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Judge Tosses Case Against Former Lehman Directors

(CN) - Lehman Brothers Holdings won dismissal of a lawsuit accusing 11 former directors of knowing about the investment bank's deteriorating condition but failing to safeguard its retirement plan.

U.S. District Judge John F. Keenan said the action, brought by participants of the plan, failed because it couldn't prove the defendants breached their duties in managing the retirement funds.

They sued the ex-directors and a member of Lehman's Employee Benefit Plans Committee for allegedly failing to protect the plan under the Employee Retirement Income Security Act (ERISA). The participants took a financial hit when the company went belly-up.

Lehman's retirement plan allowed eligible employees to contribute a percentage of their pay to the plan, which was allocated among different types of accounts, the ruling states. One option was the Lehman Stock Fund, which invested solely in Lehman's common stock, cash and short-term fixed-income investments.

Judge Keenan said the claim against the board members "does not sufficiently allege that any of the director defendants are fiduciaries in any respect material to this case," noting that "the Plan Committee, not the board of directors, had the statutory obligation" to warn the participants of impending trouble.

The only member of Lehman's Plan Committee named in the complaint was its chair, Wendy Uvino.

Plaintiffs argued that the committee should have known about the various risks that could have harmed the plan in the wake of Lehman's collapse. But the judge said the suit was "devoid of any factual allegations that Ms. Uvino knew or should have known any negative information that she was obligated to disclose or that she knowingly made false or inaccurate statements."

"There are no allegations that she was involved in valuing Lehman's assets, preparing its financial statements, or evaluating its financial position," Keenan wrote.

Lehman Brothers filled for bankruptcy on Sept. 15, 2008, after it was unable to honor a $5 billion debt to JP Morgan.

The judge said that even if the complaint "successfully alleged that Lehman's collapse became imminent at some time materially before the bankruptcy filing, it contains nothing to support the inference that Ms. Uvino, who worked in human resources, knew or should have known that."

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