Chris Wingard, an Associate in Kleinbard’s Business & Finance Practice, authored a post on the U.S. District Court for the Middle District of Tennessee’s dismissal of a putative class action against Zander Group Holdings, Inc. and its ESOP fiduciaries for the National Center for Employee Ownership (NCEO)’s Employee Ownership Legal Digest. In the lawsuit, a former employee and ESOP participant challenged the company’s decision to cash out former employees’ ESOP shares and roll the proceeds into the company’s 401(k) plan, despite his objection. The court found that the former employee had standing but dismissed all federal ERISA claims. It also held that several claims were claims for plan benefits that should have gone through the plan’s administrative claims process first. The key takeaway from this decision is that courts may recharacterize ESOP-related fiduciary-duty claims as benefits claims when the dispute is really about entitlement to plan assets, meaning participants may need to exhaust plan remedies before suing.
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