Chicago attorneys Rick Pearl and Erik Vogt wrote an article for the ESOP Association’s December ESOP Report titled, “Summary Judgment Granted in Dispute Over ESOP Segregation Provisions.” Rick and Erik provided an overview of Lee v. Holden Indu., Inc., and the November 21 summary judgment in favor of Holden.

The plaintiff terminated his employment in 2012, after which he became an “inactive participant” in the ESOP, which led to segregation of his shares and conversion to cash at the per-share value determined by that year’s valuation. He elected to receive a one-time distribution of the cash balance. The plaintiff asserted that the plan’s summary plan description (SPD) required that distributions must await valuation following the year of termination [2013]. Holden later denied the plaintiff’s claim for additional benefits, stating that the ESOP plan document required segregated accounts to be converted to cash based on the most-recent valuation, and not any subsequent valuation.

The plaintiff alleged that Holden breached its fiduciary duties and miscalculated benefits due to him, stating that the terms of the SPD conflicted with the plan documents regarding valuations. District Judge Robert Blakey entered judgment against plaintiff on his first claim—that Holden breached fiduciary duties by issuing an allegedly inaccurate summary plan description—without having to decide plaintiff’s claim that the document was inaccurate. The Court found that the company had no intent to disadvantage or deceive the plan participants and followed the general rule that a plaintiff cannot rely on summary plan descriptions when plan documents exist. The Court also granted judgment against plaintiff on his second claim—that Holden miscalculated benefits due—because the plan documents gave the fiduciary discretionary authority to construe the terms of the plan, and Holden’s decision to price the stock based on the 2012 stock valuation was reasonable and consistent with the plan documents.