The opinion of the court was delivered by: Judge Blanche M. Manning
Defendant Isis Ghobrial was a long-time employee of Ciorba Group, Inc. when she resigned on January 21, 2005. Upon her resignation, she was entitled to the cash value of Ciorba shares held in the Employee Stock Ownership Plan maintained for her benefit. Ciorba paid her more than $90,000 for her shares, but the parties dispute whether that was the correct amount. Ciorba contends that it inadvertently overpaid Ghobrial, and the trustee of the ESOP, Gerald Heimsoth, sued to get back approximately $20,000. Ghobrial disputes Ciorba's valuation and asserts that she was actually underpaid by about $88,000. She has also filed a counterclaim against Heimsoth and Ciorba in which she alleges that (1) she was denied her right to make pre-retirement diversification distribution elections and, (2) Heimsoth violated his fiduciary duties as trustee.
The parties have filed cross-motions for summary judgment on all counts. For the reasons stated below, Heimsoth and Ciorba's motion for summary judgment [143-1] is granted, while Ghobrial's motion for summary judgment [140-1] is denied.
The following facts are undisputed, except where noted. Ciorba Group, Inc. is a group of engineering consultants. It is not a publicly-traded company, but makes shares of the company available to its employees through its Employee Stock Ownership Plan ("ESOP"), a pension plan governed by the Employee Retirement Income Security Act of 1974, see 29 U.S.C. §§ 1104(a)(2), 1107(b), (d)(6). Over time, the ESOP allocates shares of the pool of Ciorba stock that it owns into employees' ESOP accounts. When vested employees leave the company, the shares that had been allocated to their account are returned to the pool of shares owned by the ESOP and the employee receives a distribution of the value of the shares. During Ghobrial's years with Ciorba, she had been allocated 28,250 shares of Ciorba stock in her ESOP account, and sought to obtain the value of those shares upon her resignation on January 21, 2005.
Under the 1997 Plan document (the one in effect when Ghobrial resigned), Ghobrial was entitled to compensation for the Ciorba shares allocated to her ESOP account based upon their value on December 31, 2004. Because Ciorba was not publicly-traded, the 1997 Plan required that the value of the shares be determined by an independent appraiser. However, the 2004 valuation had not been completed before Ghobrial's resignation on January 21, 2005. Rather than forcing her to wait, in February 2005 the ESOP distributed to her $90,287.11, representing 70% of the value of her shares based upon their value on December 31, 2003, the most recent valuation. The distribution was subject to adjustment upon the completion of the December 31, 2004, valuation.
The December 31, 2004, valuation was completed on October 31, 2005, and reported a significant drop in the value of Ciorba shares. Heimsoth contends that, as a result, the value of Ghobrial's shares was only $70,980.39, $19,306.72 less than what the ESOP had previously distributed to her. Heimsoth notified Ghobrial in writing that she must return the overpayment, but she never did. So Heimsoth filed suit to recover the $19,306.72.
Ghobrial contends that the 2004 valuation was flawed and that, according to a report prepared by an accountant she hired, her shares should have been valued at $150,017. Accordingly, she asserts that she is under no obligation to return any of the distribution she received. She also asserts in her Second Amended Counterclaim that Heimsoth and Ciorba owe her damages based upon the following allegations: (1) she was denied the right to diversify a percentage of the Ciorba shares in her account during the period of time preceding her resignation, and (2) Heimsoth breached his fiduciary duties by orchestrating a change in the composition of Ciobra's board of directors to ensure that he could never be removed as trustee of the ESOP.
Each party has filed a motion for summary judgment, asking that judgment be entered in that party's favor on the single count of unjust enrichment under ERISA alleged in Heimsoth's complaint, as well as Ghobrial's claims of denial of the right to diversify and breach of fiduciary duty alleged in the Second Amended Counterclaim.
Summary judgment is proper when the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of any material fact." Fed. R. Civ. P. 56(c). The court construes all of the facts and the reasonable inferences drawn from those facts in favor of the non-movant. See Warren v. Solo Cup Co., 516 F.3d 627, 629 (7th Cir. 2008). The non-movant, however, may not merely rest upon the allegations or details in their pleadings, but instead, must set forth specific facts showing that there is a genuine issue for trial. See Celotex, 477 U.S. at 322.
I. Unjust Enrichment (Count I of Complaint)
In this count, Heimsoth alleges that Ghobrial has been unjustly enriched by retaining an overpayment of the value of her ESOP holdings. Ghobrial contends that she is entitled to summary judgment on this claim because the higher valuation performed by the accountant she hired, Howard Gamer, is more accurate than the lower valuation performed by the ESOP's long-time appraiser, John Maher.
To determine whether Heimsoth properly relied upon the valuation performed by Maher, the court must first look to the terms of the Plan. Under the Plan, valuations "must be made in good faith and based on all relevant factors for determining the fair market value of securities." 1997 Plan ¶ 6.2. The Plan addresses when a valuation has been made in good faith:
[A] determination of fair market value based on at least an annual appraisal independently arrived at by a person who customarily makes such appraisals and who is independent of any party to the transaction will be deemed to be a good faith determination of value. Company Stock not readily tradeable on an established securities market shall be valued by an independent appraiser meeting ...