A $5 million settlement has been reached in a stock-drop class-action claim brought against the executives and fiduciaries of LandAmerica Financial, a Virginia-based title company that filed for bankruptcy protection in November 2008.
Once the third-largest title insurance group in the U.S., the company also had a lender services and financial services arm. It was forced into bankruptcy after the 2008 mortgage-backed securities' liquidity crisis. The firm invested assets from clients' real estate sales in those securities.
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But even as LandAmerica increased its exposure to sub-prime mortgage risk, fiduciaries of the company's 401(k) plan continued to add company stock to employees' savings accounts, according to the suit.
Ultimately, the value of the company's stock in the plan fell from $28 million to about $76,000, according to a post on Proskauer Rose's ERISA litigation blog.
Two separate claims were consolidated last year in federal court in Virginia.
The claim alleged LandAmerica's fiduciaries breached their fiduciary duties by imprudently continuing to invest 401(k) assets in company stock even though they knew the company's title insurance subsidiary was backed by risky sub-prime loans.
The company's former CEO, Ted Chandler, was named as a defendant, along with 15 other LandAmerica executives.
Attempts to mediate a settlement failed last year before the $5 million settlement was reached this week. The case was scheduled for trial in Richmond, Va., later this month.
In July 2011, the Pension Benefit Guaranty Corp. took over LandAmerica's defined benefit plan, assuming the pension obligations for 4,500 former employees.
Also read: Plenty to keep the ERISA lawyers busy
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
