Appeals court upholds ERISA ruling against Lehman employees
Our readers likely remember the collapse of Lehman Brothers Holdings Inc. and its filing for Chapter 11 bankruptcy, the largest ever, as one of the key actions that started the global financial crisis of 2008. Now, in one of the final remaining lawsuits stemming from the bank’s collapse, a Manhattan federal appeals court has decided in a unanimous vote that Lehman’s former chief executive officer and the company’s benefit committee are not legally responsible for the significant losses suffered by its employees.
The lawsuit involved losses of millions of dollars in Lehman Brothers stock by employees when the company went bankrupt. This month’s decision upholds the original ruling in 2015 by a Manhattan U.S. district court judge.
The former Lehman Brothers employees used the Employee Retirement Income Security Act as the basis for their lawsuit. They claimed that the company’s benefit committee should not have allowed them to continue to invest in Lehman stock while the CEO knew of the bank’s impending bankruptcy.
The appeals court, however, determined that investors, analysts, media and credit rating agencies had a “cacophony of mixed signals” history regarding the status of the company during this turbulent time in our nation’s financial history. The court said that members of the benefit committee could not be held liable for “failing to recognize the imminence of Lehman’s collapse.”
Further, the judges determined that Lehman’s former CEO, Richard Fuld, had no responsibility under ERISA to disclose information to the benefits committee about the health of Lehman’s stock. An attorney for the benefit committee said that this appeals court ruling “confirms that fiduciaries are not responsible for market and other forces beyond their control.”
Most employees aren’t familiar enough with the workings of their benefit plans to know who, if anyone, can be held accountable when the value of their plans drop precipitously – costing them money. Attorneys who specialize in ERISA cases can provide guidance and fight for your rights.
Source: Reuters, “Lehman employees lose appeal over stock losses from bankruptcy,” Jonathan Stempel, March 18, 2016