WASHINGTON (Reuters) - The U.S. Supreme Court on Monday agreed to decide whether managers of a retirement fund for IBM Corp employees that invested in the company’s stock can be sued for failing to disclose that its microelectronics business was overvalued.
The justices will hear an appeal by IBM’s retirement plan of a lower court ruling allowing the litigation to proceed. IBM is not a defendant in the case.
The U.S. Chamber of Commerce, the American business community’s biggest lobbying arm, had urged the Supreme Court in a brief to hear the case, saying a ruling against the fund could deter companies from offering retirement plans that invest in company stock. Thousands of companies offer such programs.
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 $2 billion.
The plaintiffs have said the Retirement Plans Committee of IBM, which oversees the fund, knew or should have known that the business was overvalued. The committee’s members included senior IBM executives.
IBM sold the microelectronics business a year later at a significant loss, leading to a decline in the company’s stock price. IBM paid GlobalFoundries Inc $1.5 billion to take over the money-losing unit and announced it would take a $2.4 billion write-down on the entire value of assets as well as $800 million of other unspecified costs.
The plaintiffs sued the committee and its members in 2015. A federal judge dismissed the complaint the following year. The New York-based 2nd U.S. Circuit Court of Appeals in a ruling last year revived the litigation, prompting the retirement plan committee to appeal to the Supreme Court.
The Supreme Court will hear arguments and issue a ruling in its next term, which starts in October.
The IBM dispute is 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; Editing by Will Dunham