The legacy of Enron’s highly publicized collapse includes a marked expansion of so-called stock drop litigation under the fiduciary duty provisions of the Employee Retirement Income Security Act.
Such litigation occurs when a company’s stock loses value and, as a result, the company’s retirement funds, which are frequently invested in company stock, suffer significant losses. In such cases, employee plaintiffs typically assert that company officers, who also may play roles in administering the company’s benefit plans, had knowledge of the company’s financial instability, and were thus under a fiduciary duty to prevent the plans’ further investment in company stock, divest the plans of such holdings and/or disclose certain material information about the company to plan participants.
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