WASHINGTON: The U.S. Supreme Court on Tuesday threw out a lower court ruling that allowed a lawsuit to proceed against managers of a retirement fund for IBM Corp employees centering on allegations that officials failed to disclose that IBM's microelectronics business was over-valued.
The justices sent the case back to the lower court for a further legal analysis. IBM is not a defendant in the lawsuit filed in New York federal court by plaintiffs who were participants in IBM's retirement plan.
Participants in IBM's retirement plan have said that in 2013 the company's microelectronics division was incurring losses even though IBM said at the time it was valued at US$2 billion.
The plaintiffs said the Retirement Plans Committee of IBM, which oversaw the fund, knew or should have known that the business was over-valued and made disclosures to lower the risk of an artificially high stock price and a painful correction once the problems in the unit were made public. The committee's members included senior IBM executives.
IBM sold the microelectronics business a year later at a significant loss, prompting a decline in the company's stock price. IBM paid GlobalFoundries Inc US$1.5 billion to take over the money-losing unit and announced it would take a US$2.4 billion write-down on the entire value of assets as well as US$800 million of other unspecified costs. The company's stock price subsequently plummeted more than US$12.00 per share, more than 7per cent of its value.
The plaintiffs sued the committee and its members in 2015. A federal judge dismissed the complaint in 2016. The New York-based U.S. Circuit Court of Appeals in 2018 revived the litigation, prompting the retirement plan committee to appeal to the Supreme Court.
The Supreme Court, in an unsigned decision, unanimously said that some of the key arguments presented in the case must first be considered by the lower court.
The IBM dispute was a sequel to a 2014 case in which the Supreme Court ruled that a lawsuit brought by employees against Fifth Third Bancorp for putting company stock in its employment retirement plan ahead of the housing downturn could move forward.
(Reporting by Lawrence Hurley; Additional reporting by Andrew Chung. Editing by Will Dunham)