August 15, 2023
The Third Circuit on Tuesday refused to force arbitration of a benefits suit from a proposed class of cargo airline workers who allege mismanagement of their employee stock ownership plan, backing a lower court’s decision without full briefing or arguments.
In a two-page order, a Third Circuit panel granted a motion for summary affirmance in the Employee Retirement Income Security Act suit brought by a proposed class of workers for Western Global Airlines Inc. and participants in the company’s ESOP. The proposed class had filed the motion July 14.
The suit was first filed in February 2022, when the proposed class of Western Global Airlines workers sued the airline’s owners, James and Carmit Neff; their trusts; Prudent Fiduciary, the ESOP’s trustee; and Prudent’s president, Miguel Paredes.
The workers alleged in their complaint that when the Neffs sold their shares in Western Global Airlines to the ESOP in 2020, they based their estimation of the shares’ value on the notion that the company was worth $1.3 billion, when in reality, Western Global was worth about 20 times less than that. The company took on debt that costs nearly $40 million per year to service so the Neffs could finance the transaction and receive a $510 million payout for the shares, the workers alleged.
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The proposed class is represented by Peter K. Stris, Rachana A. Pathak, Tillman J. Breckenridge and John Stokes of Stris & Maher LLP; Michelle C. Yau and Daniel R. Sutter of Cohen Milstein Sellers & Toll PLLC; and Paul J. Lukas and Brock J. Specht of Nichols Kaster PLLP.
Read 3rd Circ. Backs Arbitration Denial in Airline ESOP Fight.