock for the employees. RJR was the administer of the retirement plan (“Plan”), and decided after the spin-off of Nabisco that “it would be inappropriate to hold stock in what was becoming a non-related company.” Therefore, the Plan, as directed by RJR, divested the Nabisco stock on January 31, 2000.

However, three months after divestment, Carl Icahn decided he wanted to take over Nabisco and made an unsolicited bid; but Nabisco Group Holdings rejected it. Nevertheless, by November 2000, Philip Morris successfully acquired Nabisco for $55 per share, and RJR bought Nabisco Holdings for $30 per share. In the wake of that sale, Nabisco Group Holdings’ common stock value increased 247% and the Nabisco common stock increased 82%.

Richard Tatum, an RJR employee, filed suit in 2002 against RJR on behalf of himself and other employees since RJR divested the employees of their Nabisco stock when it was at an all-time low despite the probability that it would rebound. After a series of trials and appeals, the Middle District of North Carolina eventually found RJR breached its fiduciary duty of procedural prudence when it decided to remove the Nabisco Funds from the Plan without undertaking proper investigation into the prudence of doing so. The district court further found that RJR bore the burden of proving that this breach did not cause the alleged losses to the Plan and that RJR had, despite its breach, met its burden by showing that a hypothetical prudent fiduciary would have made the same decision.

On appeal, the Fourth Circuit affirmed the order of the district court, despite the employees’ assertion that a choice to divest requires greater justification to be prudent than does an investment decision. The court noted that there is no case law supporting the employees’ position, and it refused to publish an order holding that the employees’ position is law. The court relied upon the lack of case law to the contrary and the Supreme Court’s choice to broadly define the way in which an ERISA fiduciary’s decisions are judged. In essence, the court articulated that the district court did not need to require a more compelling reason for divestment decisions than for investment decisions.

Correspondingly, the court held that the district court did not err in finding a prudent fiduciary would have divested instead of waiting to see if the stock recovered. This was essentially a review of factual determinations. The court found that the district court adequately reviewed the record and considered all the evidence presented before it. Moreover, the court noted the Employees’ experts who concluded a prudent fiduciary would not have divested were inconsistent in their reasoning and in their ability to specify what a prudent fiduciary would have done.

Accordingly, the Fourth Circuit affirmed the district court’s order.

Judge Diaz, however, dissented by arguing that the district court failed to explain whether a hypothetical prudent fiduciary would have divested at the same time and failed to explain how or why a prudent fiduciary would have also disregarded the rules governing the Plan’s administration.

Full Opinion

James David George, Jr.

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