Fiduciary Claim Against GreatBanc Dismissed

In Allen v. GreatBanc Trust Co., No. 1:15-cv-03053 (N.D. Ill. Oct. 1, 2015), a district court dismissed a lawsuit against GreatBanc Trust in its role as a fiduciary in an ESOP transaction at Personal-Touch Home Care. Plaintiffs argued that the stock dropped to 78% of its pre-transaction value after the transaction and that the ESOP borrowed money at 6.25% instead of the 4.25% rate plaintiffs said was the going rate for ESOP loans. The court said the allegations were merely conclusory, not backed by evidence. Although the stock fell even further over time (to 55% of the transaction price), the court ruled that it must make its determination as of the transaction.

Notably, the Court referred to the Dudenhoeffer Supreme Court case in ruling that "Absent an allegation of special circumstances regarding, for example, a specific risk a fiduciary failed to properly assess, any fiduciary would be liable for at least discovery costs when the value of an asset declines. Such a circumstance cannot be the intention of Rule 8(a), or Dudenhoeffer. An allegation of a special circumstance is missing in this case—in fact, we know absolutely nothing about the financial situation of Personal-Touch."