The ESOP Association Files Amicus Brief

In the In re Citigroup ERISA Litigation, No. 07 Civ. 9790, 2009 WL 2762708 (S.D.N.Y. Aug. 31, 2009) ruling, the district court found that Citigroup did not breach its ERISA fiduciary duties by offering stock as a retirement plan option while the stock was incurring major losses. The case is on appeal.

Neil v. Zell, N.D. Ill. 2009, No. 08 C 6833

We have discussed how the Tribune Company Filed for Bankruptcy and how the Tribune ESOP is Being Terminated. A group of current and former employees filed a lawsuit on September 16, 2009. In a December 17, 2009 Memorandum Opinion and Order (Neil v. Zell, N.D. Ill. 2009, No. 08 C 6833), a federal judge dismissed some claims and ruled that other parts of the lawsuit can proceed. Employee Benefits Developments February 2010 discusses the case:

DOL Settlement Reaffirms ESOP Best Practices

The March 16, 2010 Employee Ownership Update is online and discusses the following:

DOL Settles High Profile ESOP Case

In November 2008 we discussed how the DOL Sued the Board of Directors for Alleged ERISA Violations and misusing ESOP assets. The DOL has announced that they have obtained consent judgments recovering more than $12 million for employee stock plan participants in California and Washington:

Hoffman v. Tharaldson Motels Inc. Employee Stock Ownership Plan, D.N.D., No. 3:08-cv-109, 2/26/10

In Hoffman v. Tharaldson Motels Inc. Employee Stock Ownership Plan, D.N.D., No. 3:08-cv-109, 2/26/10, a U.S. District Court for the District of North Dakota found that a plan amendment providing for the conversion of stock to cash for the ESOP accounts of terminated participants (a.k.a. Segregation of Accounts) was not a violation of the anti-cutback provisions of IRC Section 411(d)(6)(C) - Minimum vesting standards - Special rules - Accrued benefit not to be decreased by amendment.

Nestlé Purina Petcare Co. v. Commissioner of Internal Revenue, No. 09-1381 (8th Cir. 2010)

We have previously discussed how the IRS Will Continue to Litigate Deductible Redemptive Dividends and some related cases. In Nestlé Purina Petcare Co. v. Commissioner of Internal Revenue, No. 09-1381 (8th Cir. 2010), the U.S. Court of Appeals for the Eighth Circuit affirmed the Tax Court's ruling (Ralston Purina Co. v. Commissioner, 131 T.C. No. 4 (September 10, 2008)) that found that IRC Section 162(k) renders payments to an ESOP that were distributed to terminated participants nondeductible under IRC Section 404(k) because they are in connection with a redemption of stock.

DOL’s Amicus Brief re: Citigroup ERISA Litigation

The February 15, 2010 Employee Ownership Update is online and discusses the following

In re Citigroup ERISA Litigation, No. 07 Civ. 9790, 2009 WL 2762708 (S.D.N.Y. Aug. 31, 2009)

Citigroup Cleared in ERISA Fiduciary Duty Breach Case discusses how a court found that Citigroup did not breach its ERISA fiduciary duties in In re Citigroup ERISA Litigation, No. 07 Civ. 9790, 2009 WL 2762708 (S.D.N.Y. Aug. 31, 2009):

When Representations are Actionable under ERISA

Earlier this week we discussed ESOP Litigation that found that participants can pursue a fiduciary breach when a fiduciary Omits or Provides Misleading Financial Information to Participants. When Representations Regarding the Financial Condition of the Plan Sponsor Become Actionable Under ERISA provides additional analysis and discusses when intentionally connecting statements is actionable under ERISA:

ESOP Litigation: Omitting or Providing Misleading Financial Information to Participants

In Balsley v. Delta Star Employee Stock Ownership Plan, N.D. Cal., No. C09-2952 TEH, 12/10/09, a federal court found that an ESOP participant can pursue a claim that a plan fiduciary breached their fiduciary duties by omitting financial information:

According to the court opinion, a plan representative contacted Balsley on two occasions in October 2007 to offer a lump-sum buyback of the stock in Balsley's plan account based on the December 31, 2006 stock valuation of $22.38. The representative indicated that cash may not be available in the future to buy back Balsley's shares, and that the lump-sum offer would not remain open, so on November 26, 2007, Balsley received a $1,318,422.15 distribution from the plan.

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