Sidley has played a significant role in developing the case law that governs “stock drop” cases, and we have built an experience base that includes every nuance of defending against challenges to the prudence of company stock as an investment option in a 401(k) plan. Sidley is defending the nation’s leading companies, as well as their officers and directors, against these claims.
Sidley Secures Dismissal with Prejudice for Officers and Directors of SunEdison
- Plaintiffs brought an ERISA class action alleging that defendants breached their fiduciary duties by allowing participants in the SunEdison 401(k) plan to retain their stock in SunEdison as public information suggested that the company was heading to bankruptcy. Plaintiffs also alleged that defendants should have disallowed further investment because they had insider information that the stock was overvalued.
- We won dismissal with prejudice. The Second Circuit held that plaintiffs’ claim based on public information was foreclosed under Supreme Court precedent because they failed to allege “special circumstances” affecting the reliability of the market’s valuation of SunEdison stock. The Second Circuit also rejected plaintiffs’ claim based on non-public information, holding that plaintiffs failed to plausibly allege that a prudent fiduciary could not have concluded that halting further purchases would have done more harm than good to the plan and its participants. In re: SunEdison, Inc. ERISA Litig., 331 F. Supp. 3d 101 (S.D.N.Y. 2018), affirmed, O’Day v. Chatila, 2019 WL 2404660 (2nd Cir. June 7, 2019).
Sidley Achieves Motion to Dismiss in Company Spin off 401(k) Case
- Represented Principal Trust Company in an ERISA class action alleging our client breached their fiduciary duties by allowing participants in Seventy Seven Energy’s 401(k) plan to retain their stock in Chesapeake Energy after Seventy-Seven was spun off from Chesapeake. This was a first-of-its-kind case in that it alleges claims against the directed trustee and not just the plan fiduciaries. Sidley achieved a motion to dismiss for our client. Meyers ex rel. Seventy Seven Energy Inc. Ret. & Sav. Plan v. Admin. Comm., Seventy Seven Energy Inc. Ret. & Sav. Plan, No. CIV-17-200-D, 2019 WL 1320064 (W.D. Okla. Mar. 22, 2019)
Sidley Wins Dismissal with Prejudice for MEMC
- Plaintiff filed an ERISA class action alleging that the fiduciaries of MEMC, LLC’s 401(k) plan breached their fiduciary duties by allowing participants to retain their holdings in SunEdison stock after MEMC was spun off from SunEdison, when public information suggested that SunEdison was headed to bankruptcy.
- Sidley obtained a dismissal on the pleadings, which was affirmed by the Eighth Circuit. The Eighth Circuit held that the Supreme Court’s pleading standard under Fifth Third Bancorp. v. Dudenhoeffer applies to all publicly traded securities and is not limited to employer securities. The court held that plaintiff’s claim was properly dismissed because plaintiff failed to allege any “special circumstances” that would affect the reliability of SunEdison’s market price. Usenko v. MEMC, LLC, 2018 WL 999982 (E.D. Mo. Feb. 21, 2018), affirmed, 926 F.3d 468 (8th Cir. 2019).
Successful Dismissal with Prejudice for Marathon Petroleum
- Plaintiff brought a novel ERISA class action alleging that defendants breached their fiduciary duties by allowing participants in the Marathon Petroleum 401(k) plan to retain their stock in Marathon Oil after Marathon Petroleum was spun off from Marathon Oil.
- We won dismissal with prejudice. The court found that plaintiff’s “prudence” claim was foreclosed under the Supreme Court’s precedent in Dudenhoeffer because he failed to allege “special circumstances” affecting the reliability of the Marathon Oil stock price. The court also dismissed plaintiff’s “diversification” claim, finding that the Marathon Petroleum’s 401(k) plan were diversified as a whole. Yates v. Nichols, 286 F. Supp. 3d 854 (N.D. Ohio 2017).
Sidley Secures Landmark Victory in Claims Against Plan Fiduciaries
- The Seventh Circuit announced that it was adopting the Moench presumption of prudence to evaluate claims against plan fiduciaries who follow plan terms by offering company stock as an investment option.
- The court expressed “fundamental doubts” about common theories of liability in 401(k) stock drop cases and stated that “it will be difficult” for any future plaintiff to rebut the presumption of prudence.
- Absent misrepresentations or other misconduct, “plaintiffs in such cases under ERISA must try to hit a very small and perhaps non-existent target.” White v. Marshall & Ilsley Corp., 714 F.3d 980 (7th Cir. 2013).
Sidley Secures Summary Judgment in Favor of Owens Corning
- Based on the statute of limitations, we won summary judgment in favor of Owens Corning’s CEO and members of the senior management team.
- The Sixth Circuit clarified important questions about how to interpret ERISA’s three-year “actual knowledge” statute of limitations and when a claim for breach of fiduciary duty accrues. Brown v. Tober, 622 F.3d 564 (6th Cir. 2010).
Successful Dismissal of Claims on Behalf of Tribune Company
- Sidley won dismissal of all claims against Tribune Company in a class action filed on behalf of participants in the company’s 401(k) plans.
- The Seventh Circuit observed that “ERISA imposes no duty on plan fiduciaries to continuously audit operational affairs.” Pugh v. Tribune Co., 521 F.3d 686 (7th Cir. 2008).
Favorable Settlement Secured for Hartford Financial
- Plaintiffs brought ERISA and securities class actions alleging that 401(k) plan fiduciaries acted imprudently by continuing to offer Hartford stock as an investment option during the financial crisis in 2008 and 2009.
- By preemptively producing key documents in advance of formal discovery, we were able to negotiate a highly favorable settlement without significant expense. We also won dismissal of the 10b-5 class action.
Victory in Stock Drop Case for JPMorgan Chase
- We won dismissal of all claims against JPMorgan Chase Bank, N.A. in a stock drop case involving a 401(k) plan sponsored by Washington Mutual, Inc.
- After Chase acquired certain WaMu assets, plaintiffs sought to hold Chase liable on a successorship theory, but the district court rejected the theory and dismissed all claims against our client. In re Washington Mutual, Inc. Secs., Derivative & ERISA Litig., No. 2:08-md-1919, 2009 WL 3246994 (W.D. Wash. Oct. 5, 2009).
Sidley Wins Dismissal of All Claims in First Stock Drop Case Arising from the Subprime Lending Crisis
- We won dismissal of all claims against Huntington Bancshares, as well as its officers and directors, in one of the first stock drop cases arising from the subprime lending crisis.
- “ERISA was simply not intended to be a shield from the sometimes volatile financial markets,” the court said. In re Huntington Bancshares Inc. ERISA Litigation, 620 F. Supp. 2d 842 (S.D. Ohio 2009).
Favorable Settlement for Kmart CEO
- Sidley represented the former CEO and Chairman of the Board of Kmart Corporation in an ERISA stock drop case.
- After we prevailed in a separate arbitration that raised some of the same issues, the case settled on favorable terms.
Favorable Settlement on Behalf of Aon in ERISA Class Action
- This ERISA class action involving Aon’s 401(k) plan arose out of a subpoena that the New York Attorney General served on Aon and others seeking information about compensation arrangements between insurance companies and brokers. The case settled on favorable terms.
AT&T Corp. (D.N.J.) Successful Representation of AT&T in ERISA Class Action
- Plaintiffs filed ERISA and securities class actions alleging that 401(k) plan fiduciaries acted imprudently by continuing to offer AT&T stock as an investment option.
- This case was resolved on a favorable basis while AT&T’s motion for summary judgment was pending. We resolved the securities class action on a similarly favorable basis after several weeks of trial.