Tharaldson Motels, Inc. Employee Stock Ownership Plan (Hans v. Tharaldson)
Practice Area: ERISASummary of the Lawsuit
This is a class action lawsuit on behalf of participants and beneficiaries in the Tharaldson Motels, Inc. Employee Stock Ownership Plan (the “TMI ESOP”) alleging violations of the federal pension law (ERISA) in connection with two Transactions in which Gary Tharaldson and his family or family trusts (the “Tharaldsons”) sold shares to the ESOP for $500 million in December 1998 and December 1999. The lawsuit alleges that Gary Tharaldson, as the Trustee of the TMI ESOP, caused the TMI ESOP to purchase the stock in Tharaldson Motels, Inc. (“TMI”) from himself, members of his family and certain family trusts at more than fair market value. As a result, the lawsuit alleges that the TMI ESOP paid too much for the stock and incurred an excess amount of debt. The TMI ESOP incurred debt, which was financed in large part by loans from the Tharaldsons, to purchase their shares in TMI. This lawsuit alleges that these loans were designed to allow the Tharaldsons to nominally place the ownership of TMI in the hands of the TMI ESOP while retaining management control and draining the company’s cash flow in order to service the debt undertaken by the ESOP to purchase of these shares. The lawsuit also claims that the TMI ESOP paid too much for the shares purchased in the second transaction because the price was not adjusted to take into account the effect of the debt from the first transaction, and alleges that the debt imposed by the second transaction substantially reduced the value of the ESOP. The lawsuit also alleges that these transactions were undertaken not in the interest of the ESOP and its participants, but for the benefit of Gary Tharaldson and his family. As a result, the lawsuit seeks relief against Gary Tharaldson and family for the amount of the purchase price which they received in excess of fair market value at the time of the Transaction and seeks to restore any losses suffered by the ESOP as a result of Gary Tharaldson’s fiduciary breaches.
Class Action
On May 7, 2010, the Court certified the case as a class action with two subclasses: a Former Employee Class and a Current Employee Class. Cohen Milstein Sellers & Toll PLLC has been appointed Counsel for the Former Employee Class. Pursuant to the Orders on May 7, 2010 and August 27, 2010, the subclasses are defined as follows:
Former Employee Class
The Former Employee Class is defined as all persons, other than the Defendants in this action, members of their immediate families, their legal representatives, heirs, successors or assigns or any excluded party, who were participants in the Tharaldson Motels, Inc. Employee Stock Ownership Plan at any time from December 30, 1998 to the present and who received an allocation of Plan assets to their accounts which they did not subsequently forfeit under the terms of the Plan and who are no longer employees of TMI (or an affiliate) and the beneficiaries of such persons.
Current Employee Class
The Current Employee Class is defined as all persons, other than the Defendants in this action, members of their immediate families, their legal representatives, heirs, successors or assigns or any excluded party, who were participants in the Tharaldson Motels, Inc. Employee Stock Ownership Plan at any time from December 30, 1998 to the present and who is a present employee of TMI (or an affiliate) and the TMI ESOP beneficiaries of such persons.
Cohen Milstein is Class Counsel for the Former Employee Class. Keller Rohrback is Class Counsel for the Current Employee Class. Moore & Van Allen is counsel for North Star Trust Company, the Trustee of the TMI ESOP, who has intervened in this lawsuit and is also assisting with the prosecution of these claims.
Notice of Pendency of Class Action
On March 21, 2011, the Court approved a Plan of Notice whereby each member of the Current and Former Employee Subclasses are to be sent a Notice of Pendency of Class Action. This Notice was mailed to members of the Current and Former Employee Subclasses on August 12, 2011 by U.S. Mail.
The Notice of Pendency of Class Action as well as the English and Spanish versions of the Summary Notice can be located under the Case Documents tab on this page.
Current Status
The litigation was stayed for over 6 months from June 2009 to March 2010 as Plaintiffs, Defendants, the Trustee and Counsel for the TMI Board explored settlement; however, it was the collective view of the Plaintiffs, the Trustee and TMI that future settlement discussions with Defendants would not be fruitful and that it was in the best interests of the participants of the ESOP to continue this litigation. In March 2010, the Court lifted the stay and placed the litigation back on a trial schedule. The parties have now completed fact and expert discovery and will begin the process of pre-trial preparations.
On October 29, 2011, the Court entered an order on the Summary Judgment Motions submitted by the Parties. The Court found that there are key issues in dispute regarding whether or not Gary Tharaldson and the Selling Shareholders sold their shares of TMI stock to the ESOP for more than adequate consideration on December 27, 1999. If the ESOP acquired the shares of TMI from Gary Tharaldson and the Selling Shareholders for more than adequate consideration, Gary Tharaldson, as the then Trustee of the TMI ESOP, may be found liable for a breach of fiduciary duties owed to the ESOP participants.
Trial is set to begin on May 1, 2012 at 9:00 am in Fargo Courtroom 1 before Judge Ralph R. Erickson.
Whom to Contact for More Information
Former Employee Class
If you are a member of the Former Employee Class or you have information which might assist us in the prosecution of these allegations, please contact one of the following persons:
Bruce F. Rinaldi, Esq., brinaldi@cohenmilstein.com
R. Joseph Barton, Esq., jbarton@cohenmilstein.com
Jason Kolcun, Paralegal, jkolcun@cohenmilstein.com
Cohen Milstein Sellers & Toll PLLC
1100 New York Avenue, N.W., Suite 500
Washington, D.C. 20005
Telephone: (202) 408-4600
Current Employee Class
If you are a member of the Current Employee Class, please contact one of the following persons:
David J. Ko, Esq., dko@kellerrohrback.com
Keller Rohrback L.L.P.
1201 Third Avenue, Suite 3200
Seattle, WA 98101
Telephone: (206) 623-1900
Or Toll Free: 1-800-776-6044
Gary D. Greenwald, Esq., ggreenwald@kellerrohrback.com
Gary A. Gotto, Esq., ggotto@kellerrohrback.com
Ron Kilgard, Esq., rkilgard@kellerrohrback.com
Keller Rohrback P.L.C.
3101 North Central Avenue, Suite 1400
Phoenix, AZ 85012
Telephone: (602) 248-0088
Keller Rohrback’s Website