Attorneys for 401(k) plan participants at General Motors Corp., Detroit, are scheduled to face off with State Street Bank & Trust representatives this afternoon in U.S. District Court in Detroit over a lawsuit alleging breach of duty by State Street in its role as independent fiduciary.
The suit claims State Street failed that duty when it didn't sell GM stock before its price collapsed, according to an attorney for the plaintiffs.
Judge Denise Page Hood is conducting a hearing, scheduled for 4 p.m. EDT, on the case, including State Street's request for an extension to file an answer to the complaint and move the case before another judge, said John P. Zuccarini, attorney with Elwood S. Simon & Associates, one of the law firms for the plaintiffs.
The suit seeks class-action status.
The GM salaried employees' 401(k) plan and GM hourly employees' 401(k) plan had combined assets of $20.3 billion as of Dec. 31, 2007.
“As the independent fiduciary and investment manger for the GM stock purchased by and held in the plans, State Street had a fiduciary duty to determine whether GM stock was a prudent investment to offer and hold in the plans,” according to the lawsuit, filed June 8.
“State Street continued to sit on the 50 million-plus shares of GM stock,” held by the plans, the suit stated.
“By waiting until March 31, 2009, to begin divesting the plans of their holdings in GM stock, and not divesting the plans of their holdings in GM stock at an earlier date, State Street breached its fiduciary duty of prudence and caused the plans to suffer hundreds of millions of dollars in losses,” the lawsuit said.
The plaintiffs seek restoration of the losses to the plans, which State Street is obligated to do under the Employee Retirement Income Security Act, the lawsuit stated. The suit doesn't quantify the losses.
“GM stock had become an imprudent investment for the plans by July 15, 2008 … yet State Street did nothing,” the suit said.
GM appointed State Street as independent fiduciary for the company stock in the plans June 30, 2006, the suit stated.
“By the end of 2006, it should have been obvious to State Street that GM financial troubles were serious and the company itself was moving closer to an impending financial collapse,” the suit said.
Arlene Roberts, State Street spokeswoman, couldn't be reached for comment.
Julie M. Gibson, GM spokeswoman, said GM isn't involved in the suit and declined to comment.