The case involves former shareholders of Norcal Waste Systems Inc., a San Francisco garbage hauler, who claim that their company and its ESOP trustee didn’t properly look after their interests when Norcal’s ESOP defaulted on $36.5 million in long-term notes in 1991, according to a Dow Jones news report.
Justices are deciding whether to hear an appeal by Norcal and former ESOP trustee Bank of America of a ruling from the Ninth US Circuit Court of Appeals in San Francisco.
There, appeals judges decided that the Norcal shareholder suit properly belonged in California state court since ERISA didn’t apply. They threw out a lower court jury verdict clearing Bank of America and ordered the matter returned to state court.
Norcal and Bank of America lawyers claimed in their appeals that the Ninth Circuit ruling was at odds with judgments from other federal appeals courts, which held that ESOPs were governed by ERISA.
Left undisturbed, the Ninth Circuit ruling would subject a multistate company’s ESOP to varying state laws throughout the Northwest US region, Bank of America said.
Earlier, a federal trial-court judge had sided with the companies, ruling that ERISA pre-empted any chances for a state-court action. The shareholders later settled with Norcal.
The cases are Bank of America vs. Abraham, 01-1179, and Norcal Waste Systems vs. Abraham, 01-1187.