Pioneer Centres Holding Co. Employee Stock Ownership Plan & Trust v. Alerus Financial, N.A.
2017 U.S. App. LEXIS 9940
10th Cir.2017Background
- Pioneer Centros Holding Co. (Pioneer) planned a transaction whereby its ESOP would acquire the remaining shares from controlling shareholder Brewer to make the ESOP 100% owner; Alerus was retained as an independent transactional trustee to evaluate and execute the deal.
- Land Rover, whose dealer agreements with Pioneer required prior written approval for ownership changes and granted a right of first refusal, repeatedly told Pioneer it would not approve a change giving majority control to an ESOP and criticized undisclosed prior transfers.
- Alerus refused to sign Pioneer/Brewer’s revised transaction documents because Brewer insisted on heavily qualified reps and warranties; without Alerus’s signature, Pioneer never submitted a formal proposal to trigger Land Rover’s approval process and the stock transaction was abandoned.
- Pioneer later sold assets to Kuni for a materially higher price; the ESOP sued Alerus under ERISA §1109 for breach of fiduciary duty claiming damages from the failed ESOP purchase.
- The district court granted summary judgment for Alerus, ruling the Plan failed to prove causation (i.e., that Land Rover would have approved the transfer) and excluded the Plan’s expert testimony on that issue as speculative and legally conclusive.
- The Tenth Circuit affirms: it holds (1) causation is an element of an ERISA §1109 claim and remains the plaintiff’s burden, (2) the record evidence shows Land Rover would not have approved the change and any contrary inference would be speculative, and (3) the district court did not abuse its discretion excluding the experts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who bears the burden to prove causation in an ERISA §1109 breach claim? | Plan: burden should shift to fiduciary once plaintiff makes a prima facie case (trust-law burden shifting). | Alerus: plaintiff must prove all elements, including causation. | Held: plaintiff bears burden to prove causation; no ERISA-specific burden shifting. |
| Whether Plan produced admissible evidence that Land Rover would have approved the ESOP takeover (causation) | Plan: communications, state-law reasonableness rules, and experts show approval was probable or at least a triable issue. | Alerus: Land Rover repeatedly said it would not approve; record proves rejection, making approval speculative. | Held: Plan failed to present evidence that would allow a reasonable jury to find Land Rover would have approved; causation not established. |
| Admissibility of Plan’s expert opinions on whether Land Rover would have approved | Plan: experts could reliably opine that approval was likely and on legal reasonableness under state law. | Alerus: experts impermissibly speculated about Land Rover’s mindset and offered legal conclusions beyond their competence. | Held: District court did not abuse discretion excluding expert opinions as speculative and offering legal conclusions (and one expert unqualified to opine on legal duties). |
| Relevance of state-law obligations and hypothetical litigation against Land Rover | Plan: state statutes required objective reasonableness; presumption parties obey law supports inference Land Rover would have approved or been enjoined to approve. | Alerus: Land Rover’s contemporaneous refusals and final statements render that theory speculative; Plan forfeited any argument relying on hypothetical litigation. | Held: State-law arguments do not create a genuine factual dispute overcoming Land Rover’s clear contemporaneous refusals; hypothetical suit argument was not properly presented below and, in any event, would not change causation conclusion. |
Key Cases Cited
- Schaffer v. Weast, 546 U.S. 49 (2005) (when a statute is silent, the ordinary default places burden of persuasion on the plaintiff)
- Silverman v. Mutual Benefit Life Ins. Co., 138 F.3d 98 (2d Cir. 1998) (causation under §1109 is an element of the claim; plaintiff bears burden)
- Kuper v. Iovenko, 66 F.3d 1447 (6th Cir. 1995) (ERISA plaintiff must prove causation)
- Willett v. Blue Cross & Blue Shield, 953 F.2d 1335 (11th Cir. 1992) (§1109 requires proof that breach proximately caused losses)
- Berg v. United States, 806 F.2d 978 (10th Cir. 1986) (causation is normally a question of fact but may be decided as a matter of law when reasonable minds could draw only one conclusion)
- Daubert v. Merrell Dow Pharms., 509 U.S. 579 (1993) (expert testimony must be reliable and not speculative)
- Allison v. Bank One–Denver, 289 F.3d 1223 (10th Cir. 2002) (recognizing §1109’s “resulting from” language requires a causal link)