Lawyer May Be Liable in Challenge to $21M Stock Plan Deal

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

The lawyer who oversaw an employee stock ownership plan transaction may be personally liable to workers who say they significantly overpaid for their employer’s stock, a federal judge in Virginia ruled ( Hugler v. Vinoskey , 2017 BL 145574, W.D. Va., No. 6:16-cv-00062, 5/2/17 ).

The May 2 decision is a win for the Department of Labor, which sued the entities and individuals connected with a $20.7 million transaction involving the employee stock ownership plan of Sentry Equipment Erectors, a Virginia-based soda equipment manufacturer.

Michael New, a lawyer who approved the deal while working for the plan’s trustee, Evolve Bank & Trust, argued he wasn’t a proper defendant to the lawsuit, because he didn’t act as a fiduciary toward the plan. The judge disagreed, saying that the DOL sufficiently alleged that New exercised discretionary control over the plan’s management to render him a fiduciary under the Employee Retirement Income Security Act.

The DOL has been active in using the federal courts to target ESOP transactions that it believes cause workers to overpay for the stock of their employers. In March, the department secured a $9.5 million judgment against First Bankers Trust Services Inc. for its role in a $16 million deal involving the stock plan of a New Jersey construction company. In 2016, the department won nearly $900,000 in a similar lawsuit against California Pacific Bank.

This most recent ruling, by Judge Norman K. Moon of the U.S. District Court for the Western District of Virginia, means the department will move forward with its claims against New. The department’s claims against Evolve and other defendants remain pending.

Hunton & Williams and Tucker Ellis represented New and Evolve. The DOL represented itself.

To contact the reporter on this story: Jacklyn Wille in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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