U.S. District Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York ruled that the Pfizer and Pharmacia employees had put forward strong enough evidence to withstand the companies’ request to dismiss the Employee Retirement Income Security Act (ERISA) case.
The crux of the employees’ ERISA allegation is that the Pfizer and Pharmacia retirement savings plans, including 401(k) programs, lost hundreds of millions of dollars when fiduciaries imprudently continued to allow employees to invest in company stock, according to the court. The companies and their executives did not properly look into the potential effects on the stock share value of the controversy and eventual recall of the prescription drugs Celebrex and Bextra that were pulled from the market in 2005 after concerns were raised they posed cardiovascular risks, the defendants alleged.
With the “vast majority” of the plans’ assets in company stock, the plans lost about a quarter of their value when the problems with the drugs were publicized, Swain said.
Swain rebuffed arguments that Pfizer and Pharmacia were not fiduciaries, saying the plaintiffs’ had enough evidence that although the companies were not named as fiduciaries in the plan documents, they effectively functioned in that capacity. Similarly, Swain asserted, the plaintiffs had sufficiently proven the company directors were ERISA fiduciaries because of their authority to appoint plan administrative committee members.
Swain also turned down a request to throw out a charge the defendants committed a fiduciary breach by not being honest about the potential problems with the two drugs and by not bringing in an outside fiduciary when conflicts of interest arose.
The case is In re Pfizer Inc. ERISA Litigation, S.D.N.Y., No. 04 Civ. 10071 (LTS)(JFE).