JPMorgan not Liable for WaMu Retirement Plan Mismanagement
The Associated Press reports that in the decision handed down last week, Pechman also dismissed as a defendant in the lawsuit Kerry K. Killinger, chief executive of WaMu from 1990 until shortly before it ran aground in September 2008. The lawsuit claims the retirement plans were poorly managed and monitored and participants should have been advised by fund managers that WaMu stock was increasingly risky well before the bank’s collapse.
The former WaMu employees assert that responsibility for the actions of former WaMu executives regarding the retirement plans should transfer to JPMorgan, which bought the failed bank after it was seized. However, Pechman previously suggested that making a new owner liable for a failed bank’s lack of fiduciary responsibility in managing 401(k) accounts could make it harder for the Federal Deposit Insurance Corp.(FDIC) to arrange future takeovers of teetering banks (see September Ruling Expected in WaMu 401(k) Cases ).
In her opinion, Pechman said that to hold JPMorgan responsible, she would have to find that the FDIC had the legal authority to transfer liability for prior 401(k) fund management with the purchase and that the federal agency did so. “Allowing plaintiffs to proceed against JPMC (JPMorgan) runs the risk of expanding the FDIC’s jurisdiction well beyond its statutory reach,” she wrote.
Steve W. Berman, an attorney for the former employees, said he would move to challenge the ruling in the 9th U.S. Circuit Court of Appeals, according to the AP. Berman also said Pechman eventually will be asked to make the retirement case a class-action lawsuit.
Pechman let stand some claims against former members of the human resources committee of WaMu’s board of directors and against members of the Plan Investment Committee and Plan Management Committee, both of which are fiduciaries of the 401(k) plans.
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