ESOP Litigation Information

An Employee Stock Ownership Plan (ESOP) is a tax-qualified defined contribution employee benefit plan intended to invest primarily in the stock of the ESOP participant’s employer. Both private and public companies offer ESOPs. Most lawsuits involving ESOPs arise out of one of the following or similar situations:

  • The owners of a privately held company sell their stock to the ESOP at an inflated price
  • A company is in financial difficulty, but those in charge of the ESOP don’t do anything about it
  • Management or owners other than the ESOP bought the ESOP’s shares for less than they were worth.

A federal law called ERISA, or the Employee Retirement Income Security Act of 1974, regulates ESOPs. Keller Rohrback is a nationally known leader in all types of ERISA litigation, and in particular has extensive experience and has achieved significant success for our ESOP clients. Our ESOP attorneys are currently representing participants, beneficiaries and fiduciaries of both private and public company ESOPs. 

If you are a participant, beneficiary or fiduciary of a private company that is wholly or partly ESOP-owned, and you have questions about your rights or concerns or complaints about your ESOP, please contact our ESOP lawyers at 800.776.6044 or [email protected].

Private Company ESOP Litigation

Private ESOP lawsuits involve unique issues of fact and law. Because private ESOP shares are not publicly traded, ERISA requires the ESOP’s fiduciaries to carefully and accurately value that stock to protect the ESOP. If fiduciaries fail to engage in a prudent process or employ unsound valuation methodologies in valuing the stock, the ESOP and its participants may be damaged. Keller Rohrback’s ESOP attorneys are very familiar with applicable stock valuation techniques and methodologies, and work closely with valuation experts to ensure that the Stock Ownership Plan participant and beneficiary rights are protected.

ERISA also requires fiduciaries to act in the best interests of the Plan in connection with any transaction involving the ESOP, including providing Plan participants and beneficiaries with complete and accurate information. ESOP fiduciaries may breach their duties by approving or permitting transactions that favor other corporate constituencies to the detriment of the ESOP, allowing for the diversion of corporate assets to benefit parties other than the ESOP, or including terms that expose the ESOP to undue risk. 

ERISA requires that ESOP fiduciaries make good any losses that the ESOP suffers as a result of their breach of fiduciary duty. There is an extensive body of law, including the ERISA statute itself, extensive Department of Labor regulations, Treasury Regulations, and over 35 years of case law, that must be considered in evaluating whether an ESOP fiduciary has fulfilled its ERISA duties. Keller Rohrback’s attorneys are nationally recognized for their expertise with respect to ESOP matters. We are intimately familiar with ERISA and other applicable statutes, as well as the enormous and rapidly developing body of case law in this area.

Keller Rohrback and its attorneys have achieved many notable successes for its ESOP clients in all phases of litigation, all of which resulted in multi-million dollar settlements that were distributed to ESOP participants and beneficiaries or their ESOP accounts. 

Public Company ESOP Litigation

Keller Rohrback’s ESOP attorneys also have extensive experience with respect to litigation involving public-company ESOPs. While those ESOPs are designed to invest primarily in company stock, their fiduciaries are subject to an overriding duty of prudence to cease acquiring company stock and/or to divest the ESOP’s holdings under certain circumstances. 

Keller Rohrback is a recognized leader in ERISA litigation having served as lead or co-lead counsel in numerous public company ESOP cases.

IMPORTANT:  You may have other rights not described in this brief summary, and the rights of plan participants may vary from state to state, from plan to plan, or even within a single plan.


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