Supermarket Stock Drop Case Remains Alive

December 29, 2010 ( – A federal judge in Pennsylvania has cleared the way for a 401(k) participant to pursue claims trustees violated their fiduciary duties by imprudently managing the plan's company stock holdings.

U.S. District Judge Berle M. Schiller of the U.S. District Court for the Eastern District of Pennsylvania issued the ruling in plaintiff Gerald Alderfer’s suit alleging wrongdoing under the Employee Retirement Income Security Act (ERISA) in the operation of the Clemons Market Inc. Retirement Savings and Profit Sharing Plan.

Schiller held that Alderfer can move forward with claims the fiduciaries acted imprudently by not liquidating company real estate holdings when market conditions were more favorable as well as by not properly monitoring the impact of the value of those real estate holdings on the value of the plan’s company stock.

Schiller contended that it was premature to decide the issue of whether the trustees prudently managed the plan and its company stock holdings because it was yet to be determined whether the trustees were entitled to the  presumption of prudence frequently granted in similar stock-drop litigation.

The court likewise permitted Alderfer to proceed with his claim that the plan trustees misrepresented to participants the relationship between the company’s real estate assets and the plan’s value. The company, a supermarket chain, eventually sold its assets to a competitor. The suit alleges the value of company stock held by the plan fell from $3 million in 2007 to $1.8 million in 2010.

The case is  Alderfer v. Clemens Markets Inc., et al. E.D. Pa., No. 10-4423.