Current and former employees of J.C. Penney who bought or held company stock in their 401(k) accounts during the Ron Johnson era will get some relief.
A Texas federal judge preliminarily approved a $4.5 million settlement between Penney and a class of employees who claim they suffered retirement account losses due to false and misleading statements and/or omissions regarding Penney’s financial condition and prospects that caused the Plano-based retailer’s stock to trade at artificially inflated prices.
The lawsuit stems from the much-heralded attempts to transform Penney that started after activist investor Bill Ackman joined the board and included hiring Ron Johnson away from Apple to be Penney’s CEO. Johnson was fired in April 2013. Ackman ended up leaving the board soon after.
It’s a rare win for employees alleging violations under the Employment Retirement Income Security Act.
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“We’re pleased. It’s very difficult for any of these cases to even survive and settlements have been few and far between,” said Jake Zamansky, attorney representing Roberto Ramirez, a former Penney employee who filed the lawsuit in July 2014.
The preliminary approval from U.S. District Judge Robert W. Schroeder III, which came Tuesday, was first reported Thursday by Law 360. There’s another hearing in May and distributions are expected to be made this summer, Zamansky said. The amounts will vary as the size of the class isn’t known yet. It will depend on how many people put in claims, he said. Schroeder certified the class of participants and beneficiaries of Penney’s 401(k) plan from November 2011 to May 2016, as long as their plans included Penney stock.
Penney hasn’t responded to a request for comment.
The Penney lawsuit, filed in U.S. District Court in Tyler, alleged that management made misstatements between November 1, 2011, and September 27, 2013, about the company’s prospects.
The complaint quotes Johnson at a two-day meeting in New York on Jan. 25-26, 2012, attended by more than 700 analysts and reporters saying: “We fully expect that the bold and strategic changes we are making to operations will result in improved profitability. This should enable us to fund the transformation of jcpenney store experience, while at the same time returning value to shareholders with steady earnings growth.”