U.S. District Judge Richard W. Story of the U.S. District Court for the Northern District of Georgia explained he was dismissing the imprudence allegation because it was, in reality, a charge that the plan should have been better diversified. The Employee Retirement Income Security Act (ERISA) does not include that diversification requirement, Story asserted as he granted Beazer’s request to throw out that count in the suit.
Story wrote in his opinion that the notion of the prudence presumption runs up against the specific language of ERISA and that three other Georgia federal judges had likewise rebuffed prudence presumption in other cases.
Even as he dismissed the prudence count of the participant lawsuit, Story gave the plaintiffs permission to move forward with other claims that Beazer also committed an ERISA fiduciary breach by not completely informing employees about its true financial condition including the effects of its subprime mortgage exposure. The court said several other federal judges have recognized that a fiduciary has a duty to disclose to other fiduciaries material information that is necessary to protect the plan.
The class action complaint alleged that Beazer and its top executives breached their ERISA fiduciary duties by maintaining the plan’s “large investment” in the company’s stock from July 28, 2005, to May 12, 2008. The employees claimed that during this time, the stock was an imprudent investment because of the increased foreclosure rate on homes with subprime mortgages.
The case is In re Beazer Homes USA Inc. ERISA Litigation, N.D. Ga., No. 1:07-CV-0952-RWS.
« Wells Fargo Wins Some, Loses Some in Self-dealing Case