December 29, 2010
--- A federal judge in Pennsylvania has cleared the way for a 401(k)
participant to pursue his claim that plan trustees violated their fiduciary duties. ---
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.
Fred Schneyer