The achievement of a settlement agreement in the Employee Retirement Income Security Act (ERISA) lawsuit known as Cunningham v. Wawa was first announced in January, but at that time, no details of the settlement were made public.
Case documents have now emerged showing Wawa agreed to pay $21.6 million to resolve the litigation—with no admission of wrongdoing by itself as a corporate entity or by the individual fiduciaries of the employee stock ownership plan (ESOP) at the heart of the case. The basic contention of the lawsuit was that the company acted in a manner contrary to ERISA’s fiduciary requirements when it forced terminated employees to liquidate company stock holdings at an unfair price. Other claims suggested participants were misled about their rights under the plan.
Judge Paul S. Diamond of the U.S. District Court for the Eastern District of Pennsylvania previously found that eliminating ESOP participants’ right to invest in company stock is not a violation of ERISA’s anti-cutback provisions, but forcing participants with balances greater than $5,000 out of the plan may be. That ruling led to a series of appeals and attempts at mediation, which eventually resulted in the newly revealed settlement agreement.
The agreement stipulates that the settlement fund will be distributed among “all participants in the Wawa Inc. Employee Stock Ownership Plan with account balances greater than $5,000 as of the date that they terminated employment whose accounts were liquidated on or after September 12, 2015, and the beneficiaries of such participants.” The other qualifying factor for settlement class members is that their accounts must have been liquidated prior to December 31, 2019.
Under the terms of the settlement agreement, the settlement fund will be distributed to class members after any taxes on the income or earnings by the settlement fund, after any tax-related expenses and after the creation of any reserve for future expenses. The agreement also states that the settlement fund may be used for the awarding of attorneys’ fees, for reimbursements of litigation expenses and costs to class counsel, and for paying a service award to the class representatives.
Other notable features of the agreement include the fact that that none of the individual fiduciary defendants named in the lawsuit are eligible to receive payments from the settlement fund. The defendants will have “no responsibility for preparing or any right to provide input into and will take no position on the plan of allocation except to the extent that the plan of allocation would result in adverse tax consequences to the Wawa ESOP or the Wawa 401(k) plan.”
In terms of resolving future liability for Wawa, the following conditions are included: “This settlement agreement embodies a compromise of disputed claims and nothing in the settlement agreement will be interpreted or deemed to constitute any finding of wrongdoing by defendants or give rise to any inference of liability in this or any other proceeding. This settlement agreement will not be offered or received against defendants as any admission by any such party with respect to the truth of any fact alleged by plaintiffs or the validity of any claim that had been or could have been asserted in the action or in any litigation or of any liability, negligence, fault or wrongdoing of any such party.”
The full text of the agreement is available here.
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