Macy's Fiduciary Breach Suit Will Stay in Ohio

April 22, 2008 ( - Macy's Inc.'s motion to move a fiduciary breach suit on behalf of a class of participants in its 401(k) plan has been denied by the U.S. District Court for the Southern District of Ohio.

In his opinion, U.S. Senior District Judge Arthur Spiegel said Macy’s did not make a sufficiently strong showing as to why the case should be moved to the Southern District of New York. Macy’s argued the case should be moved because two pending securities litigations it was involved in had allegations nearly identical to the Employee Retirement Income Security Act (ERISA) fiduciary breach case filed by Ebrahim Shanehchian.

Macy’s said it would be a more efficient use of resources to try all cases in one court and may also avoid the possibility of inconsistent conclusions in each case. Macy’s also claimed many of the witnesses and much of the proof in the fiduciary breach case were the same as in the securities suits, so the same venue would be more convenient.

However, the court rejected Macy’s argument that New York would be more convenient for the witnesses and parties by allowing them to manage only one litigation schedule. As Shanehchian pointed out many of the defendant and witnesses in the case are located or reside in Cincinnati. Spiegel said the law does not allow for transfer to a venue that is equally convenient for the parties involved or for a transfer that shifts the convenience from one party to another.

Shanehchian agreed he could have filed the case in the Southern District of New York because Macy’s has a headquarters there, but he pointed out Macy’s also has a headquarters in Cincinnati, and that is where the Macy’s plan is administered and where the breaches occurred.

Shanehchian filed the suit individually and on behalf of a class of similarly situated participants and beneficiaries of the Macy’s, Inc. Profit Sharing 401(k) Investment Plan and the May Department Stores Company Profit Sharing Plan following Macy’s acquisition of May. According to his complaint, after the acquisition, Macy’s “made a series of material representations and omissions regarding [Macy’s] declining sales growth and its failures in converting the newly acquired May stores into Macy’s brand stores…which caused Macy’s common stock to trade at

artificially inflated levels.”

Shanehchian said fiduciaries of the Macy’s Plan and the May Plan breached their fiduciary duties under ERISA by allowing the plans to invest in Macy’s stock, and by encouraging plan participants to invest in Macy’s stock, causing participants to suffer substantial losses of retirement savings and anticipated retirement income.

The opinion in Shanehchian v. Macy’s Inc., S.D. Ohio, No. 1:07-CV-00828, was filed on 4/16/08.