Former Participants Lack Standing in Co Stock Case

While rejecting other motions by Medical Information Technology Inc. to dismiss the plaintiffs claims, the court agreed with the defendant that the plaintiffs lacked standing to obtain prospective relief through an injunction requiring outside appraisal of the stock for future valuations.   The court said in its decision that the relief does not redress the former participants’ alleged injuries since it is prospective and they are no longer members of the plan.

Further, the plaintiffs sought class certification, defining the class as other individuals who “had the same or similar experience when receiving their [Plan] distributions.”   According to the court, this definition would include only former participants in the plan, who would not benefit from an order of an injunction affecting future administration of the plan.

The plaintiffs claimed that the plan administrator knowingly undervalued the company’s stock, which accounted for approximately 85% of the company’s profit sharing account holdings, for at least eight years.   Because of this, plaintiffs alleged, they received smaller cash payments upon termination than they would have if the administrator had used a modern methodology for appraising fair market value.

Plaintiffs filed suit for failure to pay benefits due under the Plan in violation of the Employee Retirement Income Security Act (ERISA) and for breach of fiduciary duty owed under ERISA.

The decision in Hubert v. Medical Information Technology Inc. is  here .