Stock Plan Loses 10th Cir. ERISA Appeal Against Trustee

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

A car dealership’s employee stock ownership plan can’t hold the plan’s trustee liable for failing to get carmaker Land Rover to sign off on a stock purchase, a federal appeals court ruled ( Pioneer Ctrs. Holding Co. Emp. Stock Ownership Plan & Tr. v. Alerus Fin., N.A. , 2017 BL 188408, 10th Cir., No. 15-1227, 6/5/17 ).

In rejecting an appeal brought by Pioneer Centres Holding Co.'s employee stock plan, the U.S. Court of Appeals for the Tenth Circuit on June 5 refused to adopt a burden-shifting framework in cases alleging fiduciary breach under the Employee Retirement Income Security Act. As a result, the court rejected the stock plan’s claims against Alerus Financial, finding no evidence that any action by Alerus caused Land Rover to withhold its consent for the proposed stock deal, which caused the deal to fail.

With this ruling, the Tenth Circuit cited decisions by the Sixth, Ninth, and Eleventh circuits, all of which have found that parties bringing ERISA fiduciary breach claims must prove each element of their claims, including causation. Other circuits—the Fourth, Fifth, and Eighth—have been less friendly to ERISA defendants, holding that the burden of demonstrating a lack of causation falls to the defendant after a valid case for fiduciary breach has been made.

In this case, the stock plan claimed that Alerus breached its fiduciary duties to the plan by failing to get Land Rover’s approval of a deal that would cause the stock plan to own 100 percent of the dealership’s stock. A federal judge in Colorado ruled for Alerus in 2015 after finding that the stock plan hadn’t made a valid claim against Alerus, because it hadn’t shown a causal link between Alerus’ actions and Land Rover’s decision. The judge said that his decision would be the same regardless of which party—Alerus or the stock plan—had the burden of demonstrating causation.

The Tenth Circuit affirmed this decision in a split opinion written by Judge Carolyn B. McHugh and joined by Judge Gregory A. Phillips. McHugh’s opinion goes further than that of the district judge and explicitly holds that ERISA plaintiffs—in this case, the stock plan—have the burden of proving causation. The plan failed to do that in this case, McHugh concluded, because the evidence “overwhelmingly points to” the conclusion that Land Rover had no intention of authorizing the deal.

Judge Robert E. Bacharach dissented, reasoning that state law may have required Land Rover to give its consent to the deal. Bacharach said the case should be sent back to the lower court to determine whether this factor could render Alerus liable under ERISA.

The stock plan was represented by Lewis Roca Rothgerber Christie, Campbell Bohn Killin Brittan & Ray, and Eason Rohde LLC. Alerus was represented by Faegre Baker Daniels and Davis Graham & Stubbs.

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

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