ANB's final valuation figure. (Plaintiffs' Exhibit 2; Tr. 171-75, 184, 211-12, 261.)
17. In a letter dated April 14, 1983, the Mortell Company offered to purchase the 1016 Plan shares for the amount at which they had been appraised by ANB -- $ 1,254,760 ($ 1235 per share). (Plaintiffs' Exhibit 24.)
18. On April 15, 1983, Ramon and James Mortell resigned as trustees of the Plan, and First Trust became the trustee. First Trust remained trustee of the Plan until November 18, 1985. (Uncontested Facts, para. 7; Plaintiffs' Exhibits 23, 25, 26.)
19. On April 20, 1983, First Trust accepted the Mortell Company's offer to purchase the Plan's 1016 shares. (Uncontested Facts, para. 15; Plaintiffs' Exhibit 17.)
20. On April 25, 1983, the Mortell Company paid, and First Trust, on behalf of the Plan, received, $ 1,254,760 ($ 1235 per share) for the Plan's 1016 shares. (Uncontested Facts, para. 15.)
21. Prior to First Trust's acceptance of the Mortell Company's offer to purchase the Plan's 1016 shares, First Trust, through Porter and others, conducted an investigation and analysis of the proposed transaction. That investigation included a review of the February 1, 1983 valuation report prepared by ANB, an examination of the documents establishing the Plan, and a study of the Plan's asset portfolio. (Tr. 252-55.)
22. In determining to accept the Mortell Company's offer to purchase the Plan's shares at $ 1235 per share, First Trust considered various factors, including:
a.) that the Mortell Company stock constituted a large portion of the Plan's portfolio, hindering the Plan's diversification;
b.) that the Mortell Company stock had not paid dividends in the past two years, reducing the Plan's investment income;
c.) that the Plan's shares were nonvoting, and thus the Plan had no control over the company in which it was heavily invested;
d.) that there was no ready public market for the stock, since it was not listed on any stock exchange and had been privately held for many years; and
e.) that the offer was consistent with the valuation performed by ANB, a bank which Porter knew as having a fine reputation in the area of business valuations. (Tr. 254-57.)
23. At no time was First Trust ever made aware of Place's January 13, 1983 letter or its contents. (Uncontested Facts, para. 14.)
24. Robert A. Robison, a partner in charge of valuation services for the accounting firm of Coopers & Lybrand, testified as an expert in closely-held business valuations. (Tr. 205-07.) In Robison's professional opinion, the ANB valuation report was a thorough analysis containing all of the necessary elements of a proper valuation. (Tr. 208.) Robison agreed with ANB's employment of three valuation methods; he also approved of the relevant weights assigned to the values produced by each method in computing the final valuation figure. (Tr. 211-12, 221-22.)
25. Robison believed that a reasonably prudent businessman could rely on the ANB valuation report to form an opinion of the value of the Mortell Company's stock. (Tr. 223.) Robison also stated that in his opinion, the ANB valuation report contained a reasonable, and perhaps slightly high, valuation of the Plan's shares. (Tr. 221, 223, 226.)
26. Using a "venture capitalist approach" to valuation, a method not employed by ANB, Robison computed two different values, based on two separate assumptions, for the fair market value of the Plan's shares at around the time they were sold. Assuming that the Mortell Company sold for $ 28.76 million in cash in 1985, Robison computed the value of the shares to be $ 1089 per share in January 1983. Assuming the Mortell Company sold for $ 30 million in cash in June 1986, Robison computed the Plan's shares to be worth $ 841 per share in January 1983. (Tr. 223-26, First Trust's Exhibit 2.)
27. Robison also testified that Place's January 13, 1983 letter could not be considered a valuation report under generally accepted valuation standards. (Tr. 228.) Robison found the letter deficient in that it did not sufficiently discount the value of the shares for lack of marketability and lack of control. (Tr. 229.) He also stated that a reasonably prudent person would not have relied on the letter's unsupported conclusions concerning the fair market value of the Plan's shares. (Tr. 229.)
