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Compliance October 6, 2004
Class Action Granted Against Merrill Lynch in WorldCom Case
October 6, 2004 (PLANSPONSOR.com) - A US District
Court judge has granted class action status to WorldCom Inc.
401(k) plan participants, who allege that the plan's directed
trustee breached its fiduciary duty by allowing plan
participants to remain invested in WorldCom stock when it was
imprudent to do so.
Reported by Kip McDaniel
>US District Judge Denise Cote of the Southern District Court of New York rejected Merrill Lynch’s argument that, because the suit includes retirement plans from companies that had merged with WorldCom, the suit was too broad and should be thrown out. Merrill lynch had argued that it was not a fiduciary in four plans that merged with WorldCom prior to its bankruptcy, and thus could not be held accountable.
“The period of liability of individual defendants may differ, but the claims belonging to the class are united by, among other things, the class members’ purchase of WorldCom stock and WorldCom’s own relationship to each of the plans,” Cote said in her ruling Monday.
>A suit was filed by plan participants shortly after the June, 2002, announcement by WorldCom that it had been using improper accounting methods to alter its books. Following this, the company’s stock fell sharply. In July of that year, the company filed for bankruptcy.
>In June of 2003, the District Court denied the motion to dismiss of the defendants – who included Merrill Lynch, as well as WorldCom’s directors and officers – and stated that Merrill Lynch might be liable as an Employee Retirement Income Security Income (ERISA) fiduciary (See WorldCom 401(k) Stock Suit Survives ). Following this, the directors and officers of WorldCom settled with the plan participants. However, the settlement did not include participant’s claims against Merrill Lynch (See Ebbers, WorldCom Executives Agree to $51M Suit Settlement ).