The latest argument came in a friend of the court legal brief filed with the 7th U.S. Circuit Court of Appeals regarding Lingis v. Motorola Inc., a stock-drop suit in which a lower court ruled the company was protected by the 404(c) safe harbor provision in the Employee Retirement Income Security Act (ERISA) (see “Judge Says Motorola Didn’t Breach Fiduciary Duties”).
Solis argued in the legal brief that the district court made a mistake in ruling that the fact that the Motorola plan offered nine investment options qualified it for the 404(c) protection. Solis contended that the section provides protection from liability for losses “which result from” a participant’s or beneficiary’s exercise of control over his individual account in an individual account plan.
“The large losses that the Plaintiffs allege the Plan suffered here did not result from the participants’ exercise of control under the 404(c) regulation, but rather from the fiduciaries’ imprudence in offering company stock that was unduly risky because of nearly $2 billion in undisclosed corporate debt,” the brief said.
Repeating a theme echoed in similar legal briefs filed in other cases, Solis contended in the Motorola filing that judges need to pay more attention to the DoL’s 404(c) interpretation than many currently do.
“The Secretary’s interpretation of her 404(c) regulation is entitled to the highest degree of deference because it is longstanding and consistently held, thoroughly thought out, and based on the Secretary’s consideration of relevant policy concerns,” the Solis brief stated.