Overview
On August 23, 2023, the Court granted final approval of a $14.8 million settlement and granted class certification in this ESOP class action.
Summary of the Lawsuit
This lawsuit, Smith v. GreatBanc Trust Company, et al., brought on behalf of participants and beneficiaries of the Triad Manufacturing, Inc. Employee Stock Ownership Plan (“ESOP”), alleges numerous violations of the Employee Retirement Income Security Act (“ERISA”) in connection with the sale of Triad Manufacturing, Inc. to the ESOP for an inflated value, which caused a multi-million-dollar loss to the ESOP.
A federal class action was filed in the U.S. District Court for the Northern District of Illinois (1:20-cv-02350) on April 15, 2020. The Complaint alleges that David Caito, Robert Hardie, and Michael McCormick (collectively, “the Selling Shareholders”), and the ESOP’s Trustee, GreatBanc Trust Company, breached their fiduciary duties to the participants and engaged in prohibited transactions in connection with the sale of Triad Manufacturing, Inc. to the ESOP in 2015. Specifically, in December 2015, the Selling Shareholders sold 100% of the Triad Manufacturing, Inc. company stock to the newly-created Triad ESOP. Approximately two weeks later, that stock had dropped nearly 97% in value.
Class Action
The lawsuit is brought on behalf of all participants and beneficiaries in the Triad Manufacturing, Inc. (“Triad”) Employee Stock Ownership Plan (“ESOP”) from December 15, 2015 or any time thereafter who vested under the terms of the ESOP. The case arises out of the sale of 100% of the stock of Triad Manufacturing, Inc. to the Triad ESOP for approximately $106 million. Shortly after that sale, the value of that Triad stock dropped to just $3.3 million, based on public filings made by the ESOP. Plaintiff alleges that the ESOP paid more than fair market value for the Triad stock, and as a result, that the ESOP fiduciaries and parties to the ESOP transaction violated ERISA in a number of ways.
The Triad ESOP covers employees of Triad Manufacturing, Inc. who are participants in the Triad ESOP. Excluded from the Class are Defendants and their immediate family, any fiduciary of the ESOP; the officers and directors of Triad (including any of its subsidiaries or affiliates), or of any entity in which a Defendant has a controlling interest; and legal representatives, successors, and assigns of any such excluded persons.
Status of the Litigation
Plaintiff filed his Complaint on April 15, 2020 in the U.S. District Court for the Northern District of Illinois. Shortly after Plaintiff filed the Complaint, Defendants moved to compel arbitration of Plaintiff’s claims. The Court denied Defendants’ motion to send the case to arbitration. Defendants appealed that order to the Court of Appeals for the Seventh Circuit, which halted the case until the appeal was decided. On September 10, 2021, the Seventh Circuit Court of Appeals affirmed the District Court’s decision denying Defendants’ motion to compel arbitration, and the District Court allowed parties to resume discovery. After completing extensive fact discovery, the Parties engaged in mediation on December 8, 2022. While the case did not resolve that day, the Plaintiffs and Defendants continued to negotiate with the assistance of the mediator. Plaintiffs filed an Unopposed Motion for Class Certification on January 17, 2023. On February 8, 2023, the parties filed a Joint Notice of Settlement. On April 20, 2023, Plaintiffs filed an Unopposed Motion for Settlement and Class Certification. On June 7, 2023, the Court granted preliminary approval of a $14.8 million settlement and granted class certification. On August 23, 2023, the Court granted final approval of a $14.8 million settlement and granted class certification in this ESOP class action.
Whom to Contact for More Information
If you are a participant in the Triad ESOP, or if you have information which might assist us in the prosecution of these allegations, please contact:
Michelle Yau, Esq. – myau@cohenmilstein.com
Caroline Bressman, Esq. – cbressman@cohenmilstein.com
Dan Sutter, Esq. – dsutter@cohenmilstein.com
Cohen Milstein Sellers & Toll PLLC
1100 New York Avenue, N.W., Suite 500
Washington, D.C. 20005
Telephone: 888-240-0775 (Toll Free) or 202-408-4600
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