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    Court Rules on Motions in Virginia ESOP Case

    April 19, 2018, 12:00 AM

    On April 17, 2018, the Court ruled on Defendants’ Daubert motions to exclude the Secretary of Labor’s expert’s testimony and the parties’ cross-motions for summary judgment filed in Acosta v. Vinoskey, a Western District of Virginia case initiated by the Secretary on October 14, 2016 that relates to the December 2010 purchase of 51,000 of the outstanding shares of Sentry Equipment Erectors, Inc. (“Sentry”) by the Sentry Equipment Erectors, Inc. ESOP (the “Sentry ESOP”).1 

    With respect to the Daubert motions, the Court partially admitted the testimony of the Secretary’s expert; it held that the expert could testify about all issues raised in his testimony except for (1) the loss in value to the Sentry ESOP participants’ account balances as a result of the transaction, since the expert double counted the alleged losses and the total value of the Sentry ESOP participants’ accounts (i.e., the value of their previously allocated shares and the shares distributed as part of the transaction) increased because of the transaction; and (2) the market comparable approach, since the expert only used one other company and that company was not sufficiently comparable to Sentry. 

    The Court granted Michael New’s motion for summary judgment, stating that since Mr. New did not have discretion to approve the transaction or to set the share price, he was not a fiduciary. 

    The Court denied the parties’ cross-motions for summary judgment as to Counts I and II, given that there were several factual disputes about the reasonableness of Evolve Bank and Trust’s (“Evolve”) reliance on Capital Analysts, Inc.’s valuation. The Court granted Evolve’s motion for summary judgment as to Count IV, since the Secretary’s expert’s testimony about the loss in value to the Sentry ESOP participants’ account balances was excluded, and the Secretary therefore could not support its claim regarding the loss in value. Finally, the Court denied the Secretary’s motion for summary judgment as to Count III regarding Mr. Vinoskey’s liability, because the Secretary’s claim was dependent on a breach by another fiduciary, and whether such a breach had occurred was still in dispute.

    To access our summary of the Secretary of Labor’s October 14, 2016 Complaint, please click here

    Takeaways 

    • In its analysis of whether Michael New was a de facto fiduciary, the Court focused on Mr. New’s discretion throughout the transaction process, in accordance with Custer v. Sweeney, 89 F.3d 1156, 1161 (4th Cir. 1996).
    • Although Mr. New was an employee of the fiduciary (i.e., Evolve), he personally did not have discretion over the transaction, and so he was not acting as a de facto

    1 Acosta v. Vinoskey, 310 F. Supp. 3d 662 (W.D. Va. 2018).