Suit by United Employees Opposed to ESOP Dismissed

A lawsuit by a group of employees unhappy with the United Airlines ESOP has been dismissed. In Sommersby v. State Street Bank, the plaintiffs contended that the wage concessions employees made were too large for the amount of stock they got. They did not contend, however, that the price the ESOP paid for the shares was unfair. A federal district court ruled that State Street Bank, the ESOP trustee, is only obligated to evaluate the price the ESOP pays for the shares; negotiations about wage concessions are a separate, and non-ESOP, issue.

The argument by the plaintiffs would have created a novel interpretation of ERISA. A number of ESOP transactions have involved wage concessions, and most of them have involved employees giving up more in wages than they got back in stock. Often, a profit sharing plan is initiated to try to recapture some of the lost wages.