This 95-page publication categorizes, describes, and summarizes 377 ESOP lawsuits (317 in private companies and 60 in public companies) between 1990 and 2019. One public company case and 12 private company cases were added for the 2019 edition. The publication also categorizes all the court decisions in 401(k) company stock cases from 1990 through mid-2019 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 1990-2019, which provides a summary of rulings and regulations on ESOPs and related plans.

Product Details

PDF, 95 pages
11 x 8.5 inches
10th (September 2019)
Available for immediate purchase

Table of Contents

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
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 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
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


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.”

From "Tolling"

Preston v. Acosta, No. 17-1238 (U.S. June 25, 2018): The Supreme Court refused to hear a challenge to an 11th Circuit decision (Preston v. Acosta, Oct. 12, 2017) that ruled that the CEO and trustee of the ESOP at TPP Holdings could not invoke a tolling agreement to halt a DOL lawsuit alleging that he had caused the ESOP at the company to overpay for the purchase of his shares in 2006 and again in 2008. Before filing suit, the DOL and Preston tried to reach a settlement and entered into a series of “tolling agreements” that provided the DOL would delay any litigation while the efforts were pending. No settlement was reached, and the DOL sued in 2014, one day before the expiration of the agreed-upon tolling period. Despite their agreement not to assert a time bar to litigation, the defendants moved to assert one on the grounds that all alleged violations that occurred before December 30, 2008, six years prior to the filing, and thus were not permitted under ERISA’s limitation-of-actions provision. The court ruled that the agreements took precedence, and the Supreme Court let that ruling stand.

Foster v. Adams & Assocs., Inc., No. 3:18-cv-02723-JSC (N.D. Cal. Feb. 26, 2019): Ruled that employees can proceed with a lawsuit alleging the ESOP at Adams & Associates overpaid for the shares and that the trustee for the plan, a former felon, should not have been appointed. The defendants argued the three-year tolling period should have started in 2013 when the company filed its Form 5500, but the court ruled that employees did not have actual knowledge of the breach until later.