Placht v. Argent Tr. Co.

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CAROLYN PLACHT, Plaintiff, v. ARGENT TRUST COMPANY, Defendant.

No. 21 C 5783

United States District Court, N.D. Illinois, Eastern Division

March 25, 2024

OPINION AND ORDER

SARA L. ELLIS, United States District Judge

Plaintiff Carolyn Placht, a participant in Symbria Inc.'s Employee Stock Ownership Plan (the “Plan”), filed this class action lawsuit against Defendant Argent Trust Company (“Argent”), the Plan's Trustee, under the Employee Retirement Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. Placht alleges that Argent violated its fiduciary duties to Plan participants with respect to the October 31, 2015 purchase by the Plan of all issued and outstanding shares of Symbria from Symbria's former shareholders (the “ESOP Transaction”). Specifically, Placht contends that the ESOP Transaction involved prohibited transactions under ERISA § 406(a), 29 U.S.C. § 1106(a), including the purchase of stocks from and acceptance of loans from parties in interest, and that Argent breached its fiduciary duties under ERISA § 404(a)(1), 29 U.S.C. § 1104(a), by failing to independently and thoroughly investigate the proper valuation of the Symbria stock price. Placht also seeks a declaration invalidating Argent's indemnification agreement with Symbria under ERISA § 410(a), 29 U.S.C § 1110(a). The court certified a class defined as “[a]ll participants in the Symbria, Inc. Employee Stock Ownership Plan and the beneficiaries of such participants as of the date of the October 31, 2015 ESOP Transaction or anytime thereafter.” Doc. 118.

The parties now move for summary judgment.^[1]Placht seeks summary judgment that she has proved every element of her § 406(a) claims, and Argent asks for summary judgment on all of Placht's claims and its § 408 affirmative defenses to her § 406(a) claims. Although Placht has proved every element of her § 406(a) claims, removing the need to provide additional proof of these elements at trial, the § 406(a) claims remain subject to Argent's § 408 affirmative defenses. Questions of fact remain as to the adequate consideration exemption and whether Argent acted prudently in investigating and agreeing to the ESOP Transaction. While those questions must proceed to trial, Argent has shown it is entitled to judgment on Placht's claims related to the loan that funded the ESOP Transaction, Argent's alleged breach of the duty of loyalty, and the validity of the indemnification agreement under ERISA.

BACKGROUND

I. Argent's Motion to Strike

The Court first addresses Argent's motion to strike Placht's separate statement of disputed material facts. Argent argues that by filing a separate statement of disputed material facts instead of including such statements in her response, Placht violated this Court's summary judgment procedures. Indeed, this Court's summary judgment procedures differ from Local Rule 56.1, in that this Court requires the parties to submit a joint statement of undisputed facts and the party opposing summary judgment to submit additional facts it contends demonstrate a genuine issue of material fact in its response, not in a separate statement. Judge Sara L. Ellis, Case Procedures, Summary Judgment Practice, https://www.ilnd.uscourts.gov/judge- info.aspx?VyU/OurKKJRDT+FUM5tZmA==; see Sweatt v. Union Pac. R.R. Co., 796 F.3d 701, 711-12 (7th Cir. 2015) (affirming this Court's summary judgment procedures).

By using a separate statement to set out her disputed facts, Placht technically violated the Court's summary judgment procedures. But the Court nonetheless accepts Placht's separate filing, given that Argent responded to these additional allegedly disputed facts in its reply brief and cannot show any prejudice arising from Placht's use of a separate statement and then incorporating facts from that statement into her response. The Court notes, however, that many of the statements in Placht's separate statement of disputed facts, when stripped of argument, do not appear contested and so should have been included in the parties' joint statement. See Judge Ellis, Summary Judgment Practice (“The parties may not file . . . separate statements of undisputed facts.”); Chicago Studio Rental, Inc. v. Ill. Dep't of Com., 940 F.3d 971, 981-82 (7th Cir. 2019) (this Court did not abuse its discretion in striking a party's statement of additional facts for noncompliance where the additional facts were undisputed and could have been included in the parties' joint statement of undisputed facts). While the Court overlooks these violations in the interest of resolving the parties' arguments on their merits, it expect that the parties will fully comply with the Court's procedures going forward.

