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Compliance April 21, 2017
JP Morgan Stable Value Fund Suit Gets Class Certification
Plaintiffs in this long-running lawsuit claim J.P. Morgan's stable value funds held risky, highly leveraged assets, including mortgage-related assets.
Reported by Rebecca Moore
A federal district court judge has certified a class and several subclasses in a lawsuit claiming retirement plans that included J.P. Morgan stable value investments suffered losses due to the firm’s imprudent management of the investments.
The plaintiffs are investors who participated in various 401(k) retirement plans and allocated a portion of their retirement savings through those plans to certain stable value funds sold and/or managed by J.P. Morgan defendants. The named plaintiffs, of which there are twelve, invested in five of JPMC’s stable value funds through nine 401(k) retirement plans, each overseen by a different employer plan sponsor. They seek to represent participants in more than 300 retirement plans which were invested in 78 stable value funds, according to the court’s order.
The plaintiffs allege that the defendants managed the plaintiffs’ investments imprudently in violation of its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by causing its stable value funds to invest heavily in the Intermediate Bond Fund (IBF) and the Intermediate Public Bond Fund (IPBF). The defendants managed the IBF and IPBF in the same way and invested them both in risky, highly leveraged assets, including, among other things, mortgage-related assets. At the filing of the first lawsuit, J.P. Morgan Chase & Co. announced it would shed mortgage debt from its stable value fund.
The plaintiffs moved to certify a class and two subclasses of participants, which U.S. District Judge Vernon S. Broderick of the U.S. District Court for the Southern District of New York granted.
The defendants argued that those who participated in Caterpillar Inc.’s retirement plan were barred by a settlement agreement from bringing these claims. So, Broderick certified the Caterpillar Subclass, defined as:
“All participants of the Caterpillar Plan, as well as beneficiaries of those plans, who were invested directly or indirectly in JPM’s Caterpillar Stable Principal Fund or any other JPM Stable Value Fund that invested in the JPM Intermediate Bond Fund and/or the Intermediate Public Bond Fund between January 1, 2009, and December 31, 2010, and whose stable value fund investment performance underperformed the Hueler index or similar objective benchmark.”