A federal judge in Alexandria, Va., has dismissed a lawsuit filed by a 401(k) plan participant against Gannett, alleging that the company and plan fiduciaries violated ERISA by keeping in the plan stock from Gannett's former parent as well as Gannett company stock.
The decision by Senior U.S. District Court Judge Anthony J. Trenga was based on information from a three-day bench trial in April 2023 in the case of Stegemann vs. Gannett Co. Inc. et al.
"The court finds and concludes that plaintiffs have failed to establish by a preponderance of the evidence that Defendants breached either their duty of prudence in violation of (ERISA), or their duty to diversify in violation of (ERISA)," the judge wrote. The lawsuit started in March 2018 with the allegation that Gannett didn't move fast enough to divest the stock of the former parent, TEGNA, because it wasn't a diversified investment under ERISA rules. (ERISA allows defined contribution plan sponsors to offer company stock through an employee stock ownership plan as an exception to its diversification rules.)
Gannett closed the TEGNA stock fund in August 2018. Gannett was spun off from TEGNA in June 2015 and Gannett 401(k) participants received TEGNA shares.
The judge dismissed the original complaint in September 2018. However, in August 2020, the 4th U.S. Circuit Court of Appeals, Richmond, Va., reversed his decision and sent the case back to the court. "Plaintiffs have plausibly alleged defendants breached their duty of prudence and caused a loss to the plan," the judges wrote in a 2-1 decision.
In October 2020, Gannett asked the U.S. Supreme Court to review the case, but the high court declined in December 2021.
With the case back in the district court, the judge in December 2022 rejected Gannett's request for summary judgment. He ruled that at the summary judgment stage in litigation, the court isn't weighing evidence but is determining whether there are "genuine issues" for trial.
The "genuine issues" were debated during the April 2023 bench trial.
The Gannett Benefits Plan Committee "acted as a hypothetical prudent fiduciary would have, including by having timely and regular meetings, both with and without advisors, to discuss the risks of maintaining the TEGNA Stock Fund and the risks associated with divestiture, and thereby formulated a considered approach for divestiture," the judge wrote.
"Because the committee acted with procedural prudence in its approach to the divestiture of the TEGNA Stock Fund, and as a hypothetical prudent fiduciary would have, the divestiture was therefore timely and prudently made, and the committee did not breach its duty to diversify," the judge concluded.
The Gannett Retirement Plan, McLean, Va., had assets of $931 million as of Dec. 31, 2022, according to the latest Form 5500.
