ERISA Litigation and Employee Stock Ownership Plans: The Evolving Landscape of Claims Against Fiduciaries and Non-Fiduciaries

This CLE course will guide counsel, advisers, trustees, and administrators on procedures and fiduciary responsibilities in employee stock ownership plan (ESOP) transactions and cover recent court rulings. The panel will discuss best practices in satisfying fiduciary duties in ESOP transactions, legal issues that arise, and lessons learned from recent cases to defend against and minimize litigation.

An ESOP is a tax-qualified defined contribution employee retirement benefit plan designed to primarily invest in the stock of the sponsoring employer. ERISA imposes the highest duties known to law on trustees and other fiduciaries of ESOPs and also imposes duties on non-fiduciaries who are involved with the ESOP. Some transactions involving ESOPs have led to regulatory investigations and/or litigation.

Many complex issues arise when an ESOP purchases or sells employer stock or amends the Plan provisions regarding employer stock. ESOP fiduciaries face essential ERISA fiduciary standards and valuation issues. Non-fiduciaries also need to be cognizant of these issues if they engage in a transaction involving an ESOP.

Most lawsuits concerning these transactions typically involve (1) claims that selling shareholders sold company stock to the ESOP at an inflated price; (2) fiduciaries of the ESOP took failed to act to protect the interests of participants in connection with ESOP transactions; (3) buyers purchased the ESOP's shares for less than they were worth; (4) ESOP fiduciaries engaged in transactions prohibited by ERISA whereby either a fiduciary or a non-fiduciary benefited, sometimes at the ESOP’s expense or (5) the ESOP was amended to change the rules by which employees (particularly former employees) could remain participants or hold employer stock in the Plan.

Listen as our panel discusses best practices in satisfying fiduciary duties in ESOP transactions, legal issues that arise, and lessons learned from recent litigation to defend and minimize litigation.