28. Edward J. Lucas, a vice president in the Trust Department of LaSalle National Bank in Chicago, also testified as an expert in trust management. In Lucas' opinion, First Trust's decision to accept the Mortell Company's offer to buy the Plan's stock was prudent and in accordance with generally accepted standards of the trust industry. (Tr. 295, 298.) In forming that opinion, Lucas noted that the stock was nonvoting, nonincome-producing, and not readily marketable. He also believed that the stock constituted too large of a percentage of the Plan's assets. (Tr. 296.) Therefore, his opinion was that it was not in the best interests of the Plan participants and beneficiaries for the Plan to have retained the stock. (Tr. 305.)
29. In a letter dated May 31, 1983, the Mortell Company notified the Plan participants that First Trust had been appointed trustee of the Plan and that the Mortell Company stock owned by the plan had been sold. The letter stated that the stock "was sold back to the [Mortell] Company at a profit to the Plan of more than $ 300,000 on an initial investment of $ 900,000." (Uncontested Facts, para. 19; Plaintiffs' Exhibit 3.). Along with the May 31, 1983 letter, the Mortell Company sent to each Plan participant a Summary Plan Description which outlined the terms and conditions of the Plan. (Uncontested Facts, para. 18; Mortells' Exhibit 1.)
30. During the period from 1976 until May 1983, Summary Plan Descriptions had not been sent to the Plan participants (Uncontested Facts, para. 18.) At no time did plaintiffs make a request upon the Plan's trustees or administrators to review or inspect any documents relating to the Plan. (Uncontested Facts, para. 20.)
31. On April 7, 1985, First Trust filed the 1983 Annual Report of the Plan ("5500 form") with the Department of Labor. (First Trust's Exhibit 3.) The financial statement report included as part of the 5500 form contained the following entry:
Mortell Company purchase of its stock held by the plan.
Description Cost Selling Price Current Value Gain or (Loss)
1,016 shares $ 795,840 $ 1,254,760 $ 1,254,760 $ 458,920
Note -- Current value was determined by an appraisal of the company stock by American National Bank and Trust Company of Chicago-Special Asset Division on February 1, 1983. The trustees of the plan, First Trust & Savings Bank of Kankakee, authorized the sale of the stock to Mortell Company for the value of $ 1,235 per share as determined by the appraisal.
(First Trust Exhibit 3, attachment, at 8.) The 5500 form was a public document open for public review. (First Trust Exhibit 3, at 1.)
32. To the extent that any of the foregoing findings of fact are deemed to be conclusions of law, they are hereby adopted as conclusions of law.
CONCLUSIONS OF LAW
1. The court has jurisdiction over this action pursuant to section 502(e)(1) of ERISA, 29 U.S.C. § 1132(e)(1). Venue in this district is proper pursuant to 28 U.S.C. § 1391(b). The plaintiffs have authority to bring this action under sections 409(a) and 502(a)(2) of ERISA, 29 U.S.C. §§ 1109(a) and 1132(a)(2).
II. Count I
A. First Trust
2. As trustee of the Plan from April 20, 1983 to November 18, 1985, First Trust was a Plan fiduciary. 29 U.S.C. § 1002(21)(A). As such, First Trust owed plaintiffs, each of whom were Plan participants, the fiduciary duties outlined in sections 403 and 404 of ERISA, 29 U.S.C. §§ 1103, 1104.
3. Under section 403 of ERISA,
. . . the assets of a plan shall never inure to the benefit of any employer and shall be held for the exclusive purposes of providing benefits to participants in the plan and their beneficiaries and defraying reasonable expenses of administering the plan.
29 U.S.C. § 1103.
4. Under section 404 of ERISA,
a [plan] fiduciary [must] discharge his duties with respect to a plan solely in the interest of the [plan's] participants and beneficiaries and --