Benefits & Executive Compensation News

SunEdison, Execs Defeat Lawsuit Over Parent Stock in 401(k)

Feb. 21, 2018, 9:00 PM

SunEdison Semiconductor LLC defeated a lawsuit challenging its decision to keep stock of its former parent company—SunEdison Inc.—as an investment option in its employees’ 401(k) plan.

The allegation that SunEdison Semiconductor breached its fiduciary duties by allowing employees to continue holding SunEdison stock despite knowing, through public information, that the stock was an imprudent investment is insufficient to state a claim under the Employee Retirement Income Security Act, a federal judge in Missouri held Feb. 21.

The decision is another blow for workers challenging their employer’s decision to keep investing in the stock of former parent companies. In December, a federal judge in Ohio dismissed similar allegations against Marathon Petroleum Corp. executives who were accused of allowing workers to invest their retirement savings in the declining stock of its former parent company Marathon Oil Corp. Seventy Seven Energy and Phillips 66 are defending similar challenges.

The worker challenges in these cases are a twist on the typical ERISA case challenging companies that put employer stock in their workers’ retirement plan.

Lawsuits challenging losses in retirement savings following drops in company stock price have seen almost no success since 2014, when a U.S. Supreme Court decision made it harder to bring fiduciary breach claims under ERISA. Since then, a growing list of companies and their executives have defeated stock-drop lawsuits, including RadioShack Corp., WellsFargo, Target Corp., Cliffs Natural Resources Inc., Reliance Trust Co., Lehman Brothers Holdings Inc., State Street Bank & Trust Co., Citigroup, Whole Foods Corp., JPMorgan Chase & Co., L-3 Communications, and BP Plc.

In her ruling in the SunEdison case, Judge Audrey G. Fleissig of the U.S. District Court for the Eastern District of Missouri agreed with SunEdison Semiconductor’s argument that previous court decisions foreclosed the claims.

The lawsuit against SunEdison Semiconductor was filed by Alexander Usenko, a former employee and plan participant who in 2016 filed another lawsuit against the former parent company before it filed for bankruptcy later that year. The case was stayed until SunEdison’s bankruptcy proceedings were concluded.

Fleissig also denied Usenko’s request for leave to amend his lawsuit.

Harwood Feffer LLP, Dysart Taylor Cotter McMonigle & Montemore P.C., and Gainey MCkenna & Egleston represent the worker. Hepler Broom and Sidley Austin LLP represent SunEdison Semiconductor.

The case is Usenko v. SunEdison Semiconductor LLC, 2018 BL 57343, E.D. Mo., No. 4:17-cv-02227-AGF, order granting defendants’ motion to dismiss 2/21/18.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bloomberglaw.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com

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