Compliance November 4, 2010

American Express Cleared in Stock-Drop Case

A federal judge in New York threw out a stock-drop lawsuit against the American Express Company.
Reported by

U.S. District Judge John G. Koeltl of the Southern District of New York ruled that fiduciaries under the Employee Retirement Income Security Act (ERISA) are not mandated to delete a company stock investment option if the plan document calls for it to be included in a retirement savings program.

Koeltl also pointed out that even if fiduciaries of American Express’s plan had fiduciary duty to consider regarding the company’s stock, the plaintiffs would still not be able to overcome the presumption of prudence.

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The court said that while American Express stock dropped 78% during the period covered by the suit, the company continued to have earnings and income, and the stock price has since rebounded significantly.

Not only that, Koeltl said, American Express’s decision to lay off 10% of its staff during the period, and to take $3 billion in Troubled Asset Relief Program funds, did not indicate a company facing financial collapse or other dire situations.

American Express was hit with four lawsuits in 2008 and 2009 after its stock lost nearly 78% of its value during the subprime mortgage and credit crisis. The lawsuits, which were later consolidated, alleged that fiduciaries of American Express’s pension plan breached their duties by hanging on to the stock as its value plummeted.

The case is In re American Express Co. ERISA Litigation, SDNY, No. 08-10834 (JGK).

Deals & People November 4, 2010

Office Depot Decides to Use Fidelity

Office Depot chose Fidelity Investments to provide it with benefits administration services.
Reported by

According to the announcement, Fidelity will provide Office Depot with administration and recordkeeping services for the duration of the five-year contract, covering the retirement savings plans, health and welfare benefits, and stock plan services. Participants will be able to manage all three benefits under Fidelity’s NetBenefits Web site. 

Office Depot’s retirement program, which includes 401(k) plans for U.S. and Puerto Rico employees and deferred compensation plans, currently has about 17,000 participants and $336 million in assets. Fidelity’s Health & Welfare services for Office Depot, which will include administration, eligibility and election of health benefits, will serve about 20,000 Office Depot employees. Fidelity will also provide administrative services for Office Depot’s long-term incentive compensation plans through its Stock Plan Services offering for eligible domestic and international employees.

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Office Depot’s employees will have access to Fidelity’s investment education programs, including help from professional service representatives, online educational tools, and informational seminars available online or in-person at Fidelity’s 146 investor centers.

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