Court Dismisses Company Stock Suit against
Harley-Davidson
October 12, 2009 (PLANSPONSOR.com) - The U.S.
District Court for the Eastern District of Wisconsin has
dismissed a lawsuit accusing Harley-Davidson and certain of
its executives of breaching their fiduciary duties under the
Employee Retirement Income Security Act (ERISA) by continuing
to offer company stock as an investment option in the
company's retirement plans.
After first determining that former employee Lisa Bosman
had standing to sue even though she had cashed out her
retirement plan account, Chief U.S. District Judge C. N.
Clevert, Jr. said that "Stating a valid claim of
imprudence under these circumstances requires more than
allegations that there were gaps between supply and demand
and a corresponding bad quarter."
Dismissing the suit for failure to state a claim,
Clevert likened Bosman's claims to those in
Edgar v. Avaya
, in which the 3
rd
U.S. Circuit Court of Appeals found that a disruption in
sales and the corresponding drop in stock price do not
create the type of dire situation which would require
defendants to disobey the terms of the plans by not
offering company stock as an investment option, or by
divesting plans of company stock (see
Case Sensitive: "Dire"
Circumstance
).
In addition, Clevert said, "Bosman's assertions
are even more dubious given that the April 2005 stock price
drop was in no way indicative of a chronic, deteriorating
financial condition." He noted the company's stock
prices generally increased throughout the remainder of the
class period.
According to the opinion, the retirement plans at issue
gave participants a choice of 19 funds, including the
Harley-Davidson Stock Fund, and company match contributions
were invested in the company stock fund, but were only
required to remain there until participants were fully
vested at three years of service or until age 55. The
opinion also said that the SPD warned in bold, all capital
letters that "
IT IS VERY IMPORTANT THAT YOU NOT PUT ALL OF YOUR
RETIREMENT SAVINGS IN JUST ONE FUND - AND THIS INCLUDES THE
HARLEY DAVIDSON COMMON STOCK FUND
."
Bosman had invested all of her plan assets in company
stock.
She asserted in her suit that Harley-Davidson was
shipping to dealers more motorcycles than were being sold,
and that Harley-Davidson Financial Services (HDFS) lowered
credit standards to boost sales. The complaint asserts that
these practices were intended to deceive the market and to
cause Harley stock to trade at inflated prices, leading to
an April 13, 2005, announcement that Harley was adjusting
its shipment and earnings projections, which caused a 23%
drop in the value of Harley stock over the next several
days of trading.
The case is
In re Harley-Davidson Inc. Securities
Litigation,
E.D. Wis., No. 05-C-0547-CNC, 10/8/09.
Rebecca Moore
editors@plansponsor.com