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Lee v. Holden Industries, Inc.

United States District Court, N.D. Illinois, Eastern Division

November 21, 2016

WILLIAM O. LEE, Plaintiff,
v.
HOLDEN INDUSTRIES, INC., a Delaware Corporation, Defendant.

          MEMORANDUM OPINION AND ORDER

          John Robert Blakey United States District Judge.

         Plaintiff William O. Lee is a former participant in Defendant Holden Industries, Inc.'s Employee Stock Ownership Plan (“ESOP”). Plaintiff alleges that Defendant, as the administrator of the ESOP, violated its fiduciary duties to him and owes him certain benefits pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”). Defendant has moved for summary judgment on both claims. [30] at 1-4. As explained below, Defendant's motion is granted.

         I. Background[1]

         A. Plaintiff's Account

         Plaintiff is a former employee of Nosco, Inc., which authorized him to participate in the ESOP. [32] ¶ 1. Plaintiff enrolled in the ESOP on December 14, 2007. Id. ¶ 15. Plaintiff terminated his employment with Nosco, Inc. on August 3, 2012. Id. ¶ 16. At the time of his termination, 3, 770.7267 stock shares were allocated to Plaintiff's ESOP account. [32] ¶ 18.

         In October of 2013, Defendant exchanged those shares allocated to Plaintiff's ESOP account for cash, at a value determined pursuant to the company's most recent stock valuation in 2012. Id. ¶ 19. Defendant then offered an optional special distribution to Inactive Participants like Plaintiff whose stock had been exchanged for cash. [37] ¶¶ 21, 22. Plaintiff elected to accept a one-time payment of this entire balance, and he received a check for $146, 832.10. [32] ¶ 23. Plaintiff admits that he chose to receive the cash distribution, but insists that he “only accepted the lump sum distribution of the cash proceeds because Defendants wrongly segregated out his Holden stock and threatened to keep the funds in a low-risk/return fund for an undetermined length of time.” [37] ¶ 23.

         In December of 2013, Plaintiff's counsel wrote to Defendant regarding the disposition of Plaintiff's account. [32] ¶ 27. Plaintiff's counsel specifically argued that: (1) he “anticipate[d]” that the 2013 Stock Valuation would be higher than the 2012 Stock Valuation; and (2) Plaintiff's shares should have been purchased at this higher rate. [37] ¶ 27. After a lengthy exchange of correspondence, Defendant denied Plaintiff's claim for additional benefits. [32] ¶ 31.

         B. The Salient Documents

         The parties' dispute turns upon which documents constitute the operative ERISA plan (and thereby control their respective rights and obligations). Relevant language from the disputed documents is set forth below.

         1. The Stock Ownership Plan

         Both parties acknowledge that, prior to July 31, 2013, their relationship was governed, at least in part, by the Stock Ownership Plan dated January 1, 2007. Id. ¶ 15. The Stock Ownership Plan provided, inter alia:

• Defendant was the ESOP's administrator, which granted it authority to control and manage operation of the ESOP, [32-2] at 42;
• Defendant had “all authority and discretion . . . to interpret and construe the provisions of the Plan” and “determine all questions relating to the eligibility, benefits, and other rights of Employees, Participants, and beneficiaries under the Plan, ” id.;
• Defendant was entitled to purchase stock allocated to accounts held by Inactive Participants (i.e., any participant “who has terminated service with a Sponsoring Employer for any reason other than on a Normal Retirement Date”) at “any time prior to the distribution of the balance credited to his or her [account], ” id. at 28;
• Should Defendant exercise its right to purchase stock allocated to accounts held by Inactive Participants, “the price shall be equal to the fair market value of the Company Stock as of the date of the purchase and sale, ” id.; and
• Distributions were to be made “not later than . . . the last day of the sixth full Fiscal Year following the Fiscal Year in which the Participant terminates employment with a Sponsoring Employer for any reason other than death, disability, or retirement, ” though distributions could be accomplished earlier with “the consent of the Company's lenders.” Id. at 29.

         2. Amendment 5

         Defendant suggests that on July 31, 2013, its Board of Directors enacted a fifth amendment (“Amendment 5”) to the Stock Ownership Plan. [31] at 3. Plaintiff conversely insists that Amendment 5 was adopted improperly and is therefore inapplicable here. [37] ¶¶ 8, 9.

         Amendment 5 altered the distribution process and specified that the exchange rate to be used when purchasing stock allocated to Inactive Participants would be “based on the value ...


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