Moving Co. Gets ERISA Suit Over Stock Plan Transferred

May 2020 // Law360

Law360 (May 7, 2020, 8:02 PM EDT) — An ERISA suit accusing former RVNB Holdings Inc. officers of using an employee stock ownership plan to rip off workers is heading to the Northern District of Texas, after a federal judge ruled that the plan’s forum selection clause is valid and not precluded by the federal benefits law.

In his order Wednesday, U.S. District Judge Amos L. Mazzant III granted the motion to transfer from the defendants in the Employee Retirement Income Security Act case, which include former RVNB officers, a plan trustee and two trusts.

The judge was unconvinced by former employees Jessica Casey and Jason Coleman that a forum selection clause in the RVNB Holdings Inc. Employee Stock Ownership Plan was invalid and unenforceable because plan participants didn’t assent to it.

“Not only do plaintiffs fail to acknowledge that the plan allows RVNB to amend or terminate it at any time, but as a general rule, ERISA plan administrators, including employers or other plan sponsors, have the right at any time to freely adopt, modify, or terminate pension benefit plans,” Judge Mazzant wrote.

Nor did ERISA invalidate the clause as the workers contended, the judge held. The workers had argued that an ERISA provision outlining three potential venues for cases was mandatory, but ultimately the judge disagreed.

“Indeed, a plain reading of the statute’s text suggests that ERISA’s venue provision is permissive, not mandatory,” the judge wrote. “And the Sixth and Seventh Circuits have interpreted the statute in like manner.”

Judge Mazzant noted that the Sixth Circuit had reasoned that if mandatory arbitration clauses in ERISA plans are considered valid, it would be illogical to find that clauses designating specific venues in federal court were not.

According to the order, the Sixth and Seventh Circuits have been the only circuit courts to address the issue directly. And while some district courts had found that ERISA invalidates forum selection clauses, the majority had reached the contrary conclusion, the order said.

Public interest factors also didn’t weigh against the transfer of the case, the judge found.

The allegations in the suit stem from the formation of the employee stock ownership plan, a 2012 transaction, and the plan’s eventual termination. In their most recent complaint in April, Casey and Coleman said the defendants “hatched a scheme circa 2012 to loot their partners, employees and the United States.”

In a separate suit stemming from the transaction, Casey and Coleman reached a $6.25 million settlement with Reliance Trust Co., which had acted as a trustee to the plan.

Counsel for the plaintiffs and counsel for the officers and trusts declined to comment Thursday. Counsel for Neil M. Brozen, a trustee for the plan, didn’t respond Thursday to a request for comment.

Casey and Coleman are represented by Thomas R. Ajamie and John S. Edwards Jr. of Ajamie LLP, and Gregory Y. Porter, Ryan T. Jenny, James Kauffman and Alexandra Langley Serber of Bailey & Glasser LLP.

Robert Peterson Jr., Vasilia Peterson, Mike Paxton, Nick Bouras, Sterling Investment Partners III LP, Nicole Peterson 2012 Irrevocable Trust and the Brooke Peterson 2012 Irrevocable Trust are represented by Christopher M. LaVigne and Christopher S. Dodrill of Greenberg Traurig LLP, and Todd D. Wozniak of Holland & Knight LLP

Brozen is represented by Nicole Figueroa, J. Christian Nemeth and Peter B. Allport of McDermott Will & Emery LLP.

The case is Coleman et al. v. Brozen et al., case number 4:19-cv-00705, in the U.S. District Court for the Eastern District of Texas.