US Magistrate David Peebles of the US District Court for the Northern District of New York ruled that the settlement pact with Mellon Trust of New England was so broadly drafted that it would unfairly prohibit other defendants in the case from getting Mellon to contribute if the US Department of Labor files a separate lawsuit against all of the defendants.
The Agway Inc. Employees’ 401(k) Thrift Investment Plan and its independent fiduciary, State Street Bank & Trust Co., brought the lawsuit against Agway’s directors and members of the plan’s investment committee alleging they breached their fiduciary duties under the Employee Retirement Income Security Act (ERISA) by investing in Agway stock when it was no longer prudent to do so.
In addition, according to the court, Mellon Trust submitted periodic statements to the investment committee regarding the plan’s assets and also appraised the fair market value of the plan’s investments, including Agway stock. The plan alleged that Mellon Trust reported inaccurate valuations to the committee and thus breached its fiduciary duties.
The plan worked out an agreement with Mellon Trust under which Mellon would pay $3.5 million to the plan. The settlement included an order that would release Mellon Trust from all claims and would preclude the nonsettling defendants from pursuing indemnity or contribution claims against Mellon Trust out of any action or events related to the claims brought in the plan’s lawsuit.
PWC and the other nonsettling defendants objected to the settlement and asked the court to deny approval.
The case is Agway Inc. Employees’ 401(k) Thrift Investment Plan v. Magnuson, N.D.N.Y., No. 5:03-CV-1060, 11/21/05.