ESOP Legal News - August 2012 • Volume 1, Number 4


In This Issue:

District Court Allows ESOP Participants to Amend Complaint to Add Spouse of Trustee as Defendant; Department of Labor Files Action Seeking to Recover Losses Suffered by Participants; Secretary of Labor Asks Seventh Circuit to Reject Moench Presumption; Assistant Secretary Borzi Addresses Re-Proposal of Regulation Redefining Term “Fiduciary”; Pro-ESOP Legislation Re-Introduced into Senate; Pro-ESOP Legislation Garners Support; and, Study Indicates Jobs Grew by Approximately 60 Percent Over the Past Decade at ESOP-Owned S Corporations Compared with Other Corporations.

Excerpt from District Court Allows ESOP Participants to Amend Complaint to Add Spouse of Trustee as Defendant:

On July 25, 2012, the United States District Court for the Western District of Wisconsin issued an opinion holding that participants in the Trachte Building Systems, Inc. Employee Stock Ownership Plan could amend their complaint to add the spouse of the trustee as a defendant in a claim alleging the spouse was the gratuitous transferee of phantom stock units under Section 502(a)(3) of the Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406, 88 Stat. 829 (codified in part at 29 U.S.C. § 1002). Participants alleged that the trustee deposited $2,896,100 from a phantom stock plan into an account held solely by his spouse and that the spouse gave no consideration in exchange for the deposit. The court concluded that participants demonstrated “good cause” under Federal Rule of Civil Procedure 16 for deviating from the deadline for amending the complaint. Participants sought production of information relating to the payment, which the trustee refused to produce. The trustee responded to the discovery request only after the court issued a preliminary ruling concluding that the trustee would likely be liable...

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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