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News Link • Justice and Judges

Did The Supreme Court Just Outlaw Company Stock Plans?


The decision leaves employers stuck "between a rock and a hard place," the court acknowledged, in a unanimous decision penned by Justice Steven Breyer: If companies offer their own stock to employees and the price drops, they might be sued for violating the duty of prudence under the federal Employee Retirement Income Security Act. But if they dump the stock on behalf of their employees because they know the company's in trouble, that might violate insider-trading laws. Even stopping purchases might "do more harm than good," Breyer acknowledged, since other investors would take that as a sign to sell, driving the stock price lower than it might otherwise go.

No matter. Such questions were left to lower courts to decide when considering whether to dismiss class actions on behalf of employees they think were burned by holding company stock.

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