The high court decision lets stand a ruling by the 6th U.S. Circuit Court of Appeals allowing the GM participants to move forward with their lawsuit alleging that State Street failed to follow the terms of the plans, which required State Street to divest the plans’ holdings in company stock if “there is a serious question concerning [General Motors’] short-term viability as a going concern without resort to bankruptcy proceedings.”
According to the complaint, on July 15, 2008, GM announced a restructuring plan designed to improve cash flow and save the company. By November 10, 2008, GM disclosed that its auditors had “substantial doubt” regarding the company’s “ability to continue as a going concern.” However, State Street did not begin to divest the plan of its GM common stock holdings until March 31, 2009. The plaintiffs allege that the plan suffered hundreds of millions of dollars in losses as a result of State Street’s delay.The appellate court concluded that the plaintiffs sufficiently pleaded that “a prudent fiduciary acting under similar circumstances would have made a different investment decision,” overcoming the Moench v. Robertson standard that a fiduciary’s decision to remain invested in employer securities is presumed to be reasonable (see “Appellate Court Reopens Case Against State Street by GM Participants”).