A federal judge dismissed a class-action lawsuit that claimed Schering-Plough Corp., Kenilworth, N.J., breached its fiduciary duties under ERISA by including company stock as an investment option in its two 401(k) plans.
Judge Dennis Cavanaugh of U.S. District Court in Newark, N.J., on Monday dismissed the lawsuit, filed on behalf of participants in Schering-Plough's $1.7 billion Employees' Savings Plan and its $22.4 million Puerto Rico Employees' Retirement Savings Plan, “without prejudice” and granted the plaintiffs 30 days to file an amended complaint.
The plaintiffs claimed the company and its management “should have known that Schering stock was an imprudent investment alternative for the plans,” because they were aware of the “adverse” results of a clinical drug trial for a cholesterol drug called Enhance in 2007, according to court documents. They also claimed Schering-Plough managers “played an active role in improper business activities that allowed Schering to artificially inflate and manipulate its earnings,” the documents said.
Mr. Cavanaugh wrote in his ruling that the plaintiffs' claims were largely based on the allegation that executives had advance knowledge of the drug-trial results, but found the complaint had “insufficient factual allegations” to support the claims.