Chris Wingard, an Associate in Kleinbard’s Business & Finance Practice, authored a post on a Massachusetts federal court ruling in the long-running Russelectric ESOP litigation, for the National Center for Employee Ownership (NCEO)’s Employee Ownership Legal Digest. Following a bench trial, the court found in favor of plaintiffs on certain fiduciary breach claims while rejecting others. The case was brought by ESOP participants against company insiders and arose from a 2016 redemption transaction that terminated the ESOP and the subsequent 2019 sale of the company. The participants alleged breaches of ERISA fiduciary duties. The court rejected claims that the ESOP shares were undervalued and that unallocated shares were improperly excluded from future clawback payments. However, it ruled for the plaintiffs on claims that insider bonuses paid during the 2019 sale improperly reduced participants’ clawback payments. The case demonstrates that fiduciary responsibility can extend beyond the date an ESOP terminates if participants remain entitled to post-closing consideration, such as clawback payments.
To read the post, click here.
