In re Ford Motor Co. ERISA Litigation, No. 06-11718
Federal Judge Allows Ford ESOP Suit to Move Forward discusses how In re Ford Motor Co. ERISA Litigation, No. 06-11718 (E.D. Mich. December 22, 2008) modified In re Ford Motor Co. ERISA Litigation, No. 06-11718 (E.D. Mich. March 31, 2008) and denied the defendants' motion to dismiss the case on grounds that they committed no fiduciary breach under ERISA because the plan is required to be invested in company stock:
However, U.S. District Judge Stephen J. Murphy, III noted in his opinion that while ERISA does provide an exemption from diversification rules for ESOPs, it does so while still requiring that the plan sponsor act with prudence when investing in company stock.
Using previous case history Ford argued that it did not commit a fiduciary breach by continuing to invest in Ford stock because, during the class period, it was not facing "imminent collapse." Also looking to prior case history and the statutory language of ERISA, Murphy rejected this argument, saying that the "presumption of prudence means that [the law] requires fiduciaries to divest their plans of company stock when holding it becomes so risky - that is, so imprudent - that the problem could not be fixed by diversifying into other assets."
Finally, Ford argued that a magistrate judge that refused to dismiss the case previously erred by not considering the ESOPs company stock investments together with other investments in other retirement plans offered to employees. Ford said that because its employees were free to diversity their retirement savings across all plans offered to them, they were greatly exaggerating the risk the stock plans presented to their retirement savings.