Case Alleging Self-Dealing by Trustee Permitted to Proceed

Judge James C. Cacheris of the Eastern District of Virginia refused to dismiss a case on January 10, in a case alleging that the trustee of an ESOP exercised his governance power to protect his own employment rather than in the interest of plan participants. The plaintiff, a member of the company's board of directors, argued that the defendant, the company's CEO and its ESOP's trustee, had been notified by the board that it was planning to terminate his employment, and that he used his role as ESOP trustee to appoint new directors, thereby protecting his job. The CEO argued that the exercise of a trustee's authority cannot constitute a violation of ERISA, but the judge ruled that if the allegations were true, they would demonstrate a failure to act in the interest of plan participants.