U. S. District Judge S. Thomas Anderson of the U.S. District Court for the Western District of Tennessee cleared the way for First Horizon lawyers to ask the 6th U.S. Circuit Court of Appeals to decide whether courts can now expand the “presumption of prudence” standard already common when cases are decided on their merits to earlier when rulings are being rendered on the initial court filings.
The First Horizon lawyers argued federal judges around the country have been split on the issue.
Because the law gives company stock plan sponsors the presumption that their decisions were prudent, stock-drop plaintiffs have to show that prudence presumption should be disregarded in light of a company’s pending financial collapse or by arguing that no other reasonable fiduciary would have taken the same steps as the stock-drop defendants including offering company stock at all.
Plaintiffs contended that First Horizon breached their duties by continuing to offer company stock in its defined contribution plan when it was no longer a prudent investment. They further alleged that the defendants breached their duties by not giving the employees complete and accurate information about First Horizon’s financial position.
Between 2003 and 2007, according to the class-action suit, First Horizon greatly increased its exposure to risky home, commercial, and real estate construction lending. As a result, the suit charged that First Horizon shares dropped almost 90% during the time covered by the litigation.
According to the court, as of December 2005, more than 50% of the plan’s net assets of $317,598,814 were invested in First Horizon stock.
The case isSims v. First Horizon National Corp., W.D. Tenn., No. 08-2293-STA-CGC.