Each year the NCEO compiles a review of ESOP litigation over the prior 12 months. The review has been incorporated into our book ESOP and 401(k) Plan Employer Stock Litigation Review 1990-2024.
There were a few notable trends over the last year. The most significant of these was what did not happen. The Department of Labor initiated only two lawsuits that made it to court over the last 12 months. This is a decline from the typically five to seven cases that have made it to court annually over recent years, which is itself a decline over a somewhat higher number in prior years. Overall, 15 cases made it to court in the last 12 months, which aligns with the number of new cases over the past several years. Most of these cases focused on valuation, which has been true for the last several years. Several new cases focused on the management of plan assets generally, and there were a number of cases that dealt with the issue of arbitration. The decisions on the arbitration cases continue the trend of most courts saying that arbitration clauses are not applicable in ESOP lawsuits, although there were two cases where a court decided the opposite. This year also saw the first lawsuit concerning releveraging and a significant 11th Circuit decision concerning whether participants had to exhaust all their administrative remedies before they could file. There were five settlements, resulting in an average payout per participant of $12,000 minus attorney fees.