Ferguson v. Ruane Cuniff & Goldfarb Inc.

Background

The Arbitration Claimants’ memorandum supporting their motion to stay argued that the preliminary injunction issued on November 18, 2021 was deficient because it did not state its terms specifically and referred to the acts restrained by reference to the amended complaint.

The injunction applied to all members of the Federal Rule of Civil Procedure 23(b)(1) class certified on August 17, 2021, including the Arbitration Claimants. It barred those class members from starting new actions or litigating in arbitration or other proceedings against the DST Defendants concerning matters arising from or related to the facts or transactions alleged in the Ferguson amended complaint. The stated allegations concerned allegedly reckless and imprudent investment of the Profit Sharing Account, failures to diversify and supervise investments, inadequate information about the investments, and alleged breaches of fiduciary duties and other violations under the Employee Retirement Income Security Act (ERISA).

Court’s action

The court proposed replacing the injunction’s reference to the complaint with four specific categories of allegations. Those categories concerned: (1) allegedly reckless and imprudent investment of the Profit Sharing Account; (2) alleged failures involving diversification, investment strategies, supervision, and participant guidance; (3) alleged breaches of fiduciary duties under ERISA section 404; and (4) alleged breaches of fiduciary duties, prohibited transactions, co-fiduciary liability, and knowing breach of trust.

The court stated that it was permitted to explain or interpret an injunction pending on appeal and that it was not modifying the injunction. It directed the parties to submit any proposed modifications to the replacement language in a joint filing by January 21, 2022. The court specifically said that the parties’ filing should not address the injunction’s language barring the institution of new actions or litigation in arbitration or other proceedings.

The court also clarified that its August 17, 2021 order had granted Plaintiffs permission to file a third amended complaint only to add class allegations. Because Plaintiffs had not yet filed that complaint, the court stated that the Second Amended Complaint remained operative and ordered Plaintiffs to file the amended complaint by January 24, 2022. The hearing on the motion to stay was adjourned until January 26, 2022, at 2:30 p.m.

Disposition and effect

Judge Andrew L. Carter, Jr. clarified the proposed scope of the preliminary injunction, set deadlines for the parties and Plaintiffs, and adjourned the motion-to-stay hearing. The order did not decide the motion to stay.