The U.S. Supreme Court on Monday accepted a petition from International Business Machines Corp. to revisit the issue of standards needed to make fiduciary breach claims involving company stock.
IBM is appealing an appellate court decision in Retirement Plans Committee of IBM et al. vs. Larry W. Jander et al. By accepting the case, the Supreme Court will revisit a unanimous 2014 ruling in Fifth Third Bancorp et al. vs. Dudenhoeffer et al., which established a series of guidelines for lower courts to use in assessing stock-drop complaints.
On Dec. 17, a federal appeals court in New York ruled against IBM, overturning a lower court dismissal of the lawsuit brought by IBM 401(k) plan participants who said that IBM's fiduciaries should have protected their retirement accounts when the company's stock fell after IBM's efforts to sell its microelectronics unit in 2014.
In its March 8 petition to the Supreme Court, the IBM committee said the circuit court split caused by the appeals court decision "is unusually stark," and warned that it "reopens the door to lawyer-driven class actions that spring up after every stock drop."
IBM's petition is supported by the U.S. Chamber of Commerce, American Benefits Council and the ERISA Industry Committee, whose amicus brief warned that if the appeals court decision stands, "plan sponsors will be discouraged from offering (employee stock ownership plans), harming participants and sponsors alike."
