Raymond M. Pfeil, et al. v. State Street Bank and Trust Co., U.S. District Court, Eastern District of Michigan, Southern Division
Plaintiffs alleged a breach of fiduciary duty by State Street for failure to prudently manage the assets in General Motors Corporation’s two main 401k plans, in violation of Section 404 of ERISA. Specifically, Plaintiffs alleged that State Street, in its role as a fiduciary and investment manager for the GM’s Stock Fund, breached its fiduciary duty by having the fund continue to hold GM stock during the class period, despite a number of alleged red flags.
Professor Kenneth Lehn was retained by counsel for State Street to opine as to whether it was reasonable for State Street to continue to hold GM stock during the class period of July 15, 2008 through March 31, 2009. Based on the economic evidence, Professor Lehn concluded in his expert report and deposition that it was reasonable for State Street to continue to hold GM stock in the Stock Fund. In her opinion and order granting Defendant State Street’s Motion for Summary Judgment, Judge Denise Hood cited and relied upon Professor Lehn for the following conclusions:
(1) If State Street had liquidated its holdings of GM stock on July 15, 2008 as Plaintiffs argued they should have, Plaintiffs would have lost out on GM’s significant stock price increase shortly after the start of the class period.
(2) Sophisticated investors with fiduciary duties such as pension plans and large institutional investors continued to invest in GM over the class period.
(3) The consensus analyst recommendation during the class period was “hold”, not “sell”.
Defendants were successfully represented in the case by Bill Boies and Nancy Ross of McDermott Will & Emery LLP.