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ESOP and 401(k) Plan Employer Stock Litigation Review 1990-2018

(Print Version)

9th Edition

by Corey Rosen

This is the print version, and shipping charges apply. It also is available in a digital version with no shipping charges.
$75.00 for NCEO members; $150.00 for nonmembers

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This 89-page publication categorizes, describes, and summarizes 364 ESOP lawsuits (305 in private companies and 59 in public companies) between 1990 and 2018. Twenty-one cases (all in private companies) were added for the 2018 edition. The publication also categorizes all the court decisions in 401(k) company stock cases from 1990 through mid-2018 and provides brief summaries for decisions starting in 2010. Appendices discuss what the Supreme Court's Dudenhoeffer decision has meant for ESOPs, plus key elements in recent DOL fiduciary process agreements reached in settlements. We have tried to be comprehensive, but advisors must always supplement this with their own research.

You also may be interested in our related publication ESOP Regulatory Rulings 1990-2018, which provides a summary of rulings and regulations on ESOPs and related plans.

Publication Details

Format: Perfect-bound book, 89 pages
Dimensions: 8.5 x 11 inches
Edition: 9th (September 2018)
Status: In stock

Contents

Introduction
Special Note on the Presumption of Prudence Issue
DOL Process Agreements
Summary of ESOP Case Decisions
ESOP Cases
Claims Against Providers
Deferral of Gains Issues
Disclosure of Information
Distribution and Diversification
Dividends
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
Settlements
Standard of Prudence After the 2014 Dudenhoeffer Case
Standing
State Law Claims
Tolling
Valuation
Venue
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
Settlements
Standard of Prudence After the 2014 Dudenhoeffer Case
Standing Affirmed for Participants
Standing Not Affirmed for Participants
Other Standing and Class Certification Issues
Who Is a Fiduciary?
Appendix 1: What the Supreme Court's Dudenhoeffer Decision Means for ESOPs
Key Points
Overview
Standard of Prudence
Effect on ESOPs
Appendix 2: Key Issues in DOL Settlement Agreements in GreatBanc, First Bankers Trust, James Joyner, Alpha Investment, and Lubbock National Bank Cases
Valuation Assessment
Loan Structure
Providing the Right Information to the Appraiser

Excerpts

From "Distribution and Diversification"

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.

Pfeifer v. Wawa, Inc., No. 2:16-cv-00497-PD (E.D. Pa. motion for settlement approval filed Dec. 19, 2017). The trustees of WaWa's ESOP agreed to pay about 2,300 current and former employees $25 million ($5 million of which will go to attorney's fees) in a case involving a plan amendment at WaWa that segregated account values for employees when they left the company. Plaintiffs said that Wawa had allowed them to keep their stock until they retired or turn 68, the point at which all beneficiaries are required to cash out. In 2015, WaWa changed that so the shares were purchased after termination and held until normal distribution in other investments (a common ESOP practice known as account segregation). Plaintiffs allege that that ended up costing them a lot of money because WaWa stock grew quickly.

Wengert v. Rajendran, No. 16-4571 (8th Cir. Apr. 3, 2018): A circuit court upheld a lower court ruling on how much discretion can be given to plan administrators concerning the timing of distributions. The case revolved around unusual facts concerning whether a distribution is deemed to have occurred when the company sent it out rather than when the employee received it. The courts ruled that the administrator can use reasonable discretion in determining the effective date of the distribution.

Bryant v. Community Bankshares, Inc., 17-15360 (11th Cir. June 12, 2018, unpublished): An appellate court ruled that plaintiffs were correct in alleging that the trustees of the Community Bankshares ESOP breached their fiduciary duty when they failed to follow the participants' instructions to diversify shares, as the plan and the law provided they could do. The court rejected Community Bankshares' argument that allowing the plaintiffs' diversification to proceed would cause harm to other plan participants.

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."