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Employees of photography company Lifetouch Inc. suffered “hundreds of millions of dollars” in damage by investing in the company’s employee stock ownership plan over the past several years, a new proposed class action alleges.
The lawsuit, filed March 1 against individual members of Lifetouch’s board of directors, says workers who invested their retirement savings in the company’s ESOP weren’t protected from losses as the company struggled to adapt to the age of digital photography. The company stock held in Lifetouch’s ESOP declined by more than $840 million between 2015 and 2018, representing an average loss of more than $22,000 in retirement savings for each of the plan’s 16,000 investors, according to the lawsuit. This decline happened while several Lifetouch executives retired and cashed out their stock at favorable prices, the lawsuit claims.
By challenging losses in a privately held company’s ESOP, this Lifetouch case may represent a shift in litigation over lost retirement savings following drops in company stock price. These cases—which typically involve publicly traded companies—have seen almost no success since 2014, when a U.S. Supreme Court decision made it harder to bring fiduciary breach claims under the Employee Retirement Income Security Act. Since then, a growing list of companies and their executives have defeated stock-drop lawsuits, including RadioShack Corp., WellsFargo, Target Corp., Cliffs Natural Resources Inc., Reliance Trust Co., Lehman Brothers Holdings Inc., State Street Bank & Trust Co., Citigroup, Whole Foods Corp., JPMorgan Chase & Co., L-3 Communications, and BP Plc.
The new lawsuit says the Lifetouch directors knew the company’s stock was overvalued and did nothing to protect workers. Instead, they “actively condoned the overvaluation period for the benefit of Lifetouch’s retiring senior executives,” the lawsuit claims.
Lifetouch, which isn’t named as a defendant in this lawsuit, is a Minnesota company best known for its school picture business. In January, Lifetouch announced that it was being acquired by Shutterfly Inc.
Representatives of Lifetouch and Shutterfly didn’t immediately respond to Bloomberg Law’s request for comments.
The Lifetouch worker who filed suit is represented by FarmLaw and Zamansky LLC. New York-based Zamansky has spearheaded much of the recent litigation over losses in company stock plans, bringing recent cases involving the stock plans of Allergan plc, L-3 Communications Corp., Exxon Mobil Corp., and Wells Fargo.
The case is Vigeant v. Meek, D. Minn., No. 0:18-cv-00577, complaint 3/1/18.
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