September 22, 2020: Written by : Joseph G. Harraka, Jr. Esq.
The Third Circuit Court of Appeals recently ruled on the nature and scope of a Trustee’s fiduciary duties under the Employee Retirement Income Security Act (“ERISA”) in In Re Allergan ERISA Litigation. In its ruling, the Court affirmed the New Jersey District Court’s dismissal of a putative class action without leave to amend. In the appeal, the Court was requested to review whether Plaintiffs/Appellants Andrew J. Ormond and Jack Xie, former employees of Appellee Allergan plc (“Allergan”) and participants in the Company’s employee stock ownership plan (“ESOP” or “Plan”) who had brought action individually, derivatively on behalf of the ESOP, and as representatives of a purported class of similarly situated Plan participants, had plausibly alleged that the trustees of that ESOP had breached certain fiduciary duties under ERISA. In their Complaint, Plaintiffs/Appellants alleged that the Trustees of the Plan knew or should have known that the Company’s stock price was artificially inflated during the proposed class period as a result of an illegal price-fixing conspiracy yet they took no action to prevent the Plan participants from acquiring Allergan stock at falsely inflated prices to the Plan participants’ detriment.