District Court Says LaRue Does Not Apply in ESOP Case

In Binita L. Cook et. al. v. Boyd F. Campbell, No. 2:01cv1425-ID (M.D. Ala., May 5, 2008), a district court ruled that a previously decided ESOP case could not be reopened in light of the new legal standard set out in LaRue v. DeWolff, the Supreme Court case that allowed individual defined contribution plan participants to sue for damages to themselves, as opposed to the plan as whole.

In this case, the court had previously denied a claim by the plaintiffs concerning the alleged failure of the fiduciary of an ESOP at Central Alabama Home Health Services to provide for a proper valuation concerning the ESOP's purchase of shares. Now the plaintiffs sought reconsideration in light of LaRue. The court found, however, that even if the plaintiffs' allegations were valid, the actions of the fiduciary would affect the entire plan, not just individual participants. LaRue was premised on the difficulty a plaintiff might have in getting damages when the relief would apply only to that individual and a plan-wide remedy would thus be impractical or inequitable. Here, a plan-wide remedy was already available. Moreover, the court cited the concurring opinion of Chief Justice Roberts expressing concern that LaRue not be read to allow cases to proceed where existing administrative remedies had not been exhausted, as the court found they had not been in this case.

The decision, while hardly surprising in light of the facts of the case, does provide some comfort to those concerned that LaRue would open up another avenue for plaintiffs to plead arguments that would not succeed under prior law.