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March 18th, 2005

"ERISA class action lawsuit filed against Krispy Kreme"

A suit was filed in the U.S. District Court for the Middle District of North Carolina, charging Krispy Kreme executives “failed to manage prudently and loyally” the assets of the retirement plans “by continuing to offer the plans’ assets in the company’s common stock,” according to a company statement.

Part of a class action against Krispy Kreme under the Employee Retirement Income Security Act (ERISA), the suit also claims the company continued to hold large percentages of the plans’ assets in Krispy Kreme common stock and failed to provide complete and accurate information regarding the risks of the stocks.

Under ERISA, plan sponsors and fiduciaries have a duty to exercise prudence with respect to the investment of ERISA plan assets. When an employer provides an investment option in its retirement plan for its own publicly traded stock, there is a risk that its workers can suffer significant losses in a volatile market, affecting the employee’s job position and value in their retirement account.

Krispy Kreme said it intends to deny the allegations and will “vigorously” defend itself.