The U.S. Supreme Court is allowing General Motors Co. employees whose pension plans lost money to pursue their case against a State Street Corp. unit over its management of their retirement savings plans before the automaker went bankrupt.
Without comment, the court refused on Monday to review the case and let stand a February ruling from a lower court that allowed the workers to sue State Street Bank and Trust Co.
The 2009 lawsuit said the bank should have acted faster to sell a 401(k) investment fund’s shares in GM stock after the automaker’s business troubles came to light.
GM filed for Chapter 11 protection from creditors in June 2009, two months after State Street began to sell the GM shares.
But the employees said the selling should have started by mid-2008, when GM’s bleak outlook had become obvious. They accused State Street of violating its duties under the federal Employee Retirement Income Security Act of 1974.
State Street said ERISA had shielded it from liability since it did not cause the losses and the employees themselves had decided to invest in the GM fund.
A district court in Michigan agreed, but the 6th U.S. Circuit Court of Appeals revived the case in February.
“State Street had a fiduciary duty to select and maintain only prudent investment options in the plans,” even if employees chose which investments to make, Circuit Judge Thomas Anderson wrote for the 6th Circuit panel.
GM emerged from bankruptcy in July 2009.
In their appeal to the Supreme Court, lawyers for State Street said the ruling had added to a split among federal courts of appeal over whether plan managers are liable for investment decisions made by employees.
State Street, in an emailed statement, said it was disappointed the court refused to hear the case, but that the company would continue to defend itself in the litigation.
The lawsuit is one of numerous “stock drop” class actions arising out of the 2008 financial crisis.
In October, the high court refused to review a pair of similar cases against Citigroup Inc. and McGraw-Hill Cos. by thousands of employees who invested in those companies’ stocks through their retirement plans.
These workers said problems with subprime mortgage exposure at Citigroup and with the Standard & Poor’s rating agency unit of McGraw-Hill made investments in the companies’ stocks inappropriate.
The case is State Street Bank and Trust Co. v. Pfeil et al, U.S. Supreme Court, No. 12-256.