The opinion of the court was delivered by: Milton I. Shadur Senior United States District Judge
MEMORANDUM OPINION AND ORDER
Bonnie Fish, Christopher Mino, Monica Lee Woosley, Lynda Hardman and Evolve Bank & Trust ("Evolve") have brought this action against GreatBanc Trust Company ("GreatBanc"), Lee Morgan ("Morgan"), Asha Morgan Moran ("Moran") and Chandra Attiken ("Attiken") for asserted violation of their fiduciary duties under several provisions of the Employee Retirement Income Security Act ("ERISA"): 29 U.S.C. §§1104, 1106 and 1108.*fn1 All defendants have moved for summary judgment under Fed. R. Civ. P. ("Rule") 56, and the motion has been fully briefed. For the reasons stated here, defendants' Rule 56 motion is denied and this action will proceed toward trial.*fn2
Antioch Company ("Antioch") is an Ohio corporation founded by the Morgan family (D. St. ¶10, H. Dep. Ex. 32 at 56). In 1979 Antioch established an Employee Stock Option Plan ("Plan"), in which each of the individual defendants participated with other Antioch employees (D. St. ¶¶1, 11). As of 2003, when the events leading to this lawsuit occurred, the Plan owned a little less than 43% of all Antioch stock, the Morgan family owned 46.5% (H. Dep. Ex. 34) and 38 other shareholders held the remaining 11% or so (id.).
Management of the Plan was conducted by the ESOP Advisory Committee ("Committee"), which comprised Morgan, Moran and Attiken (D. St. ¶¶4-6). They had complete discretionary authority over Plan administration and investments (H. Dep. 165). Until 2003 the Plan trustee was Barry Hoskins ("Hoskins"), who also served as an Antioch vice president (D. St. ¶¶12-13). Hoskins' actions as trustee were at all times directed by the Committee (H. Dep. 164-68).
In early 2003 Morgan and the Committee began to explore making Antioch a 100% Plan-owned company (see D. St. ¶15). Deloitte & Touche was retained by Antioch to help design a transaction that would accomplish that goal while also allowing the Morgan family to retain governance over the company (id. ¶¶16, 53). First a new entity was to be formed and merged into Antioch by means of a tender offer for all non-Plan shares for cash or a combination of cash, notes and warrants (see D. St. ¶36). In the case of the Morgan family, they could opt for the combination so as to obtain sufficient cash to pay their tax liabilities, guarantee a future income stream and receive warrants for a future share purchase at a negotiated price of $850 per share (see id.).
Hoskins, as a Plan participant, was conflicted from acting as Plan trustee during the course of the transaction, so GreatBanc was proposed to serve as Trustee during the transaction (D. St. ¶¶22-23).*fn3 One of the conditions of the transaction was that GreatBanc had to decline to sell any Antioch shares in the tender offer, giving it effective power to approve or reject the transaction entirely (id. ¶47).
GreatBanc agreed to decline to sell in exchange for certain annual distributions (D. St. ¶56, P. St. ¶¶18-19). It also required a Put Price Protection Agreement under which all Plan participants whose employment terminated between 2003 and 2006 would be subject to rules that established the amount Antioch would pay to buy back its stock from those employees based on when they terminated employment (id. ¶19).
Those employees who left before October 1, 2004 would be paid about $841 per share (H. Dep. Ex. 22 at 55), while those who terminated after October 1, 2004 would be paid fair market value plus an incremental amount representing tax savings due to the transaction (id.). That amount varied from $12 to $21 depending on the date of termination (see id.). By contrast, before 2004 Plan shares had never been valued at more than $640 (see First Amended Complaint ["FAC"] ¶54, D. St. ¶65).
In the end the transaction set off a downward cycle that plaintiffs attribute to the overvaluation of Antioch stock in the tender offer (see FAC ¶¶55-59). Because the price guaranteed to Antioch employees was higher than any previous valuation of Plan stock, more employees left Antioch than might otherwise have been the case (see id. and D. St. ¶¶69-71).*fn4 That in turn increased Antioch's repurchase liability (D. St. ¶¶70-71),*fn5 which quickly exceeded Antioch's cash reserves, forcing it to take on additional debt to meet its Plan obligations (see id. ¶71).*fn6
Antioch's sales also began to decline during the same time period (D. St. ¶¶66-67). Eventually, due to a combination of declining profits and increasing debt, Antioch filed for bankruptcy (see FAC ¶64). Plaintiffs claim that the Plan is now worthless (id. ¶65).
Plaintiffs filed this lawsuit on March 17, 2009 (D. St. ¶14). Limited discovery was taken on the question whether or not plaintiffs' suit is timely (D. Mem. 1).
Every Rule 56 movant bears the burden of establishing the absence of any genuine issue of material fact (Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)). For that purpose courts consider evidentiary records in the light most favorable to nonmovants and draw all reasonable inferences in ...