A U.S. District Court judge in Jefferson City, Mo., has ruled in favor of ABB Inc., Cary, N.C., in a claim by participants in ABB's two 401(k) plans that plan executives breached their fiduciary duty by mapping one investment to another.
ABB and other defendants “did abuse their discretion” in mapping participants to the Fidelity Freedom Funds target-date series from Vanguard's Wellington Fund, Judge Nanette K. Laughrey wrote in her July 9 decision in the case of Ronald Tussey et al. vs. ABB Inc. et al.
However, she ruled for ABB because the participants “failed to prove damages consistent with the method of damage calculation” as recommended by the 8th U.S. Circuit Court of Appeals, St. Louis.
In effect, Ms. Laughrey reversed herself in a complex case. In March 2012, she ruled ABB had breached its fiduciary duties, ordering ABB to pay participants $21.8 million in what she originally said was the financial loss due to the mapping.
But in March 2014, the appellate court vacated her ruling, telling the judge to reconsider because the amount of the award was “speculative.” The appeals court said she should re-evaluate the “method of calculating the damage award, if any,” based on guidelines offered by the court.
Citing “circumstantial evidence” in her review of the original trial record, Ms. Laughrey wrote on Thursday that she “finds it more likely than not” that the mapping of assets to Fidelity Freedom Funds from the Vanguard Wellington Fund was done to benefit ABB.
“The court finds that there are too many coincidences to make the beneficial outcome for ABB serendipitous, particularly considering the powerful draw of self-interest when transactions are occurring out of sight and are unlikely to ever be discovered,” she wrote.
Despite devoting much of her opinion to criticizing ABB, the judge ruled for the company. The appeals court's standard for damages was “persuasive, and the plaintiffs have failed to present evidence of the only measure of damages that the 8th Circuit has tacitly approved,” she wrote.
Jerome Schlichter, founding and managing partner of the law firm Schlichter, Bogard & Denton and an attorney for the participants, said ABB's action caused “substantial losses” for participants, “We will be pursuing recovering those losses going forward,” Mr. Schlichter said in an e-mail.
Melissa London, a spokeswoman for ABB, could not be reached for comment.