Trachte ESOP Litigation
Practice Area: Employee BenefitsTrachte Building Systems, Inc. Employee Stock Ownership Plan Litigation
Cohen Milstein has filed a putative class action lawsuit on behalf of current and former participants and their beneficiaries of the Trachte Building Systems, Inc. Employee Stock Ownership Plan (the “Plan” or the “ESOP”). The lawsuit alleges violations of the federal pension law (ERISA) in connection with transfer of pension accounts from the Alliance Holdings, Inc. Employee Stock Ownership Plan (the “Alliance ESOP”) to the ESOP and the purchase of Trachte Building Systems, Inc. (“Trachte”) stock from Alliance Holdings, Inc. and Stephen Pagelow in August 2007.
Summary of the Claims
This action arises out of a transaction involving the Trachte ESOP that occurred on or about August 29, 2007. At that time, the assets of the accounts of Trachte employees who were participants in the Alliance ESOP, consisting of Alliance Holdings, Inc. (“Alliance”) stock and AH Transition, Inc. (“AH Transition”) stock, were transferred into the Trachte ESOP. On that same date, the Trachte ESOP exchanged the Alliance and AH Transition stock for Trachte stock and purchased additional shares of Trachte stock from Alliance, AH Transition, and Stephen W. Pagelow.
The lawsuit alleges that the transfer of assets from the Alliance ESOP to the ESOP violated ERISA because the Alliance and AH Transition stock had less value after the transfer than before the transfer, and because the stock was exchanged for and conditioned on the purchase of overpriced Trachte stock. The lawsuit alleges that the value of the participants’ accounts, consisting almost exclusively of Trachte stock, was further jeopardized because Trachte acquired more debt than it could reasonably service in order to finance the Transaction. Moreover, the lawsuit alleges that the executive compensation of certain fiduciaries responsible for approving the transaction and valuing the Trachte stock was based on the price paid for the Trachte stock by the Trachte ESOP, putting those fiduciaries in such a position that their personal interests were in conflict with the interests of the Trachte ESOP participants and beneficiaries. As a result of the Transaction and the effect of the debt on Trachte, the accounts of the participants in the Trachte ESOP have significantly declined in value and Trachte itself is burdened with excessive debt that is threatening the viability of the company.
Class Action
On September 22, 2011, the Court entered an order certifying this case as a Class Action. The class is defined as follows:
a. CLASS: Participants in the Trachte ESOP at any time from August 29, 2007 to the present who had an account or received an allocation which they did not subsequently forfeit under the terms of the Plan and the beneficiaries of such participants, excluding any fiduciary of the Trachte ESOP or Alliance ESOP during the 2007 Transaction on or about August 29, 2007 and any members of their immediate families, legal representatives, heirs, successors or assigns.
b. SUBCLASS: All persons who were participants or beneficiaries of the Alliance ESOP at the time of the 2007 Transaction and whose accounts were transferred to the Trachte ESOP on or about August 29, 2007 as part of the 2007 Transaction, excluding any fiduciary of the Trachte ESOP or Alliance ESOP during the 2007 Transaction on or about August 29, 2007 and any members of their immediate families, legal representatives, heirs, successors or assigns.
Status of the Litigation
The lawsuit, entitled Chesemore, et al. v. Alliance Holdings, Inc., et al. (W.D. Wisc.), was filed on June 30, 2009. The Alliance Defendants, the Trustees and Defendant Pagelow filed Motions to Dismiss the Amended Complaint on March 1, 2010. The Court issued an order on February 17, 2011, largely denying the motions as to every defendant and every claim. The case was bifurcated into two phases in May 2011. A seven-day court trial in Phase I was held in October 2011. The Phase II court trial on damages is scheduled to begin on April 25, 2012.
Whom to Contact for More Information
If you believe you are a member of the class or subclass or you have information which might assist us in the prosecution of these allegations, please contact one of the following persons:
R. Joseph Barton, Esq. jbarton@cohenmilstein.com
Karen L. Handorf, Esq. khandorf@cohenmilstein.com
Eva Schildhause, Paralegal, eschildhause@cohenmilstein.com
Cohen Millstein Sellers & Toll PLLC
1100 New York Avenue, N.W., Suite 500
Washington, D.C. 20005
Telephone: 888-240-0775 (Toll Free) or 202-408-4600