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February 08, 2021 03:39 PM

Court turns out lights on ERISA claims against General Electric

Robert Steyer
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    A federal appeals court in New York upheld a lower court's dismissal of allegations that General Electric Co. fiduciaries violated their ERISA duties through the management of a GE stock fund in the company's 401(k) plan.

    A participant in the plan sued the company in December 2018, contending that GE "improperly manipulated its earnings and inflated its stock price by improperly under reserving for the insurance liabilities of its wholly owned insurance subsidiaries," according to the original complaint.

    "Plan fiduciaries who either knew or should have known that the under reserving ... had improperly manipulated GE's earnings and inflated the GE common stock and, thus, the price of the GE Stock Fund," the complaint said.

    U.S. District Judge Gary Sharpe dismissed the complaint in March 2020. He wrote that the plaintiff had failed to state a claim that followed the guidelines of a 2014 U.S. Supreme Court ruling covering how lower courts should determine if a stock-drop complaint should be dismissed or be allowed to proceed to trial.

    The plaintiff had argued that GE could have disclosed information about the insurance issues or closed the stock fund.

    "We conclude that Varga failed to adequately plead alternative actions that the fiduciaries could have taken," said the Feb. 4 unanimous ruling by a three-judge panel of the 2nd U.S. Circuit Court of Appeals, in the case of Adele Varga vs. General Electric et al.

    "Varga's suggestion that the fiduciaries could have closed the (stock) fund in 2009 is ... unsupported by any factual matter suggesting that the fiduciaries could not have concluded that such an action would do more harm than good," the judges wrote, referring to a key guideline in the Supreme Court ruling in Fifth Third Bancorp et al. vs. Dudenhoeffer et al.

    The appeals court ruling was in the form of a summary order. Such rulings "do not have a precedential effect," the judges wrote.

    The GE Retirement Savings Plan, Norwalk, Conn., had assets of $27 billion as of Dec. 31, 2019, according to the latest Form 5500.

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