In its ruling, the appellate court reversed a federal district court’s dismissal of the case for lack of subject matter jurisdiction. The district court had stated that the former employees leading the suit did not qualify as plan participants. However, the appellate court said the district court’s ruling that the former employees were suing to recover damages, not benefits, was erroneous.
The suit alleges that Home Depot and several of its executives breached their fiduciary duties to 401(k) participants by “failing to prudently and loyally manage the Plan’s investment in Home Depot Stock,” and by making company contributions with Home Depot stock. The former employees charge that the company stock was an imprudent investment after the company’s share price began to decline in June 2001.
In addition, the plaintiffs claim that the stock price decline began during a time when several of Home Depot’s top executives were improperly backdating their stock option grants (See Home Depot Discloses 19 Years of Options Backdating ).
A number of Circuits have recently come to similar conclusions that former defined contribution plan participants have legal standing to sue for account losses due to plan mismanagement (See Another Circuit Says Cashed-out Participants Have Right to Sue ).
The ruling in Lanfear v. Home Depot, Inc. is here .