Mayhall Fondren Blaize

Business litigation asserts fiduciary breach in stock selections

The Employee Retirement Income Security Act (ERISA) is a complex federal law that governs employee retirement plans nationwide, including in Louisiana. Oil and energy companies have the same potential as companies in other industries to be drawn into ERISA lawsuits, which can cover a wide array of business litigation issues. For example, an employee of the Marathon Petroleum Co. recently filed a class action lawsuit against the employer for putting the stock of Marathon Oil Corp. in its workers' retirement plan.

The plaintiff claims that the stock choice was "reckless" under any common sense view of a wise investment strategy. The requirement that stock choices for retirement plans be prudently selected is a mandate of ERISA. The lawsuit claims that the stock substantially underperformed the market, and that tens of millions of losses to the retirement plan were suffered. It is alleged that while stocks tracked on the Standard and Poor's 500 Index increased by about 80 percent in the past six years, Marathon Oil Corp. stock fell by 40 percent.

Normally, ERISA provides certain protections from litigation for in-house stock to be invested in the retirement plan. However, the plaintiff in the suit claims that Marathon Petroleum Co. and Marathon Oil Corp. are two separate entities. The plaintiff claims that the two companies have been independent of each other since a 2011 corporate spinoff, and that Marathon Petroleum should therefore receive no special protection against a breach of fiduciary duty claim.

The main issue in this business litigation dispute boils down to a factual dispute that the plaintiff will have to prove. If the companies have indeed been unrelated over the past six years, then the ERISA protections requiring prudence will be effective and no special protections will be applicable. That will allow the plaintiff to argue that the company made a serious breach of fiduciary duty to the employees by recklessly choosing a drastically underperforming stock. Similar claims may be litigated in federal courts throughout the country, including in Louisiana.

Source:, "Marathon Petroleum Execs Sued Over Stock in Retirement Plan", Jacklyn Wille, June 30, 2017

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