Skip to main content

You are here

Advertisement

Wilmington Trust Strikes a $5.5 Million Settlement in ESOP Valuation Suit

Litigation

Noting that “continuing the litigation would have resulted in additional complex and costly proceedings,” including extensive discovery, summary judgment motions, a trial and possible appeal, which would have significantly delayed any relief to Class Members (at best), and might have resulted in no relief at all, the parties in an ESOP suit have come to terms.

The suit (filed in 2019) arose out of a transaction in 2014 when Wilmington Trust, as trustee of the Nation Safe Drivers Employee Stock Ownership Plan (ESOP) purchased the shares of Nation Safe Drivers common stock from the Individual Defendants (Andrew Smith, Michael Smith and Frank Mennella). Plaintiff Kristina Fink (on behalf of herself and the class seeking relief in the case) alleged that Wilmington Trust violated ERISA in connection with the ESOP Transaction by paying more than fair market value for the stock, and engaging in prohibited transactions pursuant to ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3). The suit also alleged that agreements by NSD to indemnify Wilmington Trust violated ERISA.

More specifically, the suit alleged that the trust paid between $12 million and $15 million more than what their valuation expert said their shares should have cost (640,000 shares at $342 million, according to the complaint). For its part, Wilmington Trust claimed denied the allegations that it didn’t undertake necessary due diligence, relied on an improper valuation and paid more than the fair market value of company stock.

The settlement (Fink v. Wilmington Trust, N.A. et al., case number 1:19-cv-01193, in the U.S. District Court for the District of Delaware) calls for a $5,500,000 cash settlement (there are approximately 294 participants[i] in the class), along with a 30% “cut” for the plaintiff’s counsel ($1,650,000.00[ii]), as well as reimbursement of litigation expenses advanced of $51,730.12 and a $10,000 service award for plaintiff Fink[iii] “for the substantial time and effort she devoted to this class action.”

We’ll see if the court agrees…


[i] The settlement brief indicates that this would net each of the 215 vested class members roughly $25,000, and would grant the 79 unvested employee stock ownership plan participants $50—which the agreement says is “on the high end” of recovery amounts in such cases.

[ii] Interestingly enough, the agreement details the hours spent and hourly rates of plaintiff’s counsel (and paralegals) as being some $423,690.00, noting that the “multiplier” of 3.9 is “comparable to what has been awarded in this Circuit and reasonable given the risks involved and the complexity of the case.” The settlement notes that approximately 600 hours of attorney and paralegal time were spent on the case.

[iii] A former Nation Safe Drivers claims manager and senior investigator.

Advertisement