US Department of Labor backs appeal of dismissal of Inland employee ownership lawsuit

An Inland Seafood delivery truck
An Inland Seafood delivery truck | Photo courtesy of Cape Fear Oyster Company
4 Min

The U.S. Department of Labor is urging a U.S. appeals court to reconsider a lawsuit filed against Inland Seafoods, alleging mismanagement of an employee stock ownership plan.

The DOL has filed an amicus brief urging the U.S. Eleventh Circuit Court of Appeals to consider an en banc review of Rani Bolton, et al. v. Inland Fresh Seafood Corporation Of America, Inc., et al., a lawsuit alleging Inland Seafood’s financial situation was misrepresented during a sale of the company to its employees in 2016. The suit was dismissed by U.S. District Court Judge Leigh Martin May in December 2023 on the grounds that the plaintiffs did not exhaust efforts to pursue their claims internally before filing suit.

The dismissal was appealed to the U.S. Eleventh Circuit Court of Appeals on 4 January 2024, and the appeal was filed 15 May. In its 22 May brief, the DOL asked the court to reconsider the precedent that employees must first exhaust internal remedial procedures related to employee stock ownership (ESOP) plans before advancing legal claims under the Employee Retirement Income Security Act (ERISA).

The DOL said the issue “involves a question of exceptional importance,” as there are numerous rulings on the matter it said are contradictory. 

“The Eleventh Circuit … stands increasingly alone in its unique and absolute requirement of exhaustion for ERISA statutory violations,” it said.

The DOL argued ESOP managers are employed by companies to administer plans, not interpret federal statutes such as the Employee Retirement Income Security Act. Moreover, due to the terms of their employment, ESOP managers potentially face conflicts of interest in their evaluations of federal statutes such as the one involved in the Inland case.

“ERISA makes fiduciaries personally liable to the plan for losses caused by their breaches. It makes little sense to force participants to bring their statutory grievances to fiduciaries whose personal liability hinges on the outcome,” the brief said.

The DOL said the procedures outlined in ERISA for challenging ESOP structure or management are “facially inapplicable” for dealing with the problems identified with Inland’s plan in the original lawsuit, which accused Inland’s executive team of ...

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