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Another wrinkle in the Brundle ESOP case

Although the district and appellate courts in the landmark Brundle ESOP case ruled years ago against the trustee, Wilmington Trust, litigation related to the case is not over.

BVU News and Trends April 2021

A monthly roundup of key developments of interest to business valuation experts.

DOL and Professional Fiduciary Services settle ESOP suit

The DOL recently settled a suit against Professional Fiduciary Services (PFS) related to a 2012 transaction in which PFS served as trustee in an ESOP acquisition of outstanding company stock.

Lysengen v. Argent Trust Co.

ESOP plaintiff’s proposed class action against trustee and selling shareholders survives motion to dismiss; court says complaint gave enough facts to support claims of overpayment and breach of fiduciary duty; defendant must show disputed transaction falls into adequate consideration exemption.

ESOP Plaintiff’s Proposed Class Action Alleging Overpayment Survives Motion to Dismiss

ESOP plaintiff’s proposed class action against trustee and selling shareholders survives motion to dismiss; court says complaint gave enough facts to support claims of overpayment and breach of fiduciary duty; defendant must show disputed transaction falls into adequate consideration exemption.

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.

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.

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.

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.

DOL’s Valuation-Related Claims Against Individual Actors Survive Motion to Dismiss

Court denies individual defendants’ motion to dismiss DOL’s claims that defendants breached duties as co-fiduciaries, violated a duty to monitor the co-defendant trustee, and knowingly participated in the trustee’s breaches; DOL’s complaint states sufficient facts to support claims, court finds.

Pizzella v. Reliance Trust Co.

Court denies individual defendants’ motion to dismiss DOL’s claims that defendants breached duties as co-fiduciaries, violated a duty to monitor the co-defendant trustee, and knowingly participated in the trustee’s breaches; DOL’s complaint states sufficient facts to support claims, court finds.

ESOP defendants sue for indemnification to limit financial exposure

In the face of several key rulings against ESOP fiduciaries, ESOP defendants, concerned about incurring substantial financial obligations, have begun to pursue claims for indemnification and/or contribution against other defendants or third parties to limit their exposure, as a recent case illustrates.

Novel issue of law raised in ESOP case that pits trustee against appraiser

A fairly routine ESOP case that is being litigated in the 4th Circuit has raised a novel legal issue in this jurisdiction as to the financial liability of co-fiduciaries and nonfiduciaries, including the ESOP appraiser.

Acosta v. Reliance Trust Co.

In DOL’s overpayment case against company directors and ESOP trustee, court denies directors’ pretrial motion for dismissal of case, finding DOL advanced “plausible” case theories; court also finds ESOP defendants have no right to indemnification from estate of late owner/seller of company shares.

In ‘Overpriced ESOP Insider Transaction Case,’ Defendants’ Pretrial Motion for Indemnification Fails

In DOL’s overpayment case against company directors and ESOP trustee, court denies directors’ pretrial motion for dismissal of case, finding DOL advanced “plausible” case theories; court also finds ESOP defendants have no right to indemnification from estate of late owner/seller of company shares.

Remy v. Lubbock Nat’l Bank

In ESOP case, court finds ERISA provides for right to contribution among co-fiduciaries but finds trustee defendant has no right to contribution from nonfiduciary ESOP appraiser if trustee were found liable to ESOP for losses; court dismisses third-party complaint against ESOP appraiser.

Trustee’s Claim for Contribution Against ESOP Appraiser Collapses

In ESOP case, court finds ERISA provides for right to contribution among co-fiduciaries but finds trustee defendant has no right to contribution from nonfiduciary ESOP appraiser if trustee were found liable to ESOP for losses; court dismisses third-party complaint against ESOP appraiser.

Experts comment on recent Brundle ESOP decision

In its recent Brundle opinion (see last week’s coverage), the 4th Circuit Court of Appeals, in describing the major actors in the case, included a quote (not attributed) that the ESOP world was “a very incestuous community.”

It’s not just about FMV, Brundle ESOP appeals court ruling shows

“Fair market value” is not the only consideration when it comes evaluating the performance of the ESOP trustee, the 4th Circuit made clear in its recent ruling, on which we reported here last week and which represents another milestone in ESOP case law.

4th Circuit upholds Brundle ESOP valuation and damages findings

The 4th Circuit Court of Appeals just affirmed the district court’s ruling against the trustee in the intensely contested Brundle v. Wilmington Trust ESOP case, including the district court’s valuation and damages findings.

Brundle v. Wilmington Trust N.A. (III)

In key ESOP case, 4th Circuit affirms liability and damages findings against ESOP trustee; court says trustee’s reliance on ESOP appraiser’s contemporaneous valuation was not “reasonably justified”; district court used correct measure of damages and justifiable methodology, 4th Circuit finds.

4th Circuit Says Record Supports Liability and Damages Findings Against ESOP Trustee

In key ESOP case, 4th Circuit affirms liability and damages findings against ESOP trustee; court says trustee’s reliance on ESOP appraiser’s contemporaneous valuation was not “reasonably justified”; district court used correct measure of damages and justifiable methodology, 4th Circuit finds.

In Gatekeeper Role, Court Trains Attention on Expert Methodology, Not Conclusions

In ESOP case pivoting on valuation, court denies parties’ Daubert challenges; court notes “gatekeeping” means focusing “on principles and methodology, not the conclusions that [the experts] generate”; parties’ objections are mostly quarrels with opposing expert’s conclusions, court finds.

Acosta v. Wilmington Trust, N.A. (I) (Graphite)

In ESOP case pivoting on valuation, court denies parties’ Daubert challenges; court notes “gatekeeping” means focusing “on principles and methodology, not the conclusions that [the experts] generate”; parties’ objections are mostly quarrels with opposing expert’s conclusions, court finds.

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