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Bonnie Fish, et al v. Greatbanc Trust Company

September 12, 2012


The opinion of the court was delivered by: Milton I. Shadur Senior United States District Judge


This opinion addresses for a second time whether plaintiffs -- Bonnie Fish ("Fish"), Christopher Mino ("Mino"), Monica Lee Woosley ("Woosley"), Lynda Hardman ("Hardman") and Evolve Bank & Trust -- filed this action under the Employee Retirement Income Securities Act ("ERISA")*fn1 after the applicable limitations period had elapsed. Their Complaint invokes Sections 1104, 1006 and 1108 to charge GreatBanc Trust Company ("GreatBanc"), Lee Morgan ("Morgan"), Asha Morgan Moran ("Moran") and Chandra Attiken ("Attiken") with breaches of fiduciary duties.

Initially defendants said the suit was untimely because actual knowledge of the alleged breaches existed more than three years before plaintiffs sued. In that respect they argued that the true plaintiff was the retirement plan itself. As they put it, because one of the plan's trustees -- Barry Hoskins ("Hoskins") -- had knowledge of the alleged breaches more than three years before the Complaint was filed, the plan too had knowledge and the suit was time-barred. This Court rejected that argument in its August 31, 2010 memorandum opinion and order ("Opinion," 830 F. Supp. 2d 426 (N.D. Ill. 2010)), holding that even if Hoskins had knowledge of the alleged breaches, whether he was empowered to act on that knowledge was a disputed question of fact.

Now however defendants, having acquired new facts through discovery, have raised the argument again.*fn2 They contend that each of Fish, Mino, Woosley and Hardman acquired knowledge of all of the relevant facts of the alleged breaches when they received two documents -- a Proxy Statement and a document answering frequently asked questions about the transaction -- as well as explanatory letters from Morgan. Because those documents did indeed give plaintiffs actual knowledge of the alleged breaches in 2003, the perspective expressed in the Opinion must be revisited, and this action must be and is dismissed as untimely.

Brief Account of the 2003 Transaction

It is unnecessary to repeat the Opinion's detailed recitation of many of the facts. What follows instead is a brief sketch of the relevant facts.*fn3

Plaintiffs were employees of Antioch Company ("Antioch"), a corporation founded and controlled by the Morgan family. Antioch had an Employee Stock Option Plan ("Plan" or occasionally "ESOP"). In 2003 the Plan owned almost 43% of Antioch's stock, the Morgan family owned 46.5% and 38 other shareholders held the remaining 11%.

Morgan, Moran and Attiken managed the Plan as the members of the Plan Advisory Committee. In early 2003 the Committee -- with the aid of outside consultants -- designed a transaction that would give the Plan 100% ownership of Antioch but would preserve the Morgan family's control over the company. GreatBanc was hired to serve as the Plan's trustee during that transaction.

To implement the transaction Antioch made a tender offer to all Antioch shareholders to buy back their shares for $850 per share (in either cash or some combination of cash, notes and warrants). Because the goal of the transaction was for the Plan to own 100% of Antioch's stock, the Plan had to decline to accept the offer as to its own shares. If the Plan did not decline, the transaction would be cancelled. GreatBanc negotiated a side deal: It would decline to turn in the Plan's shares for redemption if Plan members received additional cash distributions and if Antioch agreed to something the parties call the Put Price Protection Agreement. Under the Put Price Protection Agreement Antioch agreed that:

- Plan participants who left the company between January 1, 2003 and October 1, 2004 would receive the greater of the fair market value of their shares or $840.26 per share. - Plan participants who left between October 1, 2004 and October 1, 2005 would receive fair market value plus $21.00 per share - Plan participants who left between October 1, 2005 and October 1, 2006 would received fair market value plus $12.80 per share.

To fund the transaction Antioch used $46 million of its cash and borrowed $109 million. That substantially increased Antioch's debt load.

After the transaction closed, GreatBanc hired Prairie Capital Advisors ("Prairie") to value Antioch's stock as of December 31, 2003. Prairie calculated Antioch's stock to be worth $894 per share. Before that the highest appraisal of Antioch stock had been $680 per share.

According to plaintiffs, Antioch employees wanted to lock in that high valuation of their stock and rushed to quit and cash in their shares. Redemptions exceeded what GreatBanc and Antioch had forecast, and so Antioch was unable to both service its existing debt and meet its redemption obligations. That created a bank run situation: As more employees quit, others saw the mounting financial crisis and hurried to cash in their shares before the coffers were empty. In 2008 Antioch was unable to make good on its various debt payments and share redemption obligations, and the company filed for bankruptcy. Company stock, the sole asset of the Plan, is now worthless.

Statute of Limitations

Plaintiffs filed their complaint on March 17, 2009*fn4 -- too late according to Defendants. Here is the relevant statute of limitations from Section 1113:

No action may be commenced under this subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of- (1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation, or (2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation; except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation. Defendants say that plaintiffs' had actual knowledge of the alleged breach or violation more than three years before filing their complaint. Plaintiffs say that they did not, so that the six-year limitations period applies (in which event their complaint was timely).

As the first step in the analysis, the breaches or violations that plaintiffs ascribe to defendants -- that is, the facts as to which plaintiffs had to have actual knowledge before the watershed date if a limitations defense were to defeat their claims -- should be identified. Although plaintiffs are not required to identify legal theories in complaints, here the plaintiffs did that, and the theories that they expounded provide a helpful organizational structure for their claims. In that ...

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