According to the court opinion, a plan representative contacted Balsley on two occasions in October 2007 to offer a lump-sum buyback of the stock in Balsley's plan account based on the December 31, 2006 stock valuation of $22.38. The representative indicated that cash may not be available in the future to buy back Balsley's shares, and that the lump-sum offer would not remain open, so on November 26, 2007, Balsley received a $1,318,422.15 distribution from the plan.
As of December 31, 2007, each share was valued over six times higher, at $142.45, which would have made Balsley's distribution worth $8,391,729.50.
ESOP Benefit Distributions - A Little Guidance on Financial Disclosure provides more analysis, including a discussion of the potential ESOP implications:
Final scorecard on the motion to dismiss: the plaintiff will have to resubmit his fiduciary claims under Section 502(a)(3); the claim based on omission of disclosure of company financial performance may go forward against the CFO (but not the company or trustees); the misrepresentation claim based on the possible lack of cash in the future is dismissed; the misrepresentation claim based on availability of a lump sum option in the future remains against the CFO.
Since the decision of the court is only on a motion to dismiss and not a trial on the merits, it would be a mistake to read too much into the decision at this point. Two observations to keep in mind: first, the court seemed to recognize there is no general ERISA fiduciary duty for ESOP trustees to provide financial information about the company' performance in connection with benefit distributions; second, under the court's Varity approach, it is important for the fiduciaries of an ESOP to ensure that information is not provided to distributees that could be misleading.
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