WorldCom Inc. employees who invested in company stock through the firm's 401(k) plan intend to appeal a federal judge's dismissal of a class-action lawsuit against Merrill Lynch Trust Co., the plan's directed fiduciary.
"The judge relied principally on a recent Department of Labor Field Assistance Bulletin interpreting the duties of so-called directed trustees," said Jeffrey Lewis, partner in the law firm of Lewis, Feinberg, Renaker & Jackson, representing the plan participants who sued Merrill Lynch. "We believe that this new Bush administration position, if followed by the courts, will result in an unwarranted narrowing of the responsibilities of employee benefit plan trustees which will leave 401(k) plan participants and other pension plan participants with significantly less protection against self-interested and grossly imprudent transactions by their employers."
On Tuesday, U.S. District Court Judge Denise Cote of the Southern District of New York dismissed the suit, brought after WorldCom filed for bankruptcy on July 21, 2002. Participants charged Merrill Lynch, as directed trustee, violated its fiduciary duties under federal pension law for failing to stop investing employees' money in company stock in the months leading up to the dissolution of the company.
Ms. Cote, in her opinion, wrote that "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 the investments in the plan. Plaintiffs contended that Merrill Lynch was not a fiduciary because of its role as a directed trustee, but instead was simply a plan fiduciary subject to the provisions of ERISA.