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. 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.
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 report and recommendation is at http://www.bloomberglaw.com/public/document/Patterson_v_Pilgrim_et_al_Docket_No_208cv00472_ED_Tex_Dec_17_2008.
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 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)