PRESSBOX

Judge Sustains Employee Case Against General Motors

COLCHESTER, CT, May 2006 -- United States District Court Judge Nancy G. Edmunds has denied the defendants’ motion to dismiss in a case that Scott + Scott is prosecuting on behalf of a class of General Motors employees against the company. 

GM’s retirement plan trustees sought to dismiss the case, which seeks to recover funds for employees who participated in GM’s retirement savings plans from March 18, 1999 through the present (the “Class”), arguing that the Class failed to sufficiently state a claim.  On April 6, Judge Edmunds sustained the action against the GM retirement plan trustees, finding that the Class put forth sufficient factual and legal allegations to proceed to the next phase of litigation.

 “This ruling represents an important milestone in a case which significantly impacts the lives of ordinary people,” Scott + Scott attorney Geoffrey M. Johnson stated.  “This is someone’s retirement money. They have literally worked and saved their entire lives for it. For corporate irresponsibility or greed to threaten that savings is absolutely unacceptable to us,” Johnson emphasized.

The Class alleges that the plans’ trustees breached their fiduciary obligations in investing the Class’s retirement funds, thereby violating the Employee Retirement Income Security Act of 1974 (“ERISA”), which requires that plan trustees invest retirement funds “prudently,” as legally defined.  According to the Class, in its
case initiated on March 18, 2005, GM stock – heavily favored in the GM employee retirement plans – constituted an imprudent investment in light of what the GM retirement plan trustees knew regarding the Company’s lagging financial health – namely that the Company could not fund the plans’ growing healthcare and pension liabilities, despite significant employee contributions to those plans. 

Instead, the GM plan trustees engaged in a deceptive campaign, according to the Class, that included not only under-funding their existing healthcare and pension obligations, but also under-stating their true overall pension and healthcare liability to the investing public.  This public deception buoyed GM’s stock price, which already was depressed due to sluggish auto sales and emerging competitive threats in the automotive industry.  The plaintiffs’ complaint alleges that the truth was finally revealed on March 16, 2005, when GM stunned the market with a profit warning that cut the Company’s projected earnings by half. On this somber news, GM’s stock price dropped precipitously, seriously injuring GM plan participants whose retirement savings were heavily invested in GM stock. 

Scott + Scott also currently is prosecuting numerous other ERISA actions on behalf of injured employees against Fifth Third Bancorp, Merck & Co., Inc. and ConAgra Foods, Inc.

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