The U.S. Supreme Court has declined to hear an appeal by participants in two Citigroup Inc. 401(k) plans that plan executives breached their fiduciary duties by failing to place limits on investments in a company stock fund during the financial crisis of 2008.
The Supreme Court, without comment, posted its decision Monday. Attorneys for the participants, in the case of Muehlgay et al. vs. Citigroup Inc. et al., filed a petition with the court in August seeking a hearing.
The participants were appealing a ruling by the 2nd U.S. Circuit Court of Appeals in May, which supported previous decisions by a U.S. District Court in New York to dismiss the complaints.
In May 2015 and again in July 2015, District Court Judge John G. Koeltl dismissed complaints by participants in a class-action suit, who alleged plan executives and corporate executives violated their fiduciary duties.
Plaintiffs had argued that Citigroup's involvement in the subprime mortgage market caused “significant losses and insufficient capital to absorb those losses,” according to court documents. They alleged that such actions subsequently harmed Citigroup's stock price.
They said that by January 2008 — the start of the class-action claim period — the defendants “should have been aware” through public and internal “warning flags” that Citigroup stock was an “imprudent” investment for 401(k) plan participants, according to court documents.
The District Court judge dismissed the complaints because the suit was filed after the ERISA statute of limitations. The judge also ruled that the participants' breach-of-fiduciary-duty claims were “without merit” because they “failed to show any special circumstances that would have made it imprudent” for defendants to allow participants to continue investing in Citigroup stock.