Law360 (January 14, 2020, 6:27 PM EST) — Reliance Trust Co. has reached a settlement with a proposed class of RVNB Holdings Inc. workers who had accused the company of allowing them to grossly overpay for their employer’s stock, the parties told a federal judge in Texas on Monday.
Reliance, which is the trustee for the RVNB stock ownership plan, was hit with the proposed class action in June 2018, when former employees of the storage and moving company, Jessica Casey and Jason Coleman, alleged it had violated its fiduciary duties under the Employee Retirement Income Securities Act by making workers pay too much — $85 million — for shares of the company’s stock.
In the notice of settlement filed to U.S. District Court Judge Amos L. Mazzant III, the parties asked the court to stay all deadlines in the lawsuit for 60 days to allow them to “formalize the settlement agreement” that they reached in principle on Jan. 10.
If they can formalize the settlement, they told the court they’d be filing documents asking the court to approve it within 60 days.
In November, U.S. Magistrate Judge Caroline Craven recommended the case proceed in federal court, and not in arbitration as Reliance had urged in a March filing. Judge Craven held that the former employees had made the case that Reliance added an arbitration clause to their 2012 employee stock ownership plan without telling them, only after they filed the suit against Reliance in federal court.
She held that the participants in the suit weren’t bound by the arbitration clause as a result of it being added after Reliance was sued.
Reliance had argued in trying to compel arbitration that plan participants didn’t need to consent to the amendment to make it valid and that in accepting the plan’s benefits they were agreeing to its terms and any subsequent amendments. The workers had argued that just because they kept assets in the plan didn’t mean they consented to arbitration.
Casey and Coleman alleged in the lawsuit that Reliance violated its fiduciary duties under ERISA by failing to perform due diligence when the plan acquired 100% of RVNB’s common stock in 2012 for an $85 million note, which was later revalued at $24 million, according to the complaint.
Counsel for Reliance declined to comment and counsel for the proposed class did not immediately return a message seeking comment Tuesday.
The proposed class is represented by Gregory Y. Porter, Ryan T. Jenny, James L. Kauffman and Alexandra L. Serber of Bailey & Glasser LLP and Thomas R. Ajamie and John S. Edwards Jr. of Ajamie LLP.
Reliance is represented by W. Bard Brockman, Gregory J. Sachnik and Jeffrey S. Russell of Bryan Cave Leighton Paisner LLP.
The case is Jessica Casey et al. v. Reliance Trust Co., case number 4:18-cv-00424, in the U.S. District Court for the Eastern District of Texas.