Judge Paul S. Diamond of the U.S. District Court for the Eastern District of Pennsylvania has moved forward several complaints in a suit alleging terminated employee stock ownership plan (ESOP) participants’ were forced to liquidate company stock holdings at an unfair price.
Plaintiffs Greg Pfeifer and Andrew Dorley, on behalf of a putative class of terminated Wawa employees, allege that Wawa Inc., its ESOP trustees, and its plan administrators violated the Employee Retirement Income Security Act (ERISA) by amending the plan to eliminate plaintiffs’ right to own Wawa stock, forcing liquidation of plaintiffs’ Wawa stock at an unfair price, and misrepresenting plaintiffs’ rights under the plan.
Before the challenged amendment, the plan provided terminated employee participants (including plaintiffs) the same benefits as participants who retired from Wawa at their designated retirement date. Participants holding more than $5,000 in their plan accounts could receive their benefits in either a single lump-sum payment or in installment payments over ten years. The plan also provided both terminated and retired employees with a put option (which they could execute before age 68) to sell their shares back to Wawa at an appraised price.
In August 2015, however, defendants amended the plan to divest terminated employees—but not retired employees—of their shares in Wawa stock. On September 11, 2015, defendants effectuated the forced sale at $6,940 per share (below fair market value) and charged a distribution fee. According to the complaint, the price of Wawa shares has increased since the September 2015 forced sale, and reached $7,652 per share on December 30, 2015. NEXT: Anti-cutback claims and improper plan amendment