In contrast to most employer stock price drop ERISA lawsuits that allege the imprudence of maintaining company stock as an investment option, the plaintiffs in this matter alleged a breach of fiduciary duty when W.R. Grace fiduciaries and State Street Bank and Trust Company, acting as an independent fiduciary, divested the 401(k) plan of the W.R. Grace stock.
Retained by Paul, Hastings, Janofsky & Walker and by Arent Fox
In contrast to most employer stock price drop ERISA lawsuits that allege the imprudence of maintaining company stock as an investment option, the plaintiffs in this matter alleged a breach of fiduciary duty when W.R. Grace fiduciaries and State Street Bank and Trust Company, acting as an independent fiduciary, divested the 401(k) plan of the W.R. Grace stock. The plaintiffs contended that fiduciaries sold the plan’s holdings in the W.R. Grace stock at an imprudently low price while W.R. Grace was in bankruptcy reorganization.
The U.S. Court of Appeals for the First Circuit ruled that State Street did not breach its ERISA fiduciary duties.
With support from Cornerstone Research, Professor Christopher James of the University of Florida demonstrated that W.R. Grace stock traded in an efficient market and, as a result, plan participants received at least the fair value for their W.R. Grace stock holdings when these shares were liquidated. Professor James also determined that the valuation analysis that contributed to the decision to divest the plan’s holdings of the W.R. Grace stock was reasonable.
On January 29, 2009, the U.S. Court of Appeals for the First Circuit, upholding a lower court decision, ruled that State Street engaged in a substantively sound, reasonable analysis of all relevant circumstances appropriate to the decision to sell the plan’s holdings of the W.R. Grace stock and did not breach its ERISA fiduciary duties.