Sanofi Avoids ERISA Challenge to Stock Losses in Its 401(k) Plan

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By Carmen Castro-Pagan

Oct. 3 — Sanofi-Aventis U.S. LLC is the latest company to dodge a lawsuit accusing it of breaching its ERISA fiduciary duties by allowing participants in its 401(k) plan to continue investing in company stock despite knowing its value was artificially inflated ( Forte v. U.S. Pension Committee , S.D.N.Y., No. 1:15-cv-04936, 9/30/16 ).

Joseph D. Forte, who filed the lawsuit seeking class treatment on behalf of other plan participants, didn’t purchase or sell Sanofi stock during the period of the alleged artificial price inflation and as such couldn’t establish that he suffered an injury, the U.S. District Court for the Southern District of New York ruled. In dismissing the lawsuit, Judge P. Kevin Castel held Sept. 30 that Forte didn’t have standing to bring the action against the company’s investment committee and its executives.

The decision is the latest defeat for employees who are using the Employee Retirement Income Security Act to challenge losses in their retirement plans as a result of company stock drops. Last week RadioShack Corp., Whole Foods Corp. and BP Plc. defeated lawsuits by employees who claimed the companies failed to remove poorly performing company stock from their retirement plans, causing millions of dollars in losses.

No Alleged Injury

In his lawsuit, Forte alleged that plan fiduciaries violated ERISA by allowing participants and beneficiaries to continue to invest in company stock despite allegedly knowing that the stock was no longer a prudent investment option. The investment was thought to be imprudent because of an illegal kickback scheme to boost sales of Sanofi’s diabetes product line. Forte also alleged that the fiduciaries failed to disclose what they knew about the scheme. According to him, this cost participants millions in lost retirement savings.

In agreeing with the plan’s argument that Forte lacked standing, the court noted Forte didn’t allege that he purchased stock at the artificially inflated price or that he sold it at a loss. Instead, Forte alleged that he was injured when he was deprived of the opportunity to transfer his investment in the stock to a more prudent investment.

A plaintiff must identify more than merely a stock price drop throughout the proposed class period to articulate an injury for the purpose of establishing standing, the court said.

As to Forte’s claim that he was injured by not being told about the kickback scheme, the court said he couldn’t possibly claim he was injured by a lost opportunity he never could have had. If the plan fiduciaries had told Forte about the scheme, he wouldn’t have been allowed to sell his shares in the stock and invest money elsewhere, the court said.

Forte failed to allege any actual loss, the court concluded.

Zamansky & Associates LLC represented the class. Littler Mendelson PC represented the plan.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

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