Nice informative story out of the National Law Journal on the so-called stock-drop suits, which allege breaches of fiduciary duty under ERISA by trustees charged with managing company 401(k) plans. The lawsuits in question were “filed on behalf of employees who lost money in their 401(k) and other retirement plans because of the declining price of their employer’s stock.” In those cases, the “[p]laintiffs allege that companies and trustees they hire to manage their retirement plans had a fiduciary duty to shift employee investments out of their stock after learning of an impending decline in the share price.” The law may be turning against such theories. As the article summarizes:
The so-called “stock-drop” suits, which were filed under the Employee Retirement Income Security Act of 1974, or ERISA, were brought alongside hundreds of shareholder class actions following the demise of Enron Corp.
In the past year, several rulings — coupled with an action by the U.S. Department of Labor — have put limits on the liability of directed trustees, who are hired by an employer to manage employee retirement plans.
The article does allow, however, that plaintiffs’ lawyers will respond by shifting their targets, and possibly their theories, rather than abandon this line of litigation.