The U.S. Supreme Court is poised for a flurry of ERISA-related activity this year, with four cases on the docket. The first decision out of this quartet came on January 14, 2020, when the Supreme Court remanded the closely watched Retirement Plans Committee of IBM v. Jander to the Second Circuit Court to consider issues that were not fully developed at the court of appeals.
In Jander, the plaintiffs were participants in IBM’s employee stock ownership plan (ESOP), which invested in IBM stock. The plaintiffs alleged that the ESOP fiduciaries’ failure to make early corrective disclosures about an incorrect business valuation was a breach of fiduciary duty that caused the IBM stock to drop significantly.
Continue reading “Supreme Court Remands Second Circuit Stock Drop Decision”
Severance arrangements generally provide for cash payments to an employee whose employment is involuntarily terminated and may include certain benefits, such as subsidized medical coverage and outplacement assistance.
Severance arrangements take a variety of forms. Formal severance plans often are used as a retention tool for employees across the board with no individual negotiations. In our experience, companies with formal severance plans typically treat them as ERISA plans.
Continue reading “Traps for the Unwary: Is your Company’s Severance Arrangement Subject to ERISA?”
In Pizzella v. Vinoskey, the U.S. District Court for the Western District of Virginia held that an independent fiduciary hired to represent the interests of participants in an employee stock ownership plan (the ESOP) engaged in a prohibited transaction and breached its fiduciary duties of prudence and loyalty in a $21 million transaction involving the ESOP’s purchase of stock from one of the company’s founders. The ESOP was awarded a $6.5 million judgment based on the amount that the Court determined the ESOP had overpaid for the stock. The Court held that the founder and independent fiduciary were jointly and severally liable for this judgment.
Continue reading “A Lesson in ESOP Transactions: Do Your Diligence and Don’t Ignore Red Flags”