U.S. District Judge Henry Edward Autrey of the U.S. District Court for the Eastern District of Missouri said at this stage in the proceedings specific facts are not necessary, and the plaintiffs need only set forth allegations and notify defendants that they challenge the defendants’ prudence and loyalty. According to Autrey, the issue is not whether the plaintiffs will ultimately prevail, but whether they are entitled to present evidence in support of the claim.
Autrey rejected MEMC’s argument that the plaintiffs had to overcome a presumption of prudence afforded eligible individual account plans, and to do that they must allege that MEMC was on the verge of collapse. According to the opinion, the court concluded that the plaintiffs’ allegations are sufficient to overcome the presumption of prudence, and they need not allege imminent collapse in order to overcome the presumption.
MEMC is a publicly traded company that designs, manufactures, and sells silicon wafers for use in semiconductors and solar cells. According to the court opinion, MEMC manufactures its primary raw material, polysilicon, at facilities in Pasadena, Texas, and Merano, Italy. On July 23, 2008, MEMC announced that a fire at the Texas plant on June 13, 2008, shut polysilicon production down for a week. In the same announcement, MEMC stated that there had been a failure on the production line in June, 2008, at the Merano plant that reduced polysilicon output for the second quarter by almost 5%. On July 24, 2008, MEMC’s share price fell slightly more than 20%.
The plaintiffs claim that the defendants misrepresented or failed to disclose these events in a timely manner, which caused the share price to fall and not recover. They also allege the defendants breached their fiduciary duties to the plan and participants by continuing to offer company stock as an investment when it was no longer prudent.
The case is Jones v. MEMC Electronic Material Inc., E.D. Mo., No. 4:08CV1991 HEA, 3/17/10.