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The Employee Ownership Update

Loren Rodgers

March 15, 2016

(Loren Rodgers)

Courts Continue to Favor Defendants After Dudenhoeffer

In a detailed ruling, a district court ruled in Coburn v. Evercore Tr. Co., N.A, No. 1:15-cv-00049-RBW (D.D.C. Feb. 17, 2016), that an unsuccessful change in business strategy was not enough to meet the special circumstances standard outlined in the Fifth Third Bancorp v. Dudenhoeffer case. The court noted that one of the few post-Dudenhoeffer cases to survive, Gedek v. Perez, concerned Kodak, which faced a fundamentally changed market that offered virtually no way for the company to recover. The court said fiduciaries should not be in a position to outguess the market, whether that means selling or buying shares. The court also dismissed the claim made under the continuing monitoring obligation laid out in Tibble v. Edison International. The court said that the duty to monitor on an ongoing basis was nothing new, and did not mean the trustee can be expected to outguess the market absent special circumstances.

The special circumstances standard was discussed solely in the context of public companies, but in Allen v. GreatBanc Trust, No. 115-cv-03503 (N.D. Ill. Oct. 15, 2015), a district court ruled that GreatBanc did not cause an ESOP at Personal-Touch Home Care to buy shares at an excessive price. The court said even though the company was private, plaintiffs have to plead special circumstances to make a claim. The Department of Labor has filed an appeal in the case, saying the special circumstances rule should apply only to public companies.

Harpoon Brewery in Forbes

In an interview with Dan Kenary, the CEO of Harpoon Brewery, Forbes contributor Roberta Matuson asked why Kenary had adopted an ESOP. "I did this because I wanted our employees to fully participate in the value that we are creating," he said. "I have an opportunity to do something with this that speaks to my values of giving back to the community and giving people a shot at something they may never have." She also noted that the strength of the company is not just in being employee-owned, observing that "Dan's first response to just about every question that I asked him started with a discussion on culture."

ESOPs on the Radio

The CEO of employee-owned ArcherPoint, Greg Kaupp, tells his company's ESOP story on the Cleveland-area station WJCU. The interview also features NCEO founder Corey Rosen, who discusses how ESOPs affect companies, owners, employees, and the economy. The 30-minute interview, available at our ESOPinfo website at esopinfo.org/videos, originally aired on March 2, 2016.

David Ackerman: 1949 to 2016

David Ackerman, a long-time and widely respected member of the ESOP community, passed away on March 12, 2016. Ackerman, an attorney at Morgan, Lewis & Bockius LLP, was the author of many publications and a sought-after speaker, but those who knew him will remember his humor, kindness, and the calm warmth he brought to all events in which he participated.

Author biography and other columns in this series

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