Corey Rosen
Plaintiff does not have the right to see the valuation report
In Truong v. KPC Healthcare ESOP Committee, Case No. 8:23-cv-01384-SB-BFM (C.D. Cal. Sept. 9, 2024), a court said the plaintiff in a long-running ESOP case did not have the right to see the valuation report in the deal. Plaintiffs had objected to the sale of ESOP-owned KPC Healthcare to Victor Valley Health Care, which was owned by the same two people who had sold KPC to the ESOP. Plaintiffs argued that the sale price was unfair to participants and asked to see the fairness opinion produced by the ESOP valuation firm (Stout) that the trustee would use to determine if the ESOP was receiving at least fair market value. The court concluded that “Defendants produce uncontroverted evidence that the transaction price (which was negotiated before Stout provided Alerus with its written opinion) exceeded the high end of the fair market value range identified by Stout. Thus, if Plaintiff were to obtain the Stout Report, she still would not know either the total sale price for the 2021 transaction or the value of her benefits following that sale…Plaintiff is correct that the Stout Report has some connection to the sale price, primarily in the sense that the sale could not have gone forward if Stout had concluded that the negotiated price was below fair market value. But the mere fact that it contains information that hypothetically could have affected the transaction if the negotiated price had been lower does not make the Stout Report an ‘other instrument’ under which the plan is established or operated” that are required to be disclosed to participants. The judge granted summary judgment to the defendants on this issue.
