West Monroe Employee Stock Plan Undervalued Shares ERISA Class Action

Some companies, like West Monroe Partners, Inc., offers an Employee Stock Ownership Plan (ESOP) as a retirement plan. When employees leave the company, it buys back its stock from them, allowing them to cash out. This class action brings suit against West Monroe, its Board of Directors, its Benefits Committee, and the plan’s trustee, Argent Trust Company, for violating their fiduciary duties to the plan’s participants, engaging in prohibited transactions, and severely undervaluing the company’s shares when it cashed employees out.

The class for this action is all participants and beneficiaries of the plan who received a distribution from the plan in an amount based on the April 2021 valuation of the stock.

Plaintiff Matthew Daly worked for West Monroe as a consultant until late in 2020, and he had accumulated stock in the plan as part of his compensation. He kept his shares in the plan until September 2021, when the company bought back his stock.

A few months before that, in April 2021, the company’s valuation was held to be $515.8 million, or $515.18 per share over a million shares. The complaint alleges that the company used that valuation to buy back some 28,000 shares of stock from the plan.

The complaint alleges, “Within weeks of making those distributions…, on October 14, 2021, West Monroe announced that it had sold 50% of its shares to a third-party investor, MSD Partners, LP, for a price nearly five times higher” than that valuation. “According to public reports, the deal valued West Monroe at approximately $2.5 billion, or $2,500 per share: over 4.8x the April valuation.”

The defendants in this case are fiduciaries of the plan, the complaint claims, and so owed the plan fiduciary duties. The complaint quotes the Employee Retirement Income Security Act (ERISA) to describe these duties as including the duty of running the plan “solely in the interest of the participants and beneficiaries” and “with the care, skill prudence, and diligence” that a prudent person, “acting in a like capacity and familiar with such matters would use.” Those duties, the complaint alleges, included the duty of appraising the stock at its fair market value.

That’s not all. According to the complaint, the company also took advantage of the low prices paid to employees in order to enrich its leaders. In January 2021, a few months before the low company valuation and the employee cash out, executives were allowed to buy West Monroe stock at that undervalued price.

The complaint alleges, “Defendants’ double-dealing violated their duties of prudence and loyalty.” In fact, the complaint says, this was also a prohibited transaction under ERISA.

According to the complaint, West Monroe and the other defendants should have told plan participants about the coming revaluation and transaction. If participants had known, the complaint alleges, they would have been “entitled … to a portion of the proceeds from the sale to MSD Partners…”

Article Type: Lawsuit
Topic: Employment
Tags: ERISA Violations, Employment Violations, Retirement Plans, Stock Losses