Five employees of seafood processor Inland Seafood, which has since rebranded as Inland Foods, have asked the United States Court of Appeals for the 11th Circuit to reconsider their lawsuit after a panel of judges ruled against them last month.
Although such a rehearing is rare, the plaintiffs appear to have support on the court for their petition.
The lawsuit centers on the Atlanta, Georgia, U.S.A.-based company’s employee stock ownership plan, which was established in 2016. That plan was kickstarted with a USD 92 million (EUR 79 million) loan that was used to purchase 100,000 shares of common stock from four Inland Foods officers and directors. Those shares were then to be distributed to employee pension accounts based on tenure, giving more tenured employees a bigger stake in the company’s ownership.
However, five employees sued the company over the plan in 2022, alleging that those officers and directors overvalued their stocks when they sold them back to the company, artificially inflating their returns and effectively depriving the pension plan of tens of millions of dollars.
The case was dismissed in 2023 after a district judge ruled that the defendants should have exhausted the administrative claims procedures incorporated into the stock ownership plan before filing suit. The plaintiffs appealed in 2024, asking the 11th Circuit Court of Appeals to overturn the district court ruling and allow them to sue even though they had not exhausted all administrative recourses. The U.S. Department of Labor backed the employees, arguing that the administrative procedures were not appropriate to resolving the allegations.
However, an appeals court judge upheld the district court’s opinion in a 15 October ruling.
Now, the Inland Foods employees are asking the full 11th Circuit Court of Appeals to weigh in on the case. While appeals courts usually decide cases with a three-judge panel, on rare occasions, the court can convene all the judges in the circuit to opine. Such an “en banc” consideration typically involves a claim that the appeals court’s ruling goes against federal or Supreme Court precedent.
In their petition, the plaintiffs argue that the legal precedent the courts relied on in requiring them to exhaust administrative remedies actually goes against Supreme Court precedent. The employees already have support on the appeals court. In a concurring opinion, Circuit Judge Adalberto Jordan state that the legal precedent they relied upon – laid out in the 1985 case Mason v. Continental Group – was ripe for reconsideration.
“I write separately to propose that we convene en banc to consider overruling Mason v. Continental Group, which imposed a judicially created and atextual administrative exhaustion requirement for fiduciary breach and statutory claims under ERISA,” Jordan wrote. “There are a number of good reasons for overruling Mason.”
The Inland Foods employees have taken Jordan up on his suggestion, filing a petition for an en banc rehearing 5 November.
“En banc rehearing is warranted because there is no basis in ERISA’s text for imposing an exhaustion requirement on claims alleging a violation of the statute,” the plaintiffs stated. “As the Supreme Court has recognized in various contexts, including ERISA, courts are not permitted to enhance a statute by resorting to policy concerns, as Mason did in creating an exhaustion requirement for fiduciary breach claims.”
