JP Morgan Chase Hit with Class-Action ERISA Lawsuit

New York, NYIn this ERISA plan, the goal is to have losses restored—that's the idea behind a class-action lawsuit filed April 4 in the United States District Court for the Southern District of New York against financial powerhouse JP Morgan Chase & Co. (JP Morgan).

The ERISA lawsuit was filed on behalf of retirement investors who participated in the "Stable Value Fund." Much like an employee of a firm would participate in an employee stock plan as a means to save toward retirement, a participant with the Stable Value Fund would seek to grow their funds through a prudent investment.

The allegation, however, is that the Stable Value Fund may not have been prudent, stable or that much of a value.

The ERISA investment lawsuit alleges that JP Morgan used the Fund to offload high-risk mortgage assets known as Alternative Private Placement Commercial Mortgages, or APPCMs. The latter assets were allegedly not rated by any third-party credit-rating agency, and risks associated with the assets were transferred to the Fund.

It is also alleged by plaintiffs in the class-action ERISA lawsuit that the defendant rated the assets internally, in an effort to afford the APPCMs a more conservative rating than the actual risks associated with the mortgage assets warranted.

In so doing, it is alleged that JP Morgan and those involved in administering the Fund violated their fiduciary duties under ERISA. The Employee Retirement Income Security Act of 1974 regulates activity around any employee stock plan or other ERISA benefits an investor comes to depend on later in life to help fund a retirement.

Under ERISA rules, entities and individuals charged with managing an ERISA pension fund and other assets on behalf of investors have a fiduciary duty to act in the best interests of the investor, and not the company.

Lawyers representing the plaintiffs allege in comments published in Market News Publishing (4/4/12) that administrators of the Stable Value Fund took advantage of their fiduciary position to benefit JP Morgan.

The class-action ERISA lawsuit seeks a complete restoration of all losses incurred through the alleged misuse of ERISA plan assets.