Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
RadioShack Corp. executives defeated a lawsuit accusing them of violating federal benefits law by allowing workers to invest in company stock despite knowing of the company’s financial decline and impending bankruptcy.
The workers’ allegations—that the executives were imprudent by failing to respond to public information on RadioShack’s financial decline and insider information suggesting the stock was overvalued—aren’t sufficient to state a claim under the Employee Retirement Income Security Act, the U.S. Court of Appeals for the Fifth Circuit held Feb. 6.
Lawsuits challenging lost retirement savings following drops in company stock price have seen almost no success since 2014, when a U.S. Supreme Court decision made it harder to bring fiduciary breach claims under ERISA. Since then, a growing list of companies and their executives have defeated stock-drop lawsuits, including 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.
RadioShack plan fiduciaries didn’t breach their duty of prudence by relying on market price as a fair indicator of the value of the company stock, a three-judge panel held. The workers failed to show that special circumstances made the reliance on the market price imprudent, the judges said.
The case is Singh v. RadioShack Corp., 5th Cir., No. 16-11587, affirming district court decision 2/6/18.
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