Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...
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.
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 email@example.com
To contact the editor responsible for this story: Jo-el J. Meyer at firstname.lastname@example.org
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)