A lawsuit alleging Inland Seafood’s financial situation was misrepresented during a sale of the company to its employees in 2016 was dismissed on 5 December 2023.
US. District Court Judge Leigh Martin May ruled in favor of a motion by Inland Trustee James R. Urbach to dismiss the case on the grounds the plaintiffs did not fully pursue remedy of their problems with the employee stock ownership plan before filing suit.
The suit, filed 18 November, 2022, in the U.S. District Court for the Northern District of Georgia, accused Inland’s executive team of “massively inflating” the value of the company when it created a leveraged employee stock ownership plan in 2016 that is converting Inland into an employee-owned company. The lawsuit alleged their actions violated the Employee Retirement Income Security Act.
However, the plaintiffs did not attempt to pursue their claims through the administrative process outlined in the employee stock ownership plan before filing suit just two weeks before the six-year statute of limitations expired.
Legal precedent is clear that benefit plan participants must first adhere to their plan’s internal claims procedures before gaining eligibility to sue through the Employee Retirement Income Security Act, May wrote in her judgment.
“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.
May also found the claim by the Inland employees who filed suit that they received misleading advice on the plan and that they could not achieve a fair hearing from the employee stock ownership plan committee to be meritless.
“There is no allegation that plaintiffs received misleading advice, and, in fact, documents attached to the amended complaint here show that Plaintiffs’ counsel was investigating the Inland ESOP within the period Plaintiffs could have timely initiated administrative review,” May wrote.
The suit, which was filed on behalf of five former employees of Inland Seafood, accused Inland Founder and CEO Joel Knox, Inland COO Bill Demmond, Inland President Chris Rosenberger, Inland Attorney and Register Agent Les Schneider, and Urbach of failing to adhere to financial laws governing minimum standards for employee stock ownership plan fiduciaries. They claimed a valuation of the Atlanta, Georgia, U.S.A.-based seafood distributor calculated by J.P. Morgan Chase in 2016 was tainted by false and misleading sales projections proffered by Inland Executive Vice President Robert Novotny.
Photo courtesy of Inland Seafood
