On May 20, 2022, Cohen Milstein filed Lloyd, et al. v. Argent Trust Company, et al., Case No. 1:22-cv-04129, United States District Court for the Southern District of New York under the Employee Retirement Income Security Act of 1974 (“ERISA”) on behalf of a putative class of participants and beneficiaries of the W BBQ Holdings, Inc. Employee Stock Ownership Plan (“ESOP”) against the ESOP trustee, Argent Trust Company (“Argent”), and the owner, Herbert Wetanson, and the controlling managers and shareholders of W BBQ Holdings (“WBBQ”).
Case Background & Allegations
W BBQ Holdings, Inc. owns and operates Dallas BBQ, a restaurant and catering chain in New York City that serves low-cost barbeque and beverages.
The WBBQ ESOP is an ERISA-protected retirement plan whereby the individual retirement accounts of current and former employees are invested entirely in the stock of W BBQ Holdings, Inc.
Plaintiffs allege that the trustee of the WBBQ ESOP, Argent Trust Company (“Argent”), and the Company’s owner Herbert Wetanson, and controlling managers and shareholders, (the “Seller Defendants”), breached their fiduciary duties to the W BBQ Holdings, Inc. ESOP, causing the ESOP to engage in transactions that are prohibited under ERISA and breached their fiduciary duties in connection with the sale of the company to the ESOP for an inflated purchase price that far exceeded its fair market value, and by arranging for continued payments to the Seller Defendants in connection with the sale.
- Specifically, Plaintiffs allege that WBBQ ESOP acquired 400,000 shares of WBBQ common stock from the Seller Defendants in or around July 2016 (80% of the shares then outstanding) for an aggregate price of $98,887,309 – well over six million dollars higher than the purchase price that was originally negotiated ($92,000,000) and vastly exceeding the fair market value of those shares –$11,246,418 as of December 31, 2020 (the last year for which reported data is available).
The WBBQ ESOP transaction has come under scrutiny by the Department of Labor (“DOL”), which issued a subpoena to the Seller Defendants’ investment advisory firm (CSG Partners, LLC) in connection with the transaction and three other ESOP transactions. In all four transactions that are the subject of the subpoena, Argent was retained by the Seller Defendants to review the sale and offered an opinion approving the sale.
As the ESOP Trustee, Argent had a fiduciary duty under ERISA to act prudently and in the sole interest of Plan participants, and also had a duty to ensure that the ESOP did not engage in prohibited transactions Similarly, the Seller Defendants had a fiduciary duty to prudently appoint and monitor the Trustee in the sole interest of participants, and to refrain from engaging in prohibited transactions with the ESOP.
As a result of these breaches in fiduciary duties and prohibited transactions, the WBBQ ESOP Plan and its participants and beneficiaries suffered tens of millions of dollars in losses.
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