II. Factual Overview

The parties have provided the Court with 200 statements of undisputed fact, spanning 121 pages, as well as a nine-page stipulation of facts and conclusions of law for purposes of Placht's motion for partial summary judgment. Placht also submitted twenty-three statements of allegedly disputed facts spanning an additional eight pages, and the parties' attached exhibits total approximately 7,500 pages. Despite the apparent agreement of the parties on the majority of the relevant facts, the sheer number of undisputed facts does not necessarily indicate the propriety of summary judgment as undisputed facts, when considered against each other, can still create disputes of fact. That is the case here, where the voluminous record and contrary expert opinions should have suggested to the parties that summary judgment would be a mostly futile exercise. Because the Court, and not a jury, is the ultimate trier of fact in this case, the Court questions whether proceeding straight to a bench trial would have been a better use of the parties' and Court's time and resources. Nonetheless, the Court soldiers on to decide the motions before it. But in doing so, instead of providing an extensive recitation of the facts of the case here, the Court merely provides a high-level overview and addresses specific issues relevant to resolution of the motions in the analysis section.

Symbria, a healthcare services company headquartered in Warrenville, Illinois, provides on-site rehabilitation therapies, prescription drug management, wellness programs, and survey analytics to senior care organizations. Symbria is privately held with no shares readily tradable on an established securities market. Before the ESOP Transaction, twelve non-profit shareholders (the “Selling Shareholders”), including Franciscan Sisters of Chicago Service Corporation and Smith Senior, owned Symbria. Smith Senior sold all of its Symbria stock to Symbria executives Jill Krueger, Thomas Noesen, and John Callen on the day of the ESOP Transaction, making Krueger, Noesen, and Callen Selling Shareholders as well. At the time, Krueger served as Symbria's President and Chief Executive Officer, Noesen served as Symbria's Chief Financial Officer, and Callen served as President of Alliance Rehab, Inc., one of Symbria's subsidiaries.

On April 1, 2015, Symbria created the Plan, which Symbria sponsors and in which eligible employees participate. Symbria engaged Argent to serve as the trustee for the Plan with respect to the contemplated sale of Symbria stock to the Plan. Argent had responsibility for determining Symbria's fair market value (“FMV”), negotiating the terms of the sale on behalf of the Plan, and deciding whether to approve the transaction. Symbria engaged Stout Risius Ross (“SRR”) as its financial advisor and McDermott Will & Emery (“MWE”) as its legal counsel. After conducting due diligence and negotiations concerning the terms of the sale, the Plan purchased 100 percent of Symbria's common stock for $66,500,000, or $47,500 per share, on October 31, 2015 in the ESOP Transaction. The total consideration was subject to a clawback provision, under which the amount would be reduced by up to $7 million if Symbria did not meet certain financial projections. The Plan paid $22,140,090 in cash to the Selling Shareholders for the Symbria stock. The Plan financed this amount through a loan from Symbria at 2.64% interest rate and payable in forty annual installments (the “Symbria Loan”). The Plan also executed an “ESOP-Seller Note,” promising to pay the Selling Shareholders an additional $44,359,910 in the future, subject to the same terms as the Symbria Loan. The Symbria Loan and the ESOP-Seller Note were then merged into a single $66.5 million note between the Plan and Symbria, secured by all shares the Plan purchased (the “ESOP Loan”).

LEGAL STANDARD

Summary judgment obviates the need for a trial where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P 56(a). To determine whether a genuine dispute of material fact exists, the Court must pierce the pleadings and assess the proof as presented in depositions, documents, answers to interrogatories, admissions, stipulations, and affidavits or declarations that are part of the record. Fed.R.Civ.P 56(c)(1); A.V. Consultants, Inc. v. Barnes, 978 F.2d 996, 999 (7th Cir. 1992). The party seeking summary judgment bears the initial burden of demonstrating that no genuine dispute of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Bunn v. Fed. Deposit Ins. Corp. for Valley Bank Ill., 908 F.3d 290, 295 (7th Cir. 2018). In response, the nonmoving party cannot rest on mere pleadings alone but must use the evidentiary tools listed above to identify specific material facts that demonstrate a genuine dispute for trial. Fed.R.Civ.P. 56(c)(1); Celotex, 477 U.S. at 324; Sterk v. Redbox Automated Retail, LLC, 770 F.3d 618, 627 (7th Cir. 2014). The Court must construe all facts in the light most favorable to the non-moving party and...