The U.S. District Court for the Southern District of New York has preliminarily approved a settlement between Avon Products and participants in its defined contribution (DC) retirement plan.
The settlement calls for Avon to pay $6.250 million to be placed in a settlement fund. A net settlement fund of approximately $4.345 million will be divided among eligible class members, according to Stull, Stull & Brody and Zamansky, LLC, which represented the participants in the DC plan.
The Employee Retirement Income Security Act (ERISA) lawsuit over Avon’s handling of the company stock fund investment option in its retirement plan, says that in October 2008, Avon disclosed that it was conducting an investigation into the possibility of misconduct in connection with its China operations. In October 2011, the Securities and Exchange Commission (SEC) announced it initiated its own investigation into Avon’s alleged Foreign Corrupt Practices Act (FCPA) violations. According to the lawsuit, Avon’s stock price steadily declined during this period through the announcement of a joint settlement with the SEC and Department of Justice in May 2014—from $32.41 per share to $13.72 per share.
The lawsuit contends that, given their awareness of Avon’s misconduct, the plan fiduciaries should have implemented a freeze on purchases of shares in the Avon stock fund or communicated the truth about Avon’s misrepresentations. To ensure they did not run afoul of securities law prohibiting insider trading, the suit says, plan fiduciaries could have worked to make the company disclose the truth at the same time.
A fairness hearing for the settlement is set of October 11, according to the docket sheet for the case.
The settlement agreement may be viewed here.