Federal district judges in St. Louis and Minneapolis have dismissed stock-drop lawsuits against Arch Coal Inc. and Target Corp., saying that plaintiffs in both cases failed to prove that respective corporate retirement plan executives breached their fiduciary duties in managing company stock funds.
In both cases, the judges said arguments by participants of Arch Coal's and Target's 401(k) plans didn't meet the standards set by the 2014 Supreme Court ruling in Fifth Third Bancorp et al. vs. Dudenhoeffer et al. covering plan executives' responsibilities under the Employee Retirement Income Security Act.
"The court finds that plaintiffs have not sufficiently pleaded special circumstances as required by ERISA and Dudenhoeffer," wrote St. Louis-based U.S. District Court Judge Carol E. Jackson in an Aug. 4 opinion dismissing claims in the case Roe et al. vs. Arch Coal Inc. et al.
"Plaintiffs' allegations of Arch Coal's 'serious deteriorating condition' and 'overwhelming debt' are evidence of the company's slide into bankruptcy but do not establish a special circumstance under Dudenhoeffer," the judge wrote. She also dismissed participants' claims against the plan's trustee, Mercer Fiduciary Trust Co.
Participants in the Arch Coal Inc. Employee Thrift Plan, St. Louis, had argued that plan executives had failed in their fiduciary duties by continuing to offer a company stock fund even when Arch's stock dropped to $1.42 a share on Nov. 12, 2015, from "approximately" $680 on July 27, 2012, according to court documents. The plan had $500 million in assets as of Dec. 31, 2015, according to its latest Form 5500 filing. "On or about Nov. 12, 2015, the plan's investment in the (stock) fund was forcibly liquidated," according to the complaint. Arch Coal filed for Chapter 11 bankruptcy protection on Jan. 11, 2016. The company restructured and emerged from bankruptcy on Oct. 5, 2016.
In the Target case, a federal judge in Minneapolis dismissed claims that Target corporate and 401(k) plan executives had violated Securities and Exchange Commission rules governing false and misleading information as well as fiduciary duties under ERISA.
In a July 31 ruling, U.S. District Court Judge Joan Ericksen dismissed all complaints relating to In Re: Target Securities Litigation and In Re: Target Corporation ERISA litigation, a combination of several lawsuits filed against Target relating to the company's ill-fated expansion in Canada.
Target started operating in Canada in 2013 and ended in early 2015 when the company announced "it would discontinue operating its Canadian stores and that Target Canada would file for insolvency protection," the judge wrote.
In dismissing allegations of SEC violations, the judge wrote that plaintiffs "failed to allege sufficient particular facts explaining why any of the challenged statements (by company executives) were materially false or misleading when made."
In addressing claims of ERISA violations relating to management of a company stock fund in the Target Corporation 401(k) Plan, Minneapolis, the participants "do not adequately allege breaches of the duty of prudence under Dudenhoeffer," the judge wrote. The plan had $7.3 billion in assets as of Dec. 31, 2015, according to its latest Form 5500 filing.
"Plaintiffs do not plausibly allege that a prudent fiduciary could not have concluded that disclosure would do more harm than good in the circumstances," wrote the judge, adding that the complaint didn't meet the Supreme Court ruling's standards "with respect to disclosure alternatives."