The US 7 th Circuit Court of Appeals, in upholding a lower court ruling, pointed out that the ESOP’s rules required that participants be at least 55 before they could diversify their company stock holdings. Plaintiffs James and John Hess were 52, the court said.
US District Judge Philip Reinhard of the US District Court for the Northern District of Illinois issued the lower court decision in favor of Reg-Ellen Machine Tool Corp., the company sponsoring the ESOP.
Circuit Judge Ilana Diamond Rovner, in writing for the appellate court, turned away plaintiffs’ arguments that the administrator’s decision to bar them from diversifying was improper because a 28-year-old employee had been permitted to cash out his ESOP account. Cashing out an entire account was not the same as diversification of an account, the appeals court said.
The court also dismissed the Hesses’ assertion that Reg-Ellen should be prohibited from denying their diversification request because the company’s president allegedly told its employees they would be able to diversify their accounts.
The opinion in Hess v. Reg-Ellen Machine Tool Corp., 7th Cir., No. 04-3408, 9/6/05 is here .