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 Acosta v. First Bankers Tr. Servs., Inc., (No. 5:16-cv-00328-gwc) (D.-Vt, proposed consent judgment, April 27, 2018) the DOL and First Bankers Trust settled a lawsuit alleging that the ESOP at Sonnax Industries overpaid for its shares.
Corey Rosen
Continuing the string of losses in challenges to employer stock in 401(k) plans, in Fentress v. Exxon Mobil Corp., No. 4:16-cv-03484, (S.D. Tex., March 30, 2018, order granting defendants’ motion to dismiss), a district court rejected plaintiff claims that Exxon Mobil 401(k) fiduciaries knew or should have known that the price of the stock was inflated.
Corey Rosen
In Acosta v. Vinoskey, No. 6:16-cv-00062-NKMRSB, (W.D. Va., April 17, 2018, order on summary judgment motions 4/17/18), a federal court allowed a case against the ESOP at Sentry Equipment Corporation to proceed, but only after sharply cutting back on some of the DOL’s claims.
Corey Rosen
In Acosta v. Cactus Feeders, Inc., et al., 2:16-cv-00049-J-BR (N.D., Tex., May 4, 2018), the insurers for Cactus Feeders, certain of its present and former directors, officers and members of its ESOP Committee, and Lubbock National Bank (the ESOP trustee) agreed to pay $5.4 million into the Cactus Feeders ESOP to settle a lawsuit initiated by the DOL alleging that the appraisal for a transaction that increased the ESOP’s ownership of Cactus Feeders from 30% to 100% did not adequately adjust for the alleged dilutive impact of warrants and stock options, did not apply a discount for lack of marketability, and did not include a discount for lack of control.
Corey Rosen
In an online article “The Potential Impact of the Supreme Court’s Epic Systems Decision on ESOPs,” Chelsea Ashbrook McCarthy, Louis Joseph, and Jessica Farmer of Holland & Knight note that the Court’s analysis in the case indicates that it “would likely reject an argument that an arbitration provision with a class action waiver in an employee stock ownership plan (ESOP) is fundamentally unenforceable under ERISA.”
Corey Rosen
In Matters of Patrick Murphy & Kathleen Murphy, DTA No. 825277 (N.Y.S. Tax App. Trib., Mar. 6, 2018), the New York State Tax Tribunal ruled that ERISA supersedes state tax law claims against what appears to be a sham ESOP. JJF Realty was 99% owned by an ESOP and 1% by the Triune Foundation.
Corey Rosen
In Pfeifer v. Wawa, Inc., No. 2:16-cv-00497- PD (E.D. Pa., motion for settlement approval filed 12/29/17), a case we reported on previously, the Department of Labor argued, and the court agreed, that a company cannot indemnify an ESOP fiduciary.
Corey Rosen
On July 4, the SEC adopted new rules to increase the amount companies can offer in stock to employees without meeting reporting requirements applicable to public companies from $5 million to $10 million.
Corey Rosen
In Wis. Cent. Ltd. v. United States, U.S., No. 17-530, (U.S. June 17, 2018) the Supreme Court ruled that stock options paid to railroad employees are not taxable as “money” under the terms of Railroad Retirement Act. Wisconsin Central had paid taxes on the options, then decided it should not have because the Act states that only “money” received by employees is taxable.
Corey Rosen
In Kinra v. Chicago Bridge & Iron, 17 CV-4251 (S.D.N.Y., May 24, 2018), the Second District Court for New York continued its pattern of denying stock-drop claims in public company 401(k) plans.
