The U.S. Supreme Court on Monday declined to review a request by fiduciaries of an IBM 401(k) plan seeking to overturn a pro-participant ruling by a federal appeals court in a stock-drop case.
Because the Supreme Court denied the request, the case affirms the 2nd Circuit U.S. Court of Appeals decision that participants had provided sufficient information under ERISA and under a previous Supreme Court ruling, so that a complaint to go to trial.
The appeals court had ruled against IBM fiduciaries in June 2020 in the case of Retirement Plans Committee of IBM et al. vs. Larry W. Jander et al. The fiduciaries petitioned the Supreme Court in September.
Participants contended that fiduciaries should have taken corrective action because 401(k) plan investors in company stock were harmed when the stock fell following IBM's disclosure, asset write-down and subsequent sale of a money-losing microelectronics unit.
This is the second time the fiduciaries appealed to the Supreme Court. They again alleged that the New York federal appeals court incorrectly interpreted a 2014 Supreme Court stock-drop case ruling offering guidance to lower courts on allowing the case to go to trial.
IBM fiduciaries said the New York appeals court ruling conflicted with decisions by several other federal appeals courts. They asked the Supreme Court to address what they argued was a "circuit split."
When IBM first asked for a Supreme Court review, the justices in January 2020 vacated and remanded the IBM case to the New York appeals court with instructions to examine issues that lower courts had not addressed.
The appeals court in December 2018 had reversed a district court's dismissal of a 401(k) participants' allegations — a rare victory for a participant in a stock-drop complaint.
The district court had dismissed in September 2016 and again in September 2017 the initial lawsuit, filed in 2015, arguing that fiduciaries should have acted to protect those who held company stock in the plan.
However, in June 2020, a three-judge New York appeals court panel issued a unanimous unsigned opinion reinstating its December 2018 ruling. The judges had invited both parties, the federal government and various trade groups to submit supplemental briefs "not previously raised."
After reviewing the documents, the judges sent the case to the district court with instructions to proceed given the terms of the appeals court's opinion.
"To the extent that the arguments were previously considered, we will not revisit them," the judges wrote. "To the extent that they were not properly raised, they have been forfeited, and we decline to entertain them."
