Employee Ownership Legal Digest
Corey Rosen (27)

Corey Rosen

September 18, 2018

Sears defeats stock-drop lawsuit

In Catalfamo v. Sears Holdings Corp. No. 1:17-cv-05230, (N.D. Ill., order granting defendants’ motion to dismiss 8/21/18) a district court ruled that Sears and its top executives did not violate ERISA by allowing company stock to remain in the 401(k) plan despite a 76.3% decline in stock value. The plaintiffs alleged that publicly available information should have led the defendants to remove the shares, but the court, relying on Dudenhoeffer, said that would have required the defendants to, at any particular point, outguess the market.

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Corey Rosen

September 18, 2018

Henny Penny employee cannot be forced to agree to arbitration clause

In Brown v. Wilmington Tr., N.A., No. 3:17-cv-00250 (S.D. Ohio, order denying defendant’s motion to compel arbitration 7/24/18), a district court ruled that a former employee cannot be forced to go through an arbitration clause regarding her ESOP account. The company set up its ESOP in 2014, and the employee was allocated shares. Two years later, the company adopted an arbitration clause for disputes over distributions. By then, the employee had left. The company and the ESOP trust, Wilmington Trust, wanted to enforce the arbitration clause, but the court ruled that she had never agreed to it because she had left the company by then and had cashed out her plan. The plaintiff is one of a class of employees suing over an alleged overvaluation of the stock.

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Corey Rosen

September 18, 2018

Reliance Trust and DOL reach settlement on Tobacco Rag suit

In  Acosta v. Reliance Trust Co., Inc., E.D.N.C., No. 5:17-cv-00214-D, consent judgment 9/18/18, Reliance Trust agreed to pay $4.5 million to settle a DOL lawsuit that alleged the investment banking firm caused the ESOP at Tobacco Rag Processors, Inc. to overpay for company stock. The sale for $104 million took place in 2011. In that case, the DOL alleged that Reliance had “failed to ensure that the financial information provided to the appraiser and used in its valuation was accurate and complete, to thoroughly understand the appraiser’s valuation, and to meaningfully question the assumptions underlying the valuation.” Reliance Trust did not admit any wrongdoing.

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