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Guidry v. Wilmington Trust, N.A.

United States District Court, D. Delaware

December 10, 2019

LYLE J. GUIDRY and RODNEY CHOATE, on behalf of the MRMC ESOP and a class of all other persons similarly situated, Plaintiff,
v.
WILMINGTON TRUST, N.A., as successor to Wilmington Trust Retirement and Institutional Services Company, Defendant.

          David A. Felice, BAILEY & GLASSER, LLP, Wilmington, DE; Gregory Y. Porter, Patrick Muench, and Ryan T. Jenny, BAILEY & GLASSER, LLP, Washington, DC; Daniel Feinberg and Todd Jackson, FEINBERG, JACKSON, WORTHMAN & WASOW LLP, Berkeley, CA, attorneys for Plaintiff.

          Albert H. Manwaring, IV, MORRIS JAMES LLP, Wilmington, DE; Michael J. Prame, Edward J. Meehan, Ross P. McSweeney, GROOM LAW GROUP, Washington, D.C., attorneys for Defendant.

          MEMORANDUM OPINION

          ANDREWS, U.S.DISTRICT JUDGE

         Plaintiff Rodney Choate alleges Defendant Wilmington Trust breached its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by causing an employee pension plan to overpay for company stock. Currently before the Court is Plaintiffs Motion for Class Certification. (D.I. 80). For the reasons discussed below, the motion is GRANTED.

         I. BACKGROUND

         The Martin Resource Management Corporation (MRMC) is a privately-held company that transports petroleum products and other bulk liquids. (D.I. 31 at 7). In January 2012, MRMC created an Employee Stock Ownership Plan (ESOP)-a retirement benefit for employees made up primarily of stock in the employer company. (Id. at 8). MMRC appointed Wilmington Trust as the trustee of the ESOP. (Id. at 9). Under ERISA, an ESOP trustee may not pay more than "adequate consideration" for the employer's stock. 29 U.S.C. § 1108(e)(1).

         Plaintiff is challenging two ESOP transactions. In the first transaction, on October 2, 2012, the Plan purchased 3, 066.5 shares of MRMC preferred stock and 738 shares of MRMC common stock for $233 million. (D.I. 31 at 9). After a stock split and conversion of preferred stock into common stock, this transaction became 95, 112.5 shares of common stock. (Id. at 10). In the second transaction, on December 23, 2013, the Plan bought an additional 89, 049.5 shares of MMRC common stock for $142.5 million. (Id. at 11). According to Plaintiff, the shares from both transactions are only worth about $79 million now. (D.I. 81 at 1). Wilmington Trust is responsible for both transactions in its capacity as trustee of the ESOP. (D.I. 31 at 9, 11).

         Lyle J. Guidry sued Wilmington Trust over the transactions in March 2017, and Rodney Choate sued the next month. The cases were consolidated in May 2017. (D.I. 12). Guidry died on August 26, 2018, leaving Choate to pursue this action. (D.I. 124).

         Choate was employed as a boat captain for an MRMC subsidiary from November 2006 until about April 2013. (D.I. 85, Ex. 5, "Choate Decl," at 1). He became a participant in the ESOP when it started in 2012. (Id.) Because he left the company before his retirement account fully vested, Choate forfeited about 80 percent of his potential benefits. (D.I. 93 at 3).

         II. LEGAL STANDARD

         A class action is "an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only." Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013). To qualify for this exception, a party "must affirmatively demonstrate his compliance" with Fed.R.Civ.P. 23 by a preponderance of the evidence. Reyes v. Netdeposit, LLC, 802 F.3d 469, 485 (3d Cir. 2015). "Merits questions may be considered to the extent-but only to the extent-that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied." Amgen Inc. v. Connecticut Ret. Plans & Tr. Funds, 568 U.S. 455, 466 (2013). The plaintiff must satisfy "the prerequisites of Rule 23(a): numerosity, commonality, typicality, and adequacy of the class representative." Shelton v. Bledsoe, 775 F.3d 554, 559 (3d Cir. 2015). Additionally, the "proposed class must satisfy at least one of the three requirements listed in Rule 23(b)." Wal-Mart Stores v. Dukes, 564 U.S. 338, 345 (2011).

         Plaintiff has sought certification under Rules 23(b)(1) and 23(b)(2). "Most ERISA class action cases are certified under Rule 23(b)(1)." Kanawi v. Bechtel Corp., 254 F.R.D. 102, 111 (N.D. Cal. 2008). This rule "allows for certification when the prosecution of separate suits by individual class members would create a risk of inconsistent or varying adjudications and establish incompatible standards for Defendants, or when a judgment in one suit would be dispositive of the interests of the other class members who were not parties to the suit." Id. at 107. Rule 23(b)(2) authorizes a class action if the defendant "has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief... is appropriate respecting the class as a whole." Sullivan v. DB Investments, Inc., 667 F.3d 273, 296 (3d Cir. 2011).

         Courts have recognized "that an essential prerequisite of a class action, at least with respect to actions under Rule 23(b)(3), is that the class must be currently and readily ascertainable based on objective criteria." Carrera v. Bayer Corp., 727 F.3d 300, 305 (3d Cir. 2013). To satisfy this implicit "ascertainability" requirement, a plaintiff must show that "(1) the class is defined with reference to objective criteria; and (2) there is a reliable and administratively feasible mechanism for determining whether putative class members fall within the class definition." City Select Auto Sales Inc. v. BMW Bank of N. Am. Inc., 867 F.3d 434, 439 (3d Cir. 2017) (cleaned up).

         Defendant challenges certification on only three grounds: (1) ascertainability; (2) numerosity; and (3) adequacy of ...


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