Participants in a FMC Corp. defined contribution plan have filed a lawsuit against plan executives and corporate executives alleging a breach of fiduciary duty in the plan offering the Sequoia Fund, a mutual fund, as an investment option.
Participants argued executives of the FMC Corp. Savings and Investment Plan, failed to exercise “a reasonable level of diligence” regarding the Sequoia Fund and its heavy investment in Valeant Pharmaceuticals Inc., in the Nov. 18 suit filed in U.S. District Court in Philadelphia. The participants are seeking class-action status in the case of Harmon et al. vs. FMC Corp. et al.
The participants alleged that plan executives should have known that Sequoia Fund's heavy investment in Valeant violated the mutual fund's investment policy regarding concentration of stock ownership. At one point, the mutual fund owned nearly 10% of Valeant's stock, and the stock had accounted for more than 30% of the mutual fund's total assets, the participants' complaint said.
“The fundamental nature of the Sequoia Fund changed, and the (FMC) plan's fiduciaries did not appropriately react to the same,” the lawsuit said. “This was a breach of defendants' ERISA fiduciary duty to monitor investments and remove imprudent ones.”
The plan had $508 million in total assets as of Dec. 31, including $34.2 million in the Sequoia Fund, according to its latest Form 5500 filing.
A spokeswoman for FMC could not be reached for comment by press time.
Revelations about Valeant's drug-pricing practices and other criticisms of the company's management have caused Valeant's stock to lose about 93% of its value since early August 2015.
The FMC suit is similar to a pair of lawsuits, which were later consolidated, filed against the Disney Savings and Investment Plan, a 401(k) plan of The Walt Disney Co. Participants cited the same concerns about plan managers retaining the Sequoia Fund even as the fund's value dropped due to its big investment in Valeant.
A U.S. District Court in Los Angeles dismissed the consolidated suit against the Disney plan on Nov. 14, saying “plaintiffs have alleged no facts plausibly suggesting any sort of self-dealing or other disloyal conduct by the plan or the individual members of the plan's committee.”
