The opinion of the court was delivered by: Michael M. Mihm, District Judge
Now before the Court is a Motion for Summary Judgment by Defendant
Richard Hodgson's ("Hodgson"). For the reasons set forth below, the
Motion for Summary Judgment [#420] is DENIED.
The basic factual background has been sufficiently set forth in the
prior orders of this Court, and familiarity therewith is presumed. The
present motion is brought by Defendant Hodgson, who is in this suit only
as a party-in-interest in Count IX of the First Amended Complaint. He
supplied services to F&G in the 1980s, and in the mid-1980s, he was asked
to serve on the F&G Board of Directors. Hodgson served on the F&G Board
through 2001. The matter is now fully briefed and ready for resolution.
This Order follows.
Summary judgment should be granted where "the pleadings, depositions,
answers to interrogatories and admissions on file, together with the
affidavits, if any, show there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as a matter of
law." Fed.R.Civ.P. 56(c). The moving party has the responsibility of
informing the Court of portions of the record or affidavits that
demonstrate the absence of a triable issue. Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986). The moving party may meet its burden of showing
an absence of disputed material facts by demonstrating "that there is an
absence of evidence to support the non-moving party's case." Id. at 325.
Any doubt as to the existence of a genuine issue for trial is resolved
against the moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
255 (1986); Cain v. Lane, 857 F.2d 1139, 1142 (7th Cir. 1988).
If the moving party meets its burden, the non-moving party then has the
burden of presenting specific facts to show that there is a genuine issue
of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586-87 (1986). Federal Rule of Civil Procedure 56(e)
requires the non-moving party to go beyond the pleadings and produce
evidence of a genuine issue for trial. Celotex, 477 U.S. at 324. Nevertheless, this Court must "view the
record and all inferences drawn from it in the light most favorable to
the [non-moving party]." Holland v. Jefferson Nat. Life Ins. Co.,
883 F.2d 1307, 1312 (7th Cir. 1989). Summary judgment will be denied
where a reasonable fact-finder could return a verdict for the non-moving
party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Hedberg
v. Indiana Bell Tel. Co., 47 F.3d 928, 931 (7th Cir. 1995).
As the Court has previously held and hereby incorporates by reference,
once Plaintiffs establish that the purchases of stock by the ESOP
constituted a prohibited transaction under § 406, § 502(a)(3)
then provides a right of action to seek appropriate equitable relief from
parties in interest to redress the violation. Harris Trust, 120 S.Ct. at
2188, citing § 502(l)(1)(B). Borrowing from the law of trusts, the
Defendants can then invoke the substantive equivalent of a modified bona
fide purchaser defense by establishing that they gave value for the trust
property. If the Defendants are able to make such a showing, a presumption
of good faith attaches, and the burden shifts back to the Plaintiffs to
establish that Defendants acted in bad faith or had actual or
constructive notice of the circumstances that rendered the transaction
Plaintiffs have conceded that at least for purposes of these motions,
they do not contest that the stock purchase transactions were for "value"
in the sense that they were not gratuitous but rather involved
consideration that was more than nominal. Accordingly, Hodgson is
entitled to a presumption of good faith and lack of knowledge unless
Plaintiffs are able to rebut that presumption.
In this respect, the record reflects a genuine issue of material fact
requiring resolution at trial. Although Hodgson was not a fiduciary to
the ESOP, he was an F&G Board member and regularly attended F&G Board
meetings. He was therefore in a position that afforded him access to much
of the same information that was available to the plan fiduciaries.
Specifically, he would have had access to discussions and presentations to
the Board in contemplation of the 1995 transaction, as well as the
litigation reports presented and discussed at Board meetings, including
an October 26, 1995, report disclosing that MBC had received inquiries
from attorneys general offices in three states over the previous two
weeks and that a fourth inquiry remained pending. Hodgson would also have
had access to information regarding Valuemetrics' role in structuring the
transaction and alleged conflicts of interest on the part of certain
Hodgson has presented an Affidavit indicating: (1) he had no day-to-day
contact with F & G employees because he lived in Pennsylvania; (2) he did
not believe the complaints relayed to the Board regarding MBC's sweepstakes
issues were out of the ordinary for a sweepstakes marketing business until
the first part of 1998; (3) he was not involved in determining, negotiating,
or establishing the per share price or the 1995 transactions; (4) he was
aware that the trasaction was being approved by competent professional advisores
and relied on their determinations; and (5) he refused to sell shares in 1997
because he believed that the value of the shares was going to increase.
However, Plaintiffs have also introduced evidence, which when construed
in the light most favorable to Plaintiffs as the non-moving party and
drawing reasonable inferences therefrom, could support the conclusion
that he had constructive knowledge of circumstances that rendered his
reliance on the determinations of those experts unreasonable and should
have placed him on notice that the
transaction could be unlawful.*fn1 As
the Court has previously held in this case, questions of this nature are
plainly issues of fact involving assessments of credibility to be resolved
at trial. Accordingly, Hodgson's Motion for Summary Judgment must be
For the reasons set forth above, Defendant Hodgson's Motion for ...