Breach of Duty Claims Plausible
Participants in an employee stock ownership plan (ESOP) filed a putative class action against their employer, IBM, and its officers, asserting claims under the Employee Retirement Income Security Act (ERISA). The plan participants alleged the employer’s failure to prudently and loyally manage the plan's assets, and a failure to adequately monitor the plan's fiduciaries. These claims stemmed from the assertion the defendants caused a drop in the value of the company’s ESOP by failing to disclose that one of its divisions was overvalued. The Second Circuit reinstated the plaintiffs’ complaint holding the participants stated a plausible ERISA claim for breach of duty to manage ESOP assets prudently. However, the court refused to make a broader ruling establishing a standard by which such claims would be weighed.