A class-action lawsuit against Merrill Lynch Trust Co., brought by employees of WorldCom Inc. who invested in company stock through the 401(k) plan, was dismissed today. Participants filed the suit after WorldCom filed for bankruptcy in July 2002, charging that Merrill Lynch, the directed trustee for the plan, violated of its fiduciary duties under federal pension law by failing to stop investing employees' money in the company stock.
In her opinion, U.S. District Court Judge Denise Cote of the Southern District of New York wrote: "Because plaintiffs have not shown that the trustee had non-public information regarding the company's stock that would warrant the trustee taking such extraordinary action, and because the plaintiffs have not shown that the unusual circumstances that would otherwise require that action existed, the trustee's motion for summary judgment is granted."
Merrill Lynch had argued that a directed trustee is not a fiduciary with respect to investments in the plan and therefore does not owe a fiduciary duty of prudence for those investments. The plaintiffs had contended that Merrill Lynch was simply a plan fiduciary subject to the provisions of the ERISA.