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ESOPs: good for employees but facing an uncertain future

A recent article in the New York Times extols the virtues of employee ownership through employee stock ownership plans (ESOPs). And trade groups for employee-owned businesses have noted bipartisan Congressional support for ESOPs. But ESOP experts (trustees and appraisers) worry that the Department of Labor’s antagonistic attitude toward ESOP transactions, validated by key victories in court, has stymied ESOP formation.

ESOPs: good for employees but facing an uncertain future

A recent article in the New York Times extols the virtues of employee ownership through employee stock ownership plans (ESOPs).

ASA, supporting Vinoskey ESOP appeal, aims to correct BV ‘misstatements’

The ASA recently filed an amicus brief in support of the Vinoskey appeal, in which it claims the district court, in ruling against the ESOP trustee and the owner and selling shareholder, Adam Vinoskey, made numerous valuation-related misstatements that required correction.

Defendant in Vinoskey ESOP case files appeal with 4th Circuit

In the contentious Vinoskey ESOP case, one of the defendants, the owner and selling shareholder, Adam Vinoskey, recently appealed the district court’s finding that he was liable for knowingly participating in the trustee defendant’s ERISA violations and was a co-fiduciary for the trustee’s breaches of fiduciary duties.

RVNB class action alleging breach of fiduciary duty by ESOP trustee hurtles toward final settlement

ESOP litigation watchers can add one more case to the number of actions that recently have been resolved.

Plaintiffs in Rainbow ESOP class action ready to settle case

Last week, we reported on the resolution of two major ESOP litigations.

ESOP litigants play by their own valuation rules, speakers say

Imagine if you were playing on a baseball team and the opposing players argue that you are violating the rules of soccer.

Appeal in Lee ESOP case dismissed; ESOP class action also close to resolution

The last few weeks have seen the end of two ESOP litigations that have drawn a lot of attention from the ESOP community.

Gemini Ins. Co. v. Potts

In bifurcated ESOP litigation centering on ERISA violations, court finds trustee defendants’ professional liability policy expressly excluded coverage for ERISA claims; under language of policy, insurer is not required to defend or indemnify trustee defendants fighting DOL’s ERISA allegations.

Court Finds ESOP Trustee’s Insurance Excludes Coverage for Defense Against DOL’s ERISA Claims

In bifurcated ESOP litigation centering on ERISA violations, court finds trustee defendants’ professional liability policy expressly excluded coverage for ERISA claims; under language of policy, insurer is not required to defend or indemnify trustee defendants fighting DOL’s ERISA allegations.

Class-Action Litigation Involving ERISA/ESOP Valuation Issues

Join James F. Joyner and attorney Richard Pearl for unique insight into ESOPs and valuation principles. The general trend in ESOP transactions and valuation has been to acquiesce to fundamental changes because of the threat of litigation, even though ERISA or valuation principles do not require changes. Many defendants have been unable to adequately educate courts on some key issues. Get both the valuation and attorney perspective on how to address these issues.

ESOP Case Appeal Stokes Controversy Over DOL Valuations

A series of court cases have generated controversy over the tactics and valuation methods the Department of Labor (DOL) has been using, including claims that the DOL has improperly redefined the term “fair market value,” does not follow generally accepted valuation principles nor standards, and continually uses an expert the valuation community deems “unqualified.”

NCEO amicus brief supporting dismissal of case details benefits from ESOP participation

The National Center for Employee Ownership (NCEO) also filed an amicus brief in which it supports the dismissal of the Lee case that is currently on appeal with the 4th Circuit.

ASA files amicus brief in Lee case, discussing FMV concerns in ESOP litigation

Responding to the appeal in the Lee case, the American Society of Appraisers recently filed an amicus brief supporting the dismissal of the case.

ESOP trustee defends dismissal of lawsuit and rejects comparison to Brundle

In response to the plaintiff’s appeal in the Lee ESOP case, the defendant trustee said the district court’s dismissal of the case for lack of standing was appropriate.

Willamette’s spring 2020 Insights focuses on ESOP valuations

The spring 2020 Insights from Willamette Management Associates focuses on ESOP employer stock valuations and contains a number of articles, such as “Employee Stock Ownership Plan Financial Feasibility Analysis: Financial Considerations for Shareholders” (Robert F. Reilly), “Valuation Treatment of the Repurchase Obligation Liability” (Kyle J. Wishing), “The Fiduciary Process for the Annual Update of the ESOP Share Value” (Frank “Chip” Brown), “Pizzella v. Vinoskey: A Costly Lesson to Learn” (Lisa H. Tran), and more.

Pension Rights Center files amicus brief in support of ESOP plaintiff

A nonprofit consumer organization whose mission is “to protect and promote the retirement security of American workers, retirees, and their families” recently filed an amicus curiae brief in support of the appeal the plaintiff in Lee filed with the 4th Circuit (see above).

DOL announces big ESOP settlement with Wilmington Trust

In yet another ESOP development, the Secretary of Labor recently announced that it reached a settlement with Wilmington Trust NA, an international financial services firm with expertise in serving as trustee in major ESOP transactions.

ESOP plaintiff appeals dismissal of lawsuit, leaning heavily on controversial Brundle case

In appealing the dismissal of her lawsuit with the 4th Circuit Court of Appeals, an ESOP plaintiff frequently invokes the Brundle case in which the same appeals court affirmed a $30 million judgment for the ESOP.

Projection Issues Raised in ESOP Litigation

Revenue growth rate, profit margins, and long-term growth rate can all meaningfully impact projections. Add in inconsistency with historical results, industry/economy impacts, and lack of adjustment for critical things such as compensation or capital expenditures, and it is easy to see how litigation can arise. Chip Brown, Chelsea Mikula, and Kyle Wishing help identify common issues raised in ESOP litigation cases (either by the Department of Labor or private plaintiffs) with respect to financial projections ...

New DOL process agreement confronts control issue in ESOP valuations

The Department of Labor recently settled ESOP litigation with the trustee Farmers National Bank of Danville (FNB).

Best Practices – Thought Leadership in Valuation, Damages, and Transfer Price Analysis

March 2020 Hardcover

Robert F. Reilly, Robert P. Schweihs

Best Practicesincludes more than 1,200 pages of thought leadership on a wide range of topics, including the valuation of private company securities and intangible assets, valuation for property tax purposes, valuation for ESOPs, fair value measurement for financial accounting purposes, transfer price analysis, and economic damages measurement. Learn more >>

Scalia v. Farmers National Bank of Danville & Weddle Bros. Const. Co.

Under new processing agreement between DOL and specific ESOP trustee, trustee is bound by strict rules on how to handle controlling-interest acquisitions and indemnification issues; trustee must ensure ESOP plan acquires a series of specified rights before approving payment of a control premium.

DOL Processing Agreement Contains Stringent Rules on Controlling Interest Transactions, Indemnification

Under new processing agreement between DOL and specific ESOP trustee, trustee is bound by strict rules on how to handle controlling-interest acquisitions and indemnification issues; trustee must ensure ESOP plan acquires a series of specified rights before approving payment of a control premium.

Attack on DOL’s ability to seek monetary damages in Vinoskey ESOP case fails

In the contentious Vinoskey ESOP case, the trustee recently asked for a new trial, arguing the Secretary of Labor, representing the plaintiff, lacked the statutory authority to seek monetary damages on behalf of the ESOP and the court lacked the authority to hear this claim.

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