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ESOP and 401(k) Plan Employer Stock Litigation Review 1990-2017
by Corey Rosen
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You also may be interested in our related publication ESOP Regulatory Rulings 1990-2017, which provides a summary of rulings and regulations on ESOPs and related plans.
Format: PDF, 79 pages
Dimensions: 8.5 x 11 inches
Edition: 8th (August 2017)
Status: Available for electronic delivery
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- Special Note on the Presumption of Prudence Issue
- Summary of ESOP Case Decisions
- ESOP Cases
- Claims Against Providers
- Deferral of Gains Issues
- Disclosure of Information
- Employment Rights and Plan Eligibility Issues
- ESOPs as a Takeover Defense
- Executive Compensation
- Indemnification and Insurance
- Lenders as Fiduciaries
- Management of Plan Assets: General
- Management of Plan Assets: "Stock Drop" Cases pre-Dudenhoeffer (Including Presumption of Prudence)
- Party-in-Interest Definitions
- Plan Qualification
- Qualification for Set-Asides
- S Corporation Anti-Abuse Rules
- Securities Law Issues Other Than Disclosure
- Standard of Prudence After the 2014 Dudenhoeffer Case
- State Law Claims
- Voting, Tendering Rights, and ESOP Governance Rights
- Who Is a Fiduciary?
- 401(k) Cases
- Claims Against Providers
- Issues with Offering and Holding Company Stock Other than Presumption of Prudence
- Presumption of Prudence Issues
- Right to Jury Trial
- Securities Law and Required Disclosure Issues: Disclosure May Be Required
- Securities Law and Required Disclosure Issues: Disclosure May Not Be Required
- Standard of Prudence After the 2015 Dudenhoeffer Case
- Standing Affirmed for Participants
- Standing Not Affirmed for Participants
- Other Standing and Class Certification Issues
- Who Is a Fiduciary?
- Appendix: What the Supreme Court's Dudenhoeffer Decision Means for ESOPs
- Key Points
- Standard of Prudence
- Effect on ESOPs
From "Distribution"Perez v. Cal. Pac. Bank, No. 3:13-cv-03792-JD (N.D. Cal. July 20, 2015): A district court ruled that California Pacific Bank failed to properly distribute assets upon the termination of its ESOP. The DOL alleged, and the court agreed, that the bank had failed to pay out the participants in a timely fashion. The bank also moved plan assets into a non-interest-bearing account pending distribution, but the court said questions of fact remained about whether such a transfer was permissible.
Pfeifer v. Wawa Inc., No. 2:16-cv-00497 (E.D. Pa., Oct. 6, 2016): A district court refused to dismiss most claims against WaWa's ESOP fiduciaries over a change in the plan rules that required terminated employees to sell their shares after termination. The plaintiffs allege that they were underpaid for the shares and that if they had been able to hold on to WaWa shares, they would have been better off. Changing to account segregation rules such as these is common, and suits on this issue extremely rare. The court did dismiss claims that the reason for the changes was to protect a majority interest for family owners, not to provide for diversification for employees after termination.
Harper v. Conco ESOP Trs., Harper v. Conco, Inc., No. 16-6166 (6th Cir. Apr. 28, 2017): An appeals court upheld a district court ruling that employees of the bankrupt company Conco could not sell their stock for at least three years until bankruptcy reorganization was completed.
From "Employment Rights and Plan Eligibility Issues"Momchilov v. McIlvaine Trucking, No. 5:09CV1322 (N.D. Ohio Mar. 24, 2010): A district court denied a motion for summary judgment for the defendants and allowed the plaintiff to proceed with a claim that she was wrongfully discharged two weeks after requesting copies of ESOP plan documents.
Malcolm v. Trilithic, Inc., No. 1:13-cv-00073-SEB-DKL (S.D. Ind. Mar. 31, 2014): A court ruled that an executive who had been fired over allegations about abusive transactions in an ESOP could not contest his firing under ERISA because he failed to state sufficient facts.
Sexton v. Panel Processing, Inc., No. 13-1604 (6th Cir. May 9, 2014): A circuit court ruled that a single e-mail from an ESOP participant and plan trustee to the company's board chairman threatening to report violations of ERISA by the chairman in his handling of board elections did not give rise to an anti-retaliation claim under Section 510 of ERISA.
Lee v. Holden Indus., Inc., No. 1:15-cv-06405 (N.D. Ill. Nov. 21, 2016): A court ruled that an employee was not misled by company representations about how it determined the fair market value of ESOP stock for distribution purposes. The participant, in what the court characterized as a "novel argument," contended that he should have been allowed to sell at the much higher price that occurred one year after he left, citing the SDP's language that the purchase price would be the fair market value. The court said Holden did not misrepresent the plan in oral communications, and even if the SPF contradicts the plan, plan terms govern, noting that the terms of an "SDP are not governing plan documents for the purposes of a benefits claim."