Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Aug. 29 — A Georgia bank formerly known as First Citizens Bankshares Inc. must defend claims that it failed to investigate whether its employees should continue investing retirement savings in company stock that declined from $340 to $29 per share ( Brannen v. First Citizens Bankshares Inc. , 2016 BL 278918, S.D. Ga., No. 6:15-cv-00030, 8/26/16 ).
In partly denying the bank’s motion to dismiss, a federal judge on Aug. 26 drew a distinction between claims challenging the decision to invest in company stock and claims challenging the failure to adequately investigate the propriety of that investment going forward. The judge allowed the investigation claim to proceed but dismissed the investment claim as time-barred under the Employee Retirement Income Security Act.
The judge’s ruling is significant in the world of ERISA litigation because he assumed without deciding that a recent U.S. Supreme Court decision on ERISA-based challenges to employer stock drops would apply to the stock plans of privately held companies. This assumption runs contrary to the Department of Labor’s stated position and a decision by the U.S. Court of Appeals for the Seventh Circuit issued just one day before the judge decided this case.
Rather than focusing on the distinction between public and private company employee stock ownership plans, which the parties debated at length in their briefs, the judge said that the relevant distinction was between claims challenging investment decisions by plan fiduciaries and accusations that fiduciaries failed to investigate whether employer stock remained a prudent investment.
Because the latter accusation wasn’t subject to the Supreme Court’s new pleading requirements—specifically, the requirement that plaintiffs plead an alternative course of action that plan fiduciaries could have taken—the judge allowed this claim to proceed against the bank.
However, the judge dismissed several remaining claims in the lawsuit, including claims of disloyalty and claims seeking equitable relief. Claims that the bank failed to honor a participant’s distribution request remain pending.
Judge J. Randal Hall of the U.S. District Court for the Southern District of Georgia wrote the decision.
The plan participant who filed suit is represented by Fortson Bentley & Griffin PA, Epps Holloway Deloach & Hoipkemier LLC and Monnolly Pridgen Colon-Machargo & Ellenberg LLC. The bank is represented by Bryan Cave LLP.
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/Brannen_v_First_Citizens_Bankshares_Inc_No_615cv30_2016_BL_278918.
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