Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
May 24 —Total Petrochemicals USA Inc. must defend claims that it violated federal law by forcing its workers to sell off company stock held in their 401(k) accounts, a federal judge ruled.
The workers argued that Total Petrochemicals removed its company stock from the 401(k) plan at a time when its expanded operations made the stock “one of the 100 best stocks to buy,” causing the workers to take a loss and allowing the company to buy the stock back at a reduced price, the court said. These allegations were sufficient to state claims under the Employee Retirement Income Security Act of fiduciary imprudence, disloyalty and failure to monitor other fiduciaries, the judge concluded.
This ruling against the company is unusual both because it considers an infrequent set of ERISA allegations, and because it's a victory for the workers who filed suit.
The workers' allegations—that the forced sale of their well-performing company stock caused them to lose money—is a rarely seen twist on a frequent topic in ERISA litigation. In the typical “stock-drop” case, workers argue that ongoing investment in poorly performing company stock caused a drop in their retirement savings.
Both the R.J. Reynolds and Dell cases resulted in wins for the companies, with the judge who heard the Dell case describing the workers' allegations as an attempt to put the company in a “proverbial Kobayashi Maru”—a no-win scenario from the Star Trek universe.
Total Petrochemicals made a similar argument in seeking to dismiss the case against it, claiming that the workers had put it in a “Catch-22 situation” in which it could face liability regardless of whether it sold or held the stock.
This argument failed to persuade the court, which said that that “may be true,” but also may be “mere speculation.”
Specifically, the court allowed the workers to move forward with their claims of disloyalty, imprudence and failure to monitor plan fiduciaries. It allowed claims to proceed against both the company and individuals connected to the 401(k) plan.
However, the court dismissed claims against the Pension Investment Committee of Total Finance USA Inc., which allegedly advised the company to remove the company stock fund from the 401(k) plan. According to the court, “merely being an advisor to an ERISA plan does not automatically vest that advisor with fiduciary status.”
Judge Ron Clark of the U.S. District Court for the Eastern District of Texas wrote the May 20 opinion, which is designated as not for publication.
The workers are represented by Bradley Steele & Pierce LLP, Ferguson Law Firm LLP and Mostyn Law Firm. Jones Day represents Total Petrochemicals.
To contact the reporter on this story: Jacklyn Wille in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Text of the decision is at http://www.bloomberglaw.com/public/document/Barton_v_Total_Petrochemicals_USA_Inc_Docket_No_115cv00471_ED_Tex/1.
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 firstname.lastname@example.org.
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 email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)