Jones Walker litigation lawyers Robert B. Bieck, Jr., Amy Landry Glovinsky,R. Patrick Vance,Meredith Prechter Young, and litigation paralegal Lisa James recently defeated, after full trial on the merits, a $57 million ERISA claim based on the alleged breach of fiduciary duty by an ESOP administrative committee and the officers and directors of the sponsor company. The plaintiffs, who sued on behalf of all ESOP participants, alleged that the ESOP’s combined sales of approximately 5 million sponsor shares constituted a breach of the ERISA fiduciary duties of prudence and loyalty. The defendants successfully argued that the administrative committee’s desire to diversify the ESOP’s holdings properly motivated the sales, and that the ESOP sold the shares pursuant to a reasonable process and for fair market value. The plaintiffs initially alleged that the sales also constituted a violation of Section10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5; but, the defendants obtained dismissal of the securities claims prior to trial.

Jones Walker represented the sponsor company and its officers and directors. Plaintiffs’ depiction of the alleged misconduct by these defendants spanned a period of approximately 20 years and, in addition to ERISA claims, involved issues pertaining to business combinations, insider trading, and union corporate campaigns against management, including the submission of union-sponsored shareholder resolutions.

The reported decision is Thompson v. Avondale Industries, Inc., 2003 WL 359932 (E.D. La. 2/14/03). The case provides valuable authority in the post-Enron era for: (1) ERISA valuation of publicly traded sponsor shares, and (2) ESOP diversification to safeguard against participant loss. Robert B. Bieck, Jr. and Amy Landry Glovinsky served as trial counsel.