(ERISA allows defined contribution plan sponsors to offer company stock through an employee stock ownership plan as an exception to its diversification rules.)
"The court is left with one expert opining that a prudent fiduciary would have divested the TEGNA Stock Fund by July 2016 while another opines that an August 2018 divestment was prudent," Senior U.S. District Judge Anthony J. Trenga, wrote in his Nov. 17 opinion.
Given the disputed comments, Mr. Trenga ruled against Gannett's petition for summary judgment against the complaint in Stegemann vs. Gannett Co. Inc. et al. At the summary judgment stage, he explained, the court isn't weighing evidence but is determining whether there are "genuine issues" for trial.
Mr. Trenga's ruling is the latest step in a dispute that started with a lawsuit in March 2018 claiming insufficient diversification in the Gannett Co. Inc. 401(k) Savings Plan due to the company stock and the TEGNA stock.
Gannett was spun off from TEGNA in June 2015.
"The plan's holdings of TEGNA common stock should have been liquidated on or shortly after the date of separation," the original lawsuit said.
In September 2018, Mr. Trenga dismissed the complaint, writing that "the duty to diversify requires diversity among the full set of funds offered in the menu of plan offerings but does not compel every individual fund in a plan to be diversified."
However, in August 2020, the 4th U.S. Circuit Court of Appeals, Richmond, Va., reversed the lower court ruling. "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.
"Because defendants did not monitor the merits of the fund, they did not uncover that it was an imprudent fund," the judges wrote, referring to the TEGNA stock fund. "As the fund was a single-stock fund with inherent concentration risk, it is plausible that the fund was, in fact, imprudent."
In October 2020, Gannett asked the U.S. Supreme Court to review the case, but the high court declined in December 2021. The Supreme Court's decision means the case was returned to the Alexandria, Va., District Court.
The Gannett Retirement Plan, McLean, Va., had $1.9 billion in assets as of Dec. 31, according to the latest Form 5500.
