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Second stock-drop suit against Sears claims breach of fiduciary duties

A participant in a Sears Holdings Corp. 401(k) plan sued the company and plan executives, alleging breach of fiduciary duties over the retaining of a Sears stock fund as an investment option.

"This case is about the abject failure of the defendants … to protect participants' interests in violation of the defendants' legal obligations under ERISA," said the complaint, filed Thursday in U.S. District Court in Chicago.

The complaint by participant Lavarita Meriwether seeks class-action status in alleging the fiduciaries of the Sears Holding Savings Plan as well as the Sears Holdings Puerto Rico Savings Plan failed to conduct "a prudent process with regard to monitoring the performance" of the company stock fund within the two retirement plans.

Chris Brathwaite, a Sears spokesman, declined to comment.

According to the complaint, the Sears Holdings Master Trust held a total $31.3 million in company stock as of Dec. 31, 2015, with a cost basis of $61.1 million. The Sears U.S.-based 401(k) plan had $2.54 billion in assets and the Puerto Rico plan had $16.2 million in assets as of year-end 2015, according to the latest 11-K statements filed with the Securities and Exchange Commission.

Last month, a different participant represented by a different law firm filed a similar stock-drop complaint in federal district court in Chicago also alleging breaches of fiduciary duty by company and retirement plan executives.

In the latest lawsuit, the plaintiff argued the Sears fiduciaries shouldn't have kept the company stock fund in the plans "when a reasonable fiduciary … should have done otherwise," according to court documents.

Between May 22, 2014 and the present, "the fiduciaries were not properly investigating the prudence of continuing to hold and invest the savings plans' assets in the Sears Stock Fund in the face of well-reported dire circumstances facing the company," the complaint said. "There was no adequate process in place to monitor the continued prudence of including the Sears Stock Fund" in the plans' investment lineups.

The complaint noted Sears informed participants in both plans that effective Jan. 1, 2017, the stock fund would be closed to new investments. Participants who had invested in the stock fund were told they could keep their money in the stock fund unless they voluntarily transferred their money to another investment option. The lawsuit was filed by Stephan Zouras LLP and Keller Rohrback, LLP.