Ex-Motorola Worker Cannot File Company Stock Suit

August 17, 2006 (PLANSPONSOR.com) - Because a former Motorola employee no longer participated in the company's 401(k) plan and had taken a full distribution of his retirement balance, he no longer had the legal position from which he could pursue lawsuits about the program.

That was the ruling handed down by US District Judge Rebecca Pallmeyer of the US District Court for the Northern District of Illinois in a suit filed against Motorola, alleging the company breached its fiduciary duty by imprudently investing plan assets in company stock.

According to the court, although plaintiff John Endsley had a claim to benefits, his legal action was not designed to recoup “vested” benefits. Instead, Endsley wanted enough to make up the difference between his plan distribution and what his account would have been had Motorola not allegedly breached its fiduciary duties.

Endsley had filed legal papers with Pallmeyer with a request to get involved in an already pending litigation originally filed by former Motorola employee Bruce Howell. In September 2005, Pallmeyer discarded the Howell suit after finding that Howell waived his right to sue when he signed a severance release after leaving the company. Motorola opposed allowing Endsley into the suit, arguing he lacked legal standing because of no longer being in the plan.   

Endsley “wants compensation for the loss resulting from Defendants’ breach of legal duty. But this is not a remedy available under Employee Retirement Income Security Act (ERISA) [Section] 502(a) to a former employee who has accepted a lump sum payout of plan benefits,” Pallmeyer wrote.

Howell’s original case was filed on behalf of all Motorola employees who purchased the company’s common stock. Among other things, Howell alleged Motorola and its executives breached their fiduciary duties under ERISA by permitting the plan to purchase and hold shares of Motorola’s common stock when it was imprudent to do so. In addition, Howell claimed the defendants did not disclose material facts about Motorola to the plan participants.

The case is Howell v. Motorola Inc., N.D. Ill., No. 03 C 5044, 8/11/06.