U.S. Supreme Court tosses ruling which allowed IBM retirement fund suit
WASHINGTON- The U.S. Supreme Court on Tuesday threw out a lower court ruling that allowed a lawsuit to proceed against managers of a retirement fund for IBM Corp employees centring on allegations that officials failed to disclose that IBM’s microelectronics business was over-valued.
The justices sent the case back to the New York-based 2nd U.S. Circuit Court of Appeals for further legal analysis. IBM is not a defendant in the lawsuit filed in New York federal court by plaintiffs who were participants in IBM’s retirement plan.
IBM welcomed the ruling, company spokesman Douglas Shelton said.
“This case has important implications for businesses’ ability to offer strong employee stock ownership plans and for employees, across all industries, to invest in their companies,” Shelton said in a statement.
Participants in IBM’s retirement plan have said that in 2013 the company’s microelectronics division was incurring losses even though IBM said at the time it was valued at $2 billion.
The plaintiffs said the Retirement Plans Committee of IBM, which oversaw the fund, knew or should have known that the business was over-valued and made disclosures to lower the risk of an artificially high stock price and a painful correction once the problems in the unit were made public. The committee’s members included senior IBM executives.
IBM sold the microelectronics business a year later at a significant loss, prompting a decline in the company’s stock price. IBM paid GlobalFoundries Inc $1.5 billion to take over the money-losing unit and announced it would take a $2.4 billion write-down on the entire value of assets as well as $800 million of other unspecified costs. The company’s stock price subsequently plummeted more than $12.00 per share, more than 7% of its value.
The plaintiffs sued the committee and its members in 2015. A federal judge dismissed the complaint in 2016. The 2nd Circuit in 2018 revived the litigation, prompting the retirement plan committee to appeal to the Supreme Court.
The Supreme Court, in an unsigned decision, unanimously said that some of the key arguments presented in the case must first be considered by the lower court.
The IBM dispute was a sequel to a 2014 case in which the Supreme Court ruled that a lawsuit brought by employees against Fifth Third Bancorp for putting company stock in its employment retirement plan ahead of the housing downturn could move forward.
(Content and photos syndicated via Reuters)