401 litigation over company stock fund performance: it's only just begun

While the new wave of 401(k) ERISA litigation is still rising, a few predictions and conclusions can already be offered. Plan administrators and plan fiduciaries should expect ERISA litigation about abnormal declines in company stock prices, just as public company directors and officers have come to expect such litigation under the securities laws. There are major battles still to be fought in these cases about proper claims, proper parties and proper remedies, as well as the core question of the proper standard for fiduciary conduct in the context of business problems and stock price declines. These issues predictably will be resolved different ways in different cases about different companies, leading to conflicts in the case law. Aggressive plaintiffs' counsel will use the context of highly publicized collapses like Enron and Global Crossing to push for favorable early court decisions and settlements. Defendants and their counsel will need to remind the courts that ERISA does not require fiduciaries to have a crystal ball and that employer stock price declines will happen especially in a severe general market decline and are simply not enough of a basis to justify an award of damages to company stock fund participants.