ING, the global investment and insurance concern, has agreed to settle two class actions alleging that ING violated its fiduciary duty under the federal Employee Retirement Income Security Act of 1974 (ERISA) by investing retirement funds in stocks that performed poorly. See In Re ING Groep, N.V. ERISA Litigation, No. 09-0400 (N.D. Ga. Nov. 14, 2012) (MPA ISO Preliminary Approval). The pending preliminary approval motion is seeking the court’s authorization to send class members the notice required by Federal Rule 23 informing them of the terms of the settlement, which is valued at $3.5 million.
The underlying actions arose around facts coated in irony, as ING, whose primary business is managing the investments of other companies and individuals, was accused by the plaintiffs of mismanaging its own employees’ retirement accounts, in part by investing in ING’s own stock. See MPA at 5-6. The litigation invited inquiry around an unsettled ERISA doctrine: whether there is a lesser standard of care applied to claims involving investments in a company’s own stock (or, alternatively, whether there is a heightened presumption that the investment is prudent). See MPA at 12. The presumption of prudence accorded defendants is known as the “Moench presumption,” as articulated in Moench v. Robertson, 62 F.3d 533 (3d Cir. 1995). Indeed, the Moench presumption issue was before the Eleventh Circuit in an appeal from one of the ING actions when the settlement was negotiated. The settlement thus mooted that appeal, leaving the Moench prudent investor doctrine to be parsed another day.
The risk attendant to the pending appeal was cited as one of the bases for the settlement, as the Eleventh Circuit has recently given indications that it would adopt the more permissive Moench standard as to same-company stock purchases by retirement funds. See Lanfear v. Home Depot, Inc., 679 F.3d 1267 (11th Cir. 2012). Even had the plaintiffs obtained a favorable ruling from the Eleventh Circuit, the class members would likely have had to wait several years before the claims were tried to judgment and, thereafter, endure another round of appeals on entirely new issues engendered by a trial. See MPA at 13-15.