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ESOP and 401(k) Plan Employer Stock Litigation Review 1990-2017

(Digital Version)

8th Edition

by Corey Rosen

This is provided as a PDF, with no shipping charges. It also is available in a print version (for which shipping charges apply).
$75.00 for NCEO members; $150.00 for nonmembers

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This updated 79-page publication categorizes, describes, and summarizes 343 ESOP lawsuits (284 in private companies and 59 in public companies) between 1990 and 2017. Fifteen cases (all in private companies) were added for the 2017 edition, which is five pages longer than its predecessor. The publication also categorizes all the court decisions in 401(k) company stock cases from 1990 through mid-2017 and provides brief summaries for decisions starting in 2010. An appendix discusses what the Supreme Court's Dudenhoeffer decision has meant for ESOPs. We have tried to be comprehensive, but advisors must always supplement this with their own research.

If you aren't already a member, we encourage you to join (only $90 for 12 months) when ordering this to get the $75 member price; you can choose this as an option during checkout.

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.

Publication Details

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."