Economic Analysis in Erisa Class Actions Involving Employee Investments in Company Stock
Posted: 4 Dec 2006
Date Written: December 4, 2006
Recent years have witnessed an onslaught of class action suits brought under ERISA law on behalf of employee participants who invest a portion of their retirement savings in company stock. These cases typically are preceded by a decline in the market price of company stock and allege that the company, its directors, auditor, and/or the trustee of the retirement plan breached their fiduciary duties to plan participants by: 1) making material misstatements or omissions concerning the true value of company stock; 2) including company stock among the investment vehicles available to retirement plan participants when the stock was an "imprudent" investment. In this article, I discuss the similarities and differences between such ERISA class actions and federal securities class actions alleging securities fraud. I also discuss economic methodologies that can be employed to analyze ERISA class action allegations.
Keywords: company stock, class action, ERISA, damages, participant, 401(k), imprudence, disclosure, artificial inflation
JEL Classification: G14, K22, K31
Suggested Citation: Suggested Citation