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Aug. 18 — Participants in SunTrust Banks Inc.'s 401(k) plan got the green light from a federal judge in Georgia to proceed as a class with their claims that the bank breached its ERISA fiduciary duties by allowing poorly performing SunTrust stock as an investment option in the plan ( In re SunTrust Banks, Inc. ERISA Litig. , 2016 BL 266568, N.D. Ga., No. 1:08-cv-03384-RWS, 8/17/16 ).
Judge Richard W. Story of the U.S. District Court for the Northern District of Georgia Aug. 17 granted the participants’ motion to certify a class that could include thousands of members. However, Story streamlined the participants’ lawsuit by granting partial summary judgment to SunTrust in relation to the claims raised by five participants who released their claims in a severance agreement they signed with the bank.
In their amended complaint, the class alleged that SunTrust allowed the imprudent investment of the plan’s assets in the bank’s stock despite knowing that such investment was “unduly risky” for retirement savings accounts. According to the class, SunTrust stock was an imprudent investment between 2007 and 2011 due to the “serious mismanagement” of the company as well as the artificial inflation of the company stock, which declined 73 percent during that period.
In trying to convince the court to deny class certification, SunTrust argued that the class didn’t share common questions of fact or law because the assessment of damages under their legal theory created individual inquiries. The court disagreed.
“Just because the alternatives pled affect different individuals in the class in different ways does not change the fact that the determination of whether a breach of fiduciary duty occurred will provide classwide resolution,” the court said. Participants still suffered the same alleged breach of fiduciary duty and have appropriately alleged alternatives as required by Fifth Third Bancorp v. Dudenhoeffer, 134 S.Ct. 2459 (2014), the court said.
The class includes participants in SunTrust’s plan between May 2007 and March 2011, whose accounts included investments in SunTrust common stock and who sustained a loss to their account as a result of the investment in the bank’s stock.
The court agreed with SunTrust that the severance agreements signed by five participants barred them from bringing an action for the claims asserted against SunTrust.
The court also denied the participants’ request to exclude the report prepared by SunTrust’s expert witness. In doing so, the court said the report was “helpful and illuminating” as to the issues concerning the request for class certification.
Kessler Topaz Meltzer & Check LLP, Stull Stull & Brody, Douglas E. Hart, Dyers & Berens LLP, Statman Harris & Eyrich LLC, Salpeter Gitkin LLP and Holzer & Holzer LLC represents the class. King & Spalding LLP represents SunTrust.
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