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Compliance November 30, 2010
Judge Tosses Fifth Third Stock-Drop Suit
A federal judge in Ohio tossed out a stock-drop
suit against Fifth Third Bancorp, claiming it committed a fiduciary breach when company stock was included in its profit-sharing plan.
Reported by Fred Schneyer
Senior U.S. District Judge Sandra S. Beckwith of the U.S. District Court for the Southern District of Ohio said the defendants were entitled to a presumption of prudence typically applied in stock-drop cases.
Beckwith asserted that despite the bank stock’s nearly 75% drop caused by the company’s involvement in subprime mortgage lending, it remained an ongoing financial concern of the bank’s. The employees argued in the 2008 suit that the bank violated the Employee Retirement Income Security Act (ERISA) by keeping the company stock in the plan after it was no longer prudent to do so.
In arguing the company remained a viable enterprise despite being hurt by the subprime mortgage meltdown, Beckwith pointed out that Fifth Third’s participation in the federal Capital Purchase Program (CPP) helped demonstrate that the company was a viable financial institution.
The Treasury Department only allowed financial institutions to participate in the CPP if they were healthy, viable financial institutions, the court noted.
The case is Dudenhoeffer v. Fifth Third Bancorp, S.D. Ohio, No. 1:08-cv-538.