State Law Claims Based Upon Failure to Properly Value ESOP Stock Succeed
ERISA does not preempt everything, as illustrated by a recent case decided by the United States District Court for the Southern District of New York. There, Wilmington Trust was forced to settle an ERISA case after a Court found that it breached its ERISA fiduciary duties when relying upon a report appraising a company’s stock when agreeing to by that stock on behalf of an ESOP. Wilmington turned around and sued the appraiser for various state law claims, including negligence and breach of contract. The Manhattan-based federal court held that these claims were not preempted by ERISA in its recent order.
The case highlights the fact that those operating in the ERISA sphere need to take into account state law causes of action and remedies, and not assume that everything will be decided under an ERISA garb parties need to map out the risks of litigation carefully and ensure that their indemnification clauses and other limits on liability are properly drafted and take into account the unknown.