US District Judge John Lungstrum, of the US District Court for the District of Kansas, told the Associated Press the company would also have to pay $3.9 million in attorney fees for a lawsuit that has been dragging on for more than three years.
A group of participants in Sprint’s three 401(k) plans filed the suit in May 2003 against the company, its board of directors, the plans’ administrative committee and the plans’ directed trustee, alleging they breached their fiduciary duties under the Employee Retirement Income Security Act (ERISA) (See Sprint Hit With 401(k) Plan Suit). The participants claimed they breached their fiduciary duties by:
- allowing the participants to purchase and hold shares of Sprint stock
- permitting Sprint stock to remain as an investment option under the plans
- negligently misrepresenting and failing to disclose material information to participants concerning the plans’ investment in Sprint stock, not telling participants of the anticipated failure of the WorldCom merger.
The plaintiffs alleged the directors were aware of information that indicated Sprint stock was not a sensible investment. The allegations went on to include claims company officials incorporated misleading information that inflated the market price of Sprint securities into the plan’s summary plan description, knowing that participants would rely on it in making investment decisions.
Lungstrum rejected several attempts by Sprint to throw out the class action suit in September 2004 (See Sprint Co. Stock Allegations Still Alive ).
The participants in the class action suit will get between $400 and $1,000 in cash, increased company matching for their plans or other benefits, as well as financial planning classes. About 63,000 of the class-action members now work for Embarq Corp., the local telephone division that Sprint spun off to become a separate company in May, or no longer work for Sprint, the AP reported.
David Gunasegaram, a spokesman for the company, admitted no wrongdoing. “We saw this as an opportunity to resolve this litigation in a manner that was mutually beneficial,” he said, according to the AP.