Bonnie Fish v. Greatbanc Trust Company
749 F.3d 671
7th Cir.2014Background
- ERISA fiduciary duty breach claims at issue arise from Antioch Company's 2003 ESOP buy-out financed with debt and involving the Plan as sole stockholder.
- GreatBanc Trust acted as temporary Plan trustee to evaluate and approve the buy-out; Duff & Phelps provided financial advice.
- A Put Protection Price (PPP) and a new distribution policy were added to protect/encourage early cash-outs by Plan participants.
- Antioch provided limited liability projections; the full underlying report was not reviewed by GreatBanc or Duff & Phelps.
- Proxy materials disclosed some fairness assessments but did not reveal GreatBanc’s review methods or PPP/new policy considerations.
- After closing in December 2003, cash-outs began in 2004, Antioch deteriorated financially, and the Plan collapsed in bankruptcy by 2008.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether actual knowledge under § 1113(2) begins the limitations period | Plaintiffs lacked actual knowledge of ERISA breach until knowledge of the process and adequacy of consideration emerged. | Disclosures of terms and early knowledge of transaction showed actual knowledge more than three years before suit. | No; triable issues remain about actual knowledge of the processing and prudence, not just the terms. |
| Whether process-based claims trigger the three-year clock separately from substance | Process-based breaches (prudence/adequate procedures) can be an independent breach with its own knowledge base. | The three-year clock begins when terms of the transaction are known, not when processing failures are learned. | Process-based claims trigger actual knowledge only when plaintiffs know the involved procedures; summary judgment reversed. |
| Role of independent advisor and sufficiency of due diligence for adequate consideration | Independent appraisal and due diligence were insufficient to establish adequate consideration. | Reliance on Duff & Phelps evidence prudence and satisfies adequate consideration under § 1108(e). | Summary judgment inappropriate; need fact-finding on the sufficiency of the process and reliance. |
| Impact of new fiduciary replacements and imputation of knowledge | Knowledge could be imputed to subsequent fiduciaries for § 1113(2) purposes. | Knowledge should not be imputed to new fiduciaries; six-year baseline still applies. | Knowledge should not be imputed to new fiduciaries under § 1113(2); remand appropriate. |
Key Cases Cited
- Maher v. Strachan Shipping Co., 68 F.3d 951 (5th Cir. 1995) (requires knowledge of all material facts about the process, not mere transaction terms)
- Consultants & Administrators, Inc. v. Ay, 966 F.2d 1086 (7th Cir. 1992) (defines actual knowledge as knowledge of essential facts; not knowledge of illegality)
- Donovan v. Cunningham, 716 F.2d 1455 (5th Cir. 1983) (independent appraisal not a magic wand; determinations of value and process matter)
- Keach v. U.S. Trust Co., 419 F.3d 626 (7th Cir. 2005) (two requirements for adequate consideration: substantive value and procedural diligence)
- Tibble v. Edison International, 729 F.3d 1110 (9th Cir. 2013) (process-based claims cannot be reduced to transaction terms alone)
- Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 (S. Ct. 2011) (willful blindness concept limits but may show actual knowledge under certain standards)
- Armstrong v. LaSalle Bank, N.A., 446 F.3d 728 (7th Cir. 2006) (contextual guidance on ESOP repurchase liabilities and valuation concerns)
- Waller v. Blue Cross of California, 32 F.3d 1337 (9th Cir. 1994) (recognizes process-based claims and related knowledge considerations)