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Aug. 22 — Pilgrim’s Pride Corp.'s retirement committee convinced a magistrate judge that it should prevail in a long-running lawsuit over the company stock offered in the chicken producer’s retirement plan ( In re Pilgrim’s Pride Stock Inv. Plan ERISA Litig., E.D. Tex., No. 2:08-cv-00472-JRG-RSP, report and recommendation 8/19/16 ).
The proposed class of 16,000 Pilgrim’s Pride workers failed to meet the standards recently established by the U.S. Supreme Court for cases involving company stock losses in retirement plans governed by the Employee Retirement Income Security Act, according to the magistrate’s report. The workers didn’t sufficiently demonstrate what plan fiduciaries should have done differently in the face of declining share price, the magistrate said.
The lawsuit, originally filed in 2008, accuses Pilgrim’s Pride executives of failing to remove “grossly overvalued” company stock from the company’s retirement plan during 2008, when the chicken producer’s financial difficulties culminated in a Chapter 11 bankruptcy filing.
The case was put on hold while the Supreme Court contemplated the proper pleading standards for ERISA cases challenging drops in company stock price. In 2014, the high court ruled that lawsuits based on inside information about business difficulties can survive only by identifying an alternative course of action that plan fiduciaries could have taken instead of holding on to the stock in question. The alternative action must be consistent with securities laws and not, in the view of a prudent fiduciary, likely to do more harm than good to the value of company stock, according to the Supreme Court.
In the Aug. 19 report and recommendation, Magistrate Judge Roy S. Payne of the U.S. District Court for the Eastern District of Texas found that the Pilgrim’s Pride workers didn’t meet this standard.
None of the workers’ suggested alternatives were actions that a prudent fiduciary “could not have concluded … would do more harm than good,” Payne said. Making public disclosures about the company’s difficulties, as the workers suggested that fiduciaries should have done, “would guarantee the collapse of the company stock, as Plaintiffs actually allege,” he said.
Payne’s recommendation isn’t binding and ultimately will be accepted, rejected or modified by a district judge.
Squitieri & Fearon LLP, Johnson Law Firm and Gainey & McKenna represent the workers. Morgan Lewis & Bockius LLP and Ogletree Deakins Nash Smoak & Stewart PC represent the Pilgrim’s Pride fiduciaries.
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Text of the report and recommendation is at http://www.bloomberglaw.com/public/document/Patterson_v_Pilgrim_et_al_Docket_No_208cv00472_ED_Tex_Dec_17_2008.
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