Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Sept. 29 — RadioShack Corp. is the third major company in less than a week to defeat a lawsuit by employees claiming they lost retirement savings because their employer allowed them to invest in poorly performing company stock ( In re 2014 RadioShack ERISA Litig. , N.D. Tex., No. 4:14-cv-00959-O, 9/29/16 ).
In dismissing the lawsuit against RadioShack, a Texas-based federal judge found on Sept. 29 that the employees failed to allege—either by reference to public information or inside corporate knowledge—that the people running RadioShack’s 401(k) plans breached their duties by continuing to offer company stock as an investment.
This decision comes three days after BP Plc’s victory in the U.S. Court of Appeals for the Fifth Circuit and one day after a win for Whole Foods Corp. issued by another Texas-based judge. In all three cases, the courts found that employees failed to overcome the high bar set by the U.S. Supreme Court for cases challenging stock losses under the Employee Retirement Income Security Act.
The RadioShack case has a wrinkle not present in the BP or Whole Foods lawsuits—namely, that the original allegations against the company were based largely on publicly available information about RadioShack’s financial struggles. In its 2014 decision on ERISA-based stock challenges, the Supreme Court drew a distinction between cases based on public information and cases based on inside knowledge of fraud or wrongdoing, saying that the former are generally implausible absent “special circumstances.”
In January, Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas rejected the RadioShack workers’ claims after finding that the company’s slide toward bankruptcy didn’t qualify as a “special circumstances.”
In his most recent ruling, Judge O’Connor allowed the RadioShack workers to bring new allegations based on inside information, a move arguably aimed at bringing the dispute under the more plaintiff-friendly of the Supreme Court’s pleading standards.
However, O’Connor’s ultimate decision—taken along with the recent decisions favoring BP, Whole Foods, Lehman Bros., JPMorgan Chase, Edison International and International Business Machines Corp.—demonstrates how difficult it has become for plaintiffs to satisfy either standard.
After reaffirming his January conclusion that no special circumstances were present, O’Connor found that the workers also failed to state a claim based on inside corporate information. According to O’Connor, the workers failed to identify any material inside information that the RadioShack defendants withheld from the public.
RadioShack was represented by Morgan Lewis & Bockius LLP and Ogletree Deakins Nash Smoak & Stewart P.C. The employees were represented by Kessler Topaz Meltzer & Check LLP and Lackey Hershman LLP.
To contact the reporter on this story: Jacklyn Wille in Washington at email@example.com
To contact the editor responsible for this story: Jo-el J. Meyer at firstname.lastname@example.org
Text of the decision is at http://www.bloomberglaw.com/public/document/Master_File_In_Re_2014_RadioShack_ERISA_Litigation_Docket_No_414c/2.
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 email@example.com.
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 firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)