Arkansas Court Declines to Dismiss Challenge to ESOP Releveraging Transaction

Litigation attorneys Sara Benson, James Bristol, Lynn Calkins, Lindsey Camp, Chelsea McCarthy and Todd Wozniak co-authored an article for the Employee Benefit Plan Review analyzing the U.S. District Court for the Western District of Arkansas' decision in Shipp v. Central States Manufacturing, Inc. The court declined to dismiss claims that a releveraging transaction breached fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA), allowing the case to proceed to discovery. The authors assert that, though the ruling does not address the merits of the plaintiffs' claims – merely saying they can survive a motion to dismiss – it does highlight the importance of thorough planning for employee stock ownership plans (ESOPs), even newly formed ones. They conclude this case will be one to reference when reviewing ESOP sustainability and evaluating a potential releveraging transaction.

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