U.S. District Judge John G. Koeltl of the U.S. District Court for the Southern District of New York made the move as he ruled that fiduciaries under the Employee Retirement Income Security Act (ERISA) are not mandated to delete a company stock investment option if the plan document calls for it to be included in a retirement savings program.
Koeltl also pointed out that even if the fiduciaries of American Express’s plan had a fiduciary duty to consider stopping investments in the company’s stock, the plaintiffs would still not be able to overcome the presumption of prudence typically afforded plans with employer shares.
In particular, the court said that while American Express stock dropped 78% during the period covered by the suit, the company continued to have earnings and income and the stock price has since rebounded significantly.
Not only that, Koeltl said, American Express’s decision to lay off 10% of its staff during the period, and to take $3 billion in Troubled Asset Relief Program funds, did not indicate a company facing financial collapse or other dire situations.
American Express was hit with four lawsuits in 2008 and 2009 after its stock lost nearly 78% of its value during the subprime mortgage and credit crisis. The lawsuits, which were later consolidated, alleged that fiduciaries of American Express’s pension plan breached their duties by hanging on to the stock as its value plummeted.
The case is In re American Express Co. ERISA Litigation, SDNY, No. 08-10834 (JGK).