Gearren, et al. v. The McGraw-Hill Companies, Incorporated, et al.

Case Updates

Affirming the lower circuit, the Second Circuit held that the facts alleged by plaintiffs were, even if proven, insufficient to establish that the defendants abused their discretion by continuing to offer plan participants the opportunity to invest in McGraw-Hill stock. The court also held that the plaintiffs failed to allege facts sufficient to prove that the defendants made any statements, while acting in a fiduciary capacity, that they knew to be false.

NCLC urged the Second Circuit to uphold the dismissal of a “stock drop” case brought against McGraw-Hill by a group of its employees. In this case, the value of McGraw-Hill's stock declined after the employer had contributed stock to an employee pension fund. The district court applied the Moench presumption of prudence, holding that the company's maintenance of the stock fund was prudent. In its brief, NCLC argued that the district court properly rejected the employees' claims. NCLC warned that expanding ERISA's scope will double the remedies already available under the Securities Exchange Act and unduly burden employers who act responsibly in offering company stock as part of a benefit plan.