Last week, I wrote about "ignorance risk" http://johnhlowell.blogspot.com/2011/01/how-much-weight-do-you-give-to.html Earlier, I wrote about being a singles hitter rather than swinging for the fences and hitting some home runs and striking out a bunch http://johnhlowell.blogspot.com/2010/12/two-key-words.html
In Veera v. Ambac Plan Administrative Committee, the plan committee may have struck out.
For several years now, participants have been suing plan sponsors in so-called stock drop cases, so named because the participants claimed that the sponsor violated their prudence requirement under ERISA by continuing to allow investment in company stock, even when the risk of precipitous loss had increased. In Ambac, the plaintiffs charge that the company significantly changed its business practices and strategies taking on a much higher risk profile between 2004 and 2007. During that period of time, the value of the company stock dropped from $96 to $1.
In most cases of this nature, judges have ruled that companies/administrators should be given the presumption that they acted prudently in stock drop cases. In this case, the judge has failed to do so.
Now, this doesn't mean that the plaintiffs have prevailed, or even will prevail, it simply means that the judge is allowing the case to move forward, on a more plaintiff favorable basis than was probably expected. While it's often a matter for discussion, the bar has been set very high for plaintiffs in ERISA prudence cases. We'll monitor this one to see where it goes.