Federal courts continue to process a steady diet of so-called “stock-drop” cases — generally involving plaintiff claims of fiduciary breaches related to a significant drop in the share value of employer stock held as an investment in a retirement plan such as a 401(k) plan. In a recent case handled by a Georgia federal trial court, the judge followed what seems to be a growing trend that favors plan fiduciaries by dismissing plaintiffs’ fiduciary breach claims on a motion to dismiss. The defendants included the employer’s pension committee and individual members of that committee. Plaintiffs claimed defendants breached their fiduciary duties by allowing plaintiffs to purchase shares of employer stock in a defined contribution retirement plan. The employer’s stock value suffered a dramatic drop in value in connection with the worldwide economic recession during 2008 and 2009. The defined contribution retirement plan included a provision requiring employer stock to be included as an investment option. The court noted that none of the defendants had the discretion or authority to eliminate employer stock as an investment option under the plan. As a result, the judge ruled that the defendants could not be liable for a breach of fiduciary duty with respect to the retention of employer stock as an investment option under the plan. The court’s additional rulings include a presumption that the plan committee and its members acted prudently by following the plan terms and offering employer stock as an investment option. In this case, the plaintiffs failed to allege facts sufficient to overcome that presumption. (In re ING Groep, N.V. ERISA Litigation, N.D. Ga. 2010)
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A steady diet of stock drop cases
- Hodgson Russ LLP
- Peter K. Bradley, Anita Costello Greer, Michael J. Flanagan, Richard W. Kaiser, Arthur A. Marrapese III and Daniel R. Sharpe
- June 29 2010
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