A federal district court recently dismissed a lawsuit brought against the fiduciaries of the SunTrust 401(k) plan for breaches of ERISA fiduciary duties in connection with a loss of significant value in 401(k) plan account balances that were invested in SunTrust stock. SunTrust’s share price plummeted during the subprime mortgage crisis. The lawsuit alleges plan fiduciaries knew or should have known the stock was an imprudent plan investment and that maintaining the plan’s heavy investment in the stock violated the ERISA duty of prudence. Relying on the holding in Lanfear v. Home Depot, Inc. (11th Cir. 2012), the district court ruled that in order for the plaintiffs to state a claim that plan fiduciaries violated their duty of prudence, they must allege the settlor, under the circumstances faced by the plan fiduciaries, would have intended the fiduciaries sell off the plan’s investments in SunTrust stock. While the court noted the complaint failed to make the necessary specific allegations and therefore failed on its face to state a prudence claim under ERISA, the court nevertheless considered the prudence claim. The court reviewed various plan documents, including the investment policy statement, and could find no indication that the settlor (i.e., SunTrust) contemplated the sale of the plan’s SunTrust shares, even in the face of dire financial circumstances. The plan documents reviewed by the court also indicate the settlor fully understood and approved of the fact that the company stock fund was a high-risk investment for plan participants. For these and other reasons, the court granted defendants’ motion to dismiss plaintiffs’ prudence claim. In re SunTrust Bank, Inc., ERISA Litig. (N.D. Ga. 2013)
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SunTrust stock drop case dismissed
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