Stay informed on the latest legal developments impacting employee ownership with timely and concise summaries of key cases and rulings. Learn more about this digest »
Corey Rosen
In Rev. Rul. 2003-27; 2003-1 C.B. 597, EB. 20, 2003, the IRS ruled that the basis of shares on an S corporation ESOP trust must be adjusted in the same way as any other S corporation shares are adjusted for the purpose of calculating net unrealized appreciation.
Corey Rosen
In Su v. Bowers, D.C. No. 1:18-cv-00155SOM-WRP (9th Cir. Oct. 23, 2023), the Ninth Circuit said that the Department of Labor did not have to pay attorneys’ fees to the defendants’ attorneys in a valuation case the DOL decisively lost.
Corey Rosen
Courts have generally not favored arbitration clauses in ESOPs. As we reported in November 2023, the Supreme Court recently declined to hear two appeals of cases in which an arbitration clause was denied as a defense.
Corey Rosen
On October 10, the Supreme Court, without comment, denied an effort to hear an appeal of a 10th Circuit decision to deny arbitration in an ESOP case. In Harrison v. Envision Management Holding Company, No. 22-1098 (10th Cir. Apr. 11, 2023), the 10th Circuit denied a request that it reconsider its earlier three-judge ruling that Envision Management Holding Company cannot compel arbitration in a case concerning the price an ESOP paid for shares in the company.
Corey Rosen
On October 16, the Supreme Court denied a request to allow arbitration in another ESOP case. In Henry v. Wilmington Trust et al., No. C.A. 19-1925 DM (D.C. Del. June 30, 2023), a district court ruled that a plaintiff (Henry) was not subject to an arbitration clause in the company’s ESOP.
Corey Rosen
In Smith v. Greatbanc Trust, No. 20 C 2350 (D. Ill. Aug. 22, 2023), a district court gave final approval to a $14.8 million settlement involving an ESOP at Triad Manufacturing.
Corey Rosen
In Walsh v. Reliance Trust Co., et al., No. CV-19-03178-PHX-JJT (D.C. Ariz. Aug. 30, 2023), a district court approved a $22.5 million consent decree in the case of RVR, Inc. The case originated in a 2019 lawsuit alleging that Reliance Trust allowed an ESOP to overpay for the shares of RVR, Inc.
Corey Rosen
In Lysengen v. Argent Trust, et al., No. 1:20-cv-01177MMM-JEH (D.C. Ill. Sept. 7, 2023), former shareholders of Morton Buildings were dismissed as defendants in a case concerning the valuation of their shares in a sale to the company’s ESOP.
Corey Rosen
In Lysengen v. Argent Trust, et al., No. 1:20-cv-01177-MMM-JEH (D.C. Ill. Aug. 10, 2023) an individual plaintiff was allowed to sue on behalf of the ESOP trust. The case involved the alleged overvaluation of stock at Morton Buildings.
Corey Rosen
In David Burnett, et al., v. Prudent Fiduciary Services LLC, et al., No. 22-270-RGA (3rd Cir. August 15, 2023), the 3rd Circuit affirmed a lower court ruling that an arbitration clause does not apply in an ESOP case.
