Harris v. Koenig
815 F. Supp. 2d 26
D.D.C.2011Background
- Old Waste restated financials 1991–1997 after 1998 disclosure; Illinois securities class action settled in 1999 with releases of claims against Old Waste and affiliates.
- State Street served as Trustee and Investment Manager for the New Waste Plan and received the Illinois Settlement Class Notice in July 1999.
- State Street forwarded the Illinois Notice to in-house counsel and filed a claim on behalf of the Plan after settlement approval.
- Plaintiffs assert Counts VI and VII (second period) alleging fiduciary breach by failing to investigate/preserve ERISA claims and a prohibited transaction by releasing claims.
- Court denied Plaintiffs’ partial summary judgment on Counts VI and VII; granted Defendants’ summary judgment, effectively resolving these two counts against State Street and Old Waste.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether State Street breached ERISA fiduciary duties by not adequately investigating Illinois litigation claims | Harris argues State Street failed to investigate/opt out and recover ERISA claims | State Street followed standard practice; no evidence prudent fiduciary would have pursued carve-out | No genuine issue; State Street entitled to judgment on Count VI |
| Whether State Street's Illinois settlement release constitutes a prohibited transaction under ERISA 406 and whether PTE 2003-39 applies | Plaintiffs contend the release violated ERISA 406 and carve-outs were warranted | Settlement processed with same prudence standard as PTE 2003-39; exempted if prudent | Summary judgment for State Street/Old Waste; Count VII denied Plaintiffs' petition |
Key Cases Cited
- Harris v. Koenig, 602 F. Supp. 2d 39 (D.D.C. 2009) (ERISA fiduciary duties standard; prior ruling cited)
- Merino v. Chang, 452 F.3d 174 (2d Cir. 2006) (prudence standard; hindsight not permitted)
- Liberty Lobby, Inc. v. Liberty Lobby, 477 U.S. 242 (U.S. 1986) (summary judgment standard; credibility not for judge at this stage)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (burden on movant to show absence of a genuine issue of material fact)
- Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995) (presumption of ERISA stock investment often favorable to fiduciaries)