General Motor's Motion-to-Dismiss ERISA Suit Denied
DETROIT – Employees of embattled General Motors (NYSE:GM) won a victory today in court when a U.S. District Court judge refused the automotive giant's motion to dismiss a lawsuit claiming those in the company charged with overseeing employees' retirement accounts failed in their responsibility.
The suit, filed in the U.S. District Court for Michigan, claims that GM and plan fiduciaries ignored the company's dire financial problems and in doing so imprudently managed the two retirement funds, causing employee-investors to incur huge losses.
In the ruling, Judge Nancy Edmunds cites that GM had a duty to convey complete and accurate financial information about GM's true financial health to the plaintiffs, something the suit claims it failed to do.
The case involves two General Motors ERISA Plans - the Personal Savings Plan for Hourly Employees, and the Savings-Stock Purchased Program for Salaried Employees - both holding large amounts of General Motors stock.
"It is our belief that GM and the investment fund committee sold out GM employees, plain and simple, " said Steve Berman, co-lead counsel for the plaintiffs. "They stood motionless and mute while the stock's slide devastated the retirement savings of thousands."
The suit claims the defendants put the interests of GM ahead of the interests of the plan participants by continuing to offer GM stock as an investment option, matching employee contributions in GM stock and failing to diversify the stock fund when it was clear GM stock was not a prudent investment.
According to the suit, the members of the investment fund committee were also responsible for overseeing the horribly under-funded defined-benefit pension and healthcare plans. "That gave them first-hand knowledge of GM's problems early on," Berman added. "Even when analysts begin issuing 'sell' recommendations and the company's debt was reduced to junk status, the committee refused to take action for their employees.
Judge Edmonds granted State Street Bank's motion to dismiss charges against it.
Judge Edmunds appointed Steve Berman as co-lead counsel for the consolidation of three suits. The consolidated suit was filed May 13, 2005.
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