Participants in the Schering-Plough Corporation 401(k) Plan brought suit against fiduciaries on behalf of the Savings Plan and all participants whose accounts included investments in Schering stock, (alleging that the defendants breached their fiduciary duties of loyalty, prudence and due care by continuing to offer the Company Stock Fund when they knew that Schering’s stock price was artificially inflated). The Third Circuit rejected the defendants’ argument that the plaintiffs could not demonstrate any losses to the Plan because any and all losses were suffered by individual participants in individual accounts. Examining the terms of the Plan, the court noted that each participant’s deferred payroll compensation was held in trust as an asset of the Savings Plan, and that, while each participant was provided with an individualized account, the Plan makes it clear that segregation of funds is not required. Rejecting the Fifth Circuit’s decision in Milofsky, the court reasoned thatRussell does not preclude an action under Section 502(a)(2) by a subgroup of plan participants on the basis that the fiduciaries’ alleged breach did not affect the investments of participants in other subgroups. “The Plaintiffs in this case do not seek to force the Savings Plan to purchase annuities for their individual benefit. Instead, they seek to force the Defendants to make payments to the Savings Plan for the Defendants’ alleged failure to fulfill their fiduciary obligations, in order to remedy the damage their actions caused to the Savings Plan. The fact that damages paid to the Savings Plan for breaches of fiduciary duties will also indirectly benefit its participants does not bar a derivative action under Sections 409 and 502(a)(2).” In re: Schering-Plough Corp. ERISA Lit., 420 F.3d 231 (3rd Cir. 2005).
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