The U.S. Court of Appeals for the 11th Circuit heard oral arguments on 12 May to determine whether it will appeal a lawsuit brought by Inland employees against the owners of the company.
The hearing is the latest stint in a lawsuit alleging Inland Seafood’s financial situation was misrepresented when it was sold to its own employees in 2016. Inland Seafood – now known as Inland Foods – was sold to its own employees for USD 92 million (EUR 82 million) through an employee stock ownership plan (ESOP) to be repaid over the next 30 years – but the employees alleged in a suit filed 18 November 2022 that that valuation was massively inflated.
The inflated price, according to the lawsuit, would be a violation of the duties imposed by the Employee Retirement Income Security Act (ERISA), which grants retirement plan participants right of action to seek relief for that kind of misconduct.
The lawsuit was dismissed by U.S. District Court Judge Leigh Martin May in December 2023, who determined that the plaintiffs (the employees) did not fully pursue a remedy of their problems with the ESOP before they filed the lawsuit in 2022.
“Plaintiffs did not attempt to pursue their claims through the administrative process and did not even bring suit on the claims until two weeks before the expiration of the statute of [limitations],” May wrote at the time.
At the center of May’s decision, as well as the new appeal, is the “exhaustion” requirement, which means workers must show they raised issues through a retirement plans internal appeals before filing any suit with the court.
Attorney Sean Soyars, representing the plaintiffs, argued that the Supreme Court’s intervening precedents have undermined that exhaustion point “to the point of abrogation.”
Soyars argued that there’s nothing in the text of ERISA constituting a prerequisite to filing a claim for breach of fiduciary duty that would have required Inland’s employees to exhaust its other remedies.
“The court has consistently said that the court should not tamper with a carefully crafted enforcement mechanism, and that’s exactly what the Mason rule does,” Soyars said.
The Mason rule refers to a court case, Mason v. Continental Group, which formed the basis of the earlier dismissal of the Inland employees’ lawsuit.
Judge Adalberto Jordan, during oral arguments, also said that one of the bases of the exhaustion ruling against Inland – Mason v. Continental Group, a court case from the 1980s – may be in error.
“I speak only for myself, I think you’ve got a good argument that Mason was wrongly decided,” Jordan said.
Now that the court has heard oral arguments, there is no time limit on how long it will take for the court to hand down its official decision on the appeal.
