Court Allows Case Alleging Fiduciary Violation by Following Plan Directions to Go Forward

A U.S. district court judge in the Middle District of Florida rejected a defendant's motion to dismiss a claim against trustees of the KSOP (combined 401(k)/ESOP) at Community National Bank Corporation (CNBC). The CNBC stock eventually became worthless, and plaintiffs allege that the defendants failed in the duty of prudence and loyalty by continuing to offer CNBC stock as an investment alternative. Plaintiffs allege that the defendants knew of the threat to the value of the shares because, in their capacity as directors and officers, they signed an agreement with the Office of the Comptroller of the Currency (OCC) under which the OCC found unsafe and unsound banking practices. In a ruling on May 10, the judge, James Moody, found that "these allegations are sufficient to state a claim because, taken as true, which the Court must assume at this stage, they demonstrate that Defendants 'abused their discretion by following the [P]lan's directions.'"