United States District Court, E.D. Kentucky, Northern Division, Covington
LONNIE E. ELEY, on behalf Of the General Cable Savings And Investment Plan, himself, And a class consisting of Similarly situated participants Of the Plan PLAINTIFFS
GENERAL CABLE CORP., ET AL. DEFENDANTS
MEMORANDUM OPINION AND ORDER
William O. Bertelsman United States District Judge
matter is before the Court on defendants' motion to
dismiss (Doc. 29). The Court previously heard oral argument
on this motion and took the matter under advisement. (Doc.
further study, the Court issues the following Memorandum
Opinion and Order.
and Procedural Background
Lonnie M. Eley, on behalf of a putative class of participants
in the General Cable Savings and Investment Plan (“the
Plan”), brings this action under §§ 404, 405,
409 and 502 of the Employee Retirement Income Security Act of
1974, as amended, for defendants' alleged breaches of
fiduciary duties. (Am. Compl. ¶ 1) (Docs. 20,
Count One of the Amended Class Action Complaint alleges
breach of the duty of prudence; Count Two alleges breach of
the duty of loyalty; and Count Three alleges breach of the
duty to monitor. (Doc. 20 ¶¶ 153-188).
contends that defendants permitted the Plan to continue to
offer General Cable stock as an investment option even after
defendants knew or should have known that the stock was
artificially inflated because the company had not disclosed
that employees of its foreign subsidiaries had violated the
Foreign Corrupt Practices Act of 1997 (“FCPA”) by
paying bribes to foreign government officials. (Id.
¶¶ 6-7). Plaintiff alleges that the stock was thus
an imprudent investment, and defendants breached their duties
of prudence and loyalty in offering the stock to Plan
participants. (Id. at 5).
2014 to 2016, General Cable publicly disclosed the possible
FCPA violations. As a result, General Cable's stock price
dropped, and Plan participants lost a significant portion of
their retirement investments. (Id. ¶ 110-114).
December 2016, the company entered into agreements with the
Department of Justice and the Securities and Exchange
Commission to pay millions of dollars to settle FCPA-related
charges against it. (Id. ¶¶ 115-117).
Amended Complaint, plaintiff alleges that defendants should
have taken steps to protect Plan participants from harm: (1)
making early and candid disclosures of the company's FCPA
violations (Id. ¶¶ 122-125); (2) freezing
further purchases of company stock and holding contributions
in cash “or some other short-term investment”
(Id. ¶¶ 126-139); (3) seeking guidance
from the Department of Labor or Securities and Exchange
Commission (Id. ¶ 140); (4) resigning as Plan
fiduciaries to the extent that could not act loyally and
prudently (Id.); and (5) retaining outside experts
to serve as advisors or independent fiduciaries for the Plan
have moved to dismiss the Amended Complaint, arguing that it
fails to state a claim under applicable law. For the reasons
that follow, the Court agrees.
Breach of the Duty of Prudence
requires a fiduciary to discharge his or her duties with
respect to a Plan solely in in the interest of the
participants and beneficiaries and “with the care,
skill, prudence, and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims.” 29
U.S.C. § 1104(a)(1)(B).
duty of prudence applies to employee stock ownership plans
(“ESOPs”) such as the General Cable plan, except
that ESOPs need not be diversified. Fifth Third ...