As posted yesterday, "JP Morgan Chase Co. and the Federal government stepped in to avoid a bankruptcy" for Bear Stearns. Today we note that litigation follows.
Marketwatch has reported that both ERISA and Securities Class Action lawsuits have been filed against the company. The ERISA lawsuit was filed in U.S. District Court in Manhattan, and alleges that Bear Stearns and its executives breached their fiduciary duties to plan participants by allowing their retirement savings to be invested in the company's stock despite knowing such an investment was imprudent. According to Workforce Management, approximately one-third of Bear Sterns outstanding stock is owned by its employees through its ESOP. (Article here.) A similar lawsuit was filed earlier Monday in U.S. District Court in Manhattan on behalf of Bear Stearns shareholders.
The litigation reserves for class action lawsuits by shareholders is one of the primary drivers of decreased share price paid to shareholders by JP Morgan in its bail-out. Potential ERISA litigation also may have factored into the share price. It's hard not to notice how tied together we all are in this tough economic time.