August 29, 2014
Authored by: benefitsbclp
Tatum v. RJR Nabisco Investment Committee, decided by the Fourth Circuit on August 4, involved the divestiture of the Nabisco stock funds following spin off of Nabisco. Some 14 years after Nabisco and RJ Reynolds merged to form RJR Nabisco, the merged company decided to separate the food and tobacco businesses by spinning off the tobacco business. Following the spinoff, the RJR 401(k) plan, which was formed after the spinoff, provided for the Nabisco stock funds as frozen funds, which permitted participants to sell, but not purchase, Nabisco stock.
Although the Plan document provided for the Nabisco stock funds, RJR decided to eliminate the funds approximately 6 months following the spinoff. The decision was made by a “working group” of several corporate employees and not by either of the fiduciary committees appointed to administer the Plan and review its investments.
During the 6 months following the spinoff, the price of the Nabisco stock declined significantly. However, the stock was rated positively during this period by analysts who recommended a “hold” or a “buy” for the stock during 1999 and 2000.
After the Nabisco stock funds were divested in January 2000, the price for the Nabisco stock began to rebound. In December 2000, following a bidding war, Nabisco was sold for a price well in excess of the price that the stock was sold by the Plan in January. In 2002, this litigation commenced.
District Court Decision. The