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What do you do if you’re a milling and animal feed manufacturer saddled in scandal because you produced horse and cattle feed containing a fatal amount of monensin?  Apparently, you sell your stock to an ESOP at an overly inflated price.  That’s at least what the plaintiff alleges in this week’s notable decision, Zavala v. Kruse-Western, Inc., et al., No. 119CV00239DADSKO, 2019 WL 3387102 (E.D. Cal. July 26, 2019).  

Following Kruse-Western’s expensive settlements related to monensin poisoning of horses and cattle, and allegedly with the knowledge of significant future liabilities, the Western Milling Employee Stock Ownership Plan (the “ESOP”) was created.  Zavala, a current ESOP participant, alleges various violations related to the sale of Kruse-Western stock to the ESOP.  The ESOP purchased the stock from Kruse-Western and the other defendant “selling shareholders,” which the ESOP financed by borrowing the entire purchase price of $244 million from Kruse-Western.  The value of Kruse-Western stock fell shortly thereafter, with only marginal recovery, such that within two years of the ESOP’s creation, the ESOP had purchased Kruse-Western’s outstanding stock for nearly ten times its actual value.  And like monensin, that’s a hard pill to swallow.
Continue Reading Dudenhoeffer Does Not Defeat Breach of Fiduciary Duty Claims Related to ESOP Purchase of Inflated Company Stock

Good morning, ERISA Watchers!  Last week was quite a busy week.  I spent four days in Spokane, Washington attending the Ninth Circuit Judicial Conference (and met Associate Justice Elena Kagan to boot!).  Despite the flurry of activity, I continued to review all the recent ERISA decisions so that Your ERISA Watch wouldn’t miss a beat. The mid-week notable decision was from the Fourth Circuit.  (Read about it here if you missed it.).  Today’s notable decision is from the Fifth Circuit in Faciane v. Sun Life Assurance Co. of Canada, No. 18-30918, __F.3d__, 2019 WL 3334654 (5th Cir. July 25, 2019), where the court addresses the accrual of a limitations period applicable to a disability benefit miscalculation claim.  
Continue Reading Fifth Circuit Finds Limitations Period for Miscalculation Claim Began to Accrue Upon Notice of Benefit Calculation

Good morning, ERISA Watchers!  You may remember the case last year involving a group of Maine dairy delivery drivers who received $5 million in a proposed settlement all due to a missing oxford comma.  (A lack of an Oxford comma cost dairy $5 million.)  In this week’s notable decision, Tyll v. Stanley Black & Decker Life Insurance Program et al., 2019 WL 3081061 (D. Conn. July 12, 2019), it is Federal Insurance Company getting an expensive lesson in policy drafting.

Tyll involves a claim for accidental death and dismemberment insurance benefits.  Ms. Tyll’s late husband was a participant in the Stanley Black & Decker Life Insurance Program which offered, among other benefits, a Business Travel Accident Insurance Program (“the Policy”).  Mr. Tyll died while on board a commercial flight from Paris to New York.  At the time of his death, he was earning a salary of more than one million per year.  Federal Insurance Company, which insures the benefit, initially denied that Ms. Tyll was entitled to any benefit and denied her claim on December 11, 2014.  By April 17, 2017, it reversed its position on her entitlement to benefits but it claimed that Tyll is entitled to benefits capped at one million.  Ms. Tyll argued that she was entitled to a cap of five million.
Continue Reading Say What You Mean or Pay What you Say: Federal Insurance Company’s Four-Million-Dollar Lesson