December 7, 2022
A New York federal judge refused to send to arbitration a suit claiming Argent Trust let a barbecue chain’s employee stock ownership plan overpay for company shares, ruling Tuesday that the plan’s arbitration agreement is unenforceable because it denies rights afforded under federal benefits law.
U.S. District Judge Denise L. Cote said Jamaal Lloyd and Anastasia Jenkins are not obligated to arbitrate their claims brought under the Employee Retirement Income Security Act against Argent, the trustee of W BBQ Holdings Inc.’s ESOP, after finding that the agreement prevents employees from seeking relief that federal benefits law provides.
“The plaintiffs are correct; the plan’s arbitration clause may not be enforced,” Judge Cote said. “The plan’s arbitration procedures prohibit representative actions seeking relief on behalf of a plan even though ERISA expressly provides for such actions.”
Lloyd sued Argent and several of the barbecue chain’s shareholders in May, alleging its workers lost millions of dollars in retirement savings when shareholders sold 400,000 shares of common stock to the ESOP in July 2019 at above fair market value. The shares were sold for $99 million, but by the end of 2016, the value of the shares plummeted to $28.9 million, Lloyd and Jenkins said.
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Lloyd and Jenkins are represented by Michelle C. Yau, Kai H. Richter, Daniel R. Sutter, Ryan A. Wheeler and Michael Eisenkraft of Cohen Milstein Sellers & Toll PLLC.
The article can be read on Law360.