Walt Disney Co.’s 401(k) fiduciaries will not have to defend a class action lawsuit that challenged their choice to allow participants in the investment plans to invest their assets in a mutual fund that heavily invested in Valeant Pharmaceuticals International Inc. stock.
The participants’ amended lawsuit was dismissed by Judge Percy Anderson on April 21. Judge Anderson determined the participants did not point to any type of “special circumstance” that would even support an inference that the plan had any reason not to rely on the market valuation of Valeant’s stock until its price collapsed, or to stop offering the Sequoia Fund as an investment option. As of 2015, the Sequoia Fund had invested 25 percent of all its assets into Valeant stock.
This marked the second time Judge Anderson dismissed allegations by participants against Disney’s investment committee. In this most recent decision, the judge ruled that participants would not be allowed to amend their allegations again.
The allegations levied by Disney’s 401(k) participants came after Valeant Stock declined to under $70 per share by November 2015, after reaching $262 per share in August 2015. The decline followed a growth-by-acquisition strategy in which the pharmaceutical company spent more than $23 billion to purchase seven new companies from 2009 to 2015. Participants had invested 12 percent of their assets — a total of more than $500 million — in the Sequoia Fund.
What effect will the judge’s decision have?
This decision could be good news for other companies facing Employee Retirement Income Security Act (ERISA) claims related to issues with Valeant stock held in employee retirement assets. For example, DST Systems Inc. has already been sued twice in the last year for mismanaging its 401(k) plan in similar circumstances.
If you would like to learn more about the process of filing an ERISA lawsuit, consult a knowledgeable Dallas attorney with Whistleblower Law for Managers.