In recent years, there has been a dramatic increase in class action participant lawsuits. These lawsuits allege that plan sponsors, their officers and employees, and (in some cases) board members, breached their fiduciary duties by continuing to hold employer stock in the defined contribution plan. A wide spectrum of corporations have been sued, and the common theme seems simply to be that the employer stock in question dramatically declined in value.
The specifics of these lawsuits may vary, but they generally include allegations that the plan sponsor and other defendants breached their fiduciary duties by:
- failing to monitor the continued suitability of employer stock as a plan investment option;
- failing to disclose company financial information that participants needed in order to make informed investment decisions in employer stock held in the plan; and
- taking actions purportedly designed to artificially inflate the value of the stock.
The case law in this area continues to evolve, and many of the questions raised by employer stock cases are still open.
Miller & Chevalier held a teleconference to discuss these lawsuits and learn about steps that plan fiduciaries can take to protect themselves from potential liability. Issues that were discussed included:
- What circumstances trigger litigation;
- Who are the possible defendants in stock drop litigation;
- What is the Moench rebuttable presumption; and
- What steps can be taken to mitigate potential liability.
This teleconference is the first event in our ERISA University series, which is focused on providing information on the latest trends in ERISA litigation and offering strategic insight into the issues affecting companies nationwide.