Summary of the Lawsuit
The lawsuit challenges the October 2014 sale by the Rainbow Disposal Company ESOP of 100% of the stock of Rainbow Disposal to Republic Services because the sale violated various provision of the Employee Retirement Income Security Act of 1974 (“ERISA”) and alleges breaches of fiduciary duty in connection with the transaction and the management of the assets of the Plan.
Summary of the Claims
Prior to the sale in October 2014, the Rainbow ESOP owned 100% of Rainbow. The Complaint alleges that the sale by the ESOP was not for adequate consideration and constituted a breach of fiduciary duty. Among other things, the Complaint alleges that the sale was based on an outdated valuation, the sale price was less than the fair market value in that valuation, that certain fiduciaries breached their fiduciary duties in connection with the sale, including by failing to provide appropriate and accurate disclosures and information. Additionally, the Complaint also alleges that the sale was accomplished without holding a vote by the ESOP participants, as required by the Plan Document and as promised in the SPD. The Complaint also alleges that the sale was accompanied by prohibited transactions by certain fiduciaries and the failure to properly manage plan assets. Finally, the Complaint alleges that of the $15 million of proceeds from the sale that was distributed for more than 2 years, the ESOP fiduciaries failed to properly invest or diversify those assets which resulted in substantial losses to the plan participants.
Class Action Allegations
This lawsuit is brought on behalf of the following persons:
All persons who were vested participants in the Rainbow ESOP as of October 1, 2014 and the beneficiaries of any such participants.
Excluded from the Class are Defendants and persons who were named fiduciaries of the Rainbow ESOP, who are alleged to have engaged in prohibited transactions or breaches of corporate fiduciary duties, or who had decision-making or administrative authority relating to the administration, modification, funding, or interpretation of the Rainbow ESOP, or relating to the decision to sell Rainbow.
Status of the Litigation
The Class Action Complaint was filed on September 15, 2017. Plaintiffs filed an Amended Complaint on February 28, 2018. Defendants filed separate Motions to Dismiss on March 21, 2018 and March 28, 2018. On July 9, 2018, the Court issued an Order denying Defendants’ Motions to Dismiss in their entirety.Plaintiffs filed a Motion for Class Certification on December 18, 2018, which was granted by the Court on April 22, 2019. Plaintiffs filed a Second Amended Complaint on February 6, 2018.
Plaintiffs reached a settlement on behalf of the Class to settle the claims in this Litigation. On July 27, 2020, Plaintiffs filed the Motion for PreliminaryApproval of Settlement. The settlement needs to be approved by the Court, which consists of a three part pross: (1) the Court granting preliminary approval of the settlement, (2) formal notice mailed to class members and class members will be provided with the ability to comment on the Settlement, and (3) the Court granting final approval of the settlement.
The hearing on Plaintiffs’ Motion for Preliminary Approval is scheduled to December 11, 2020.
Whom to Contact for More Information
If you are a member of the proposed class or you have information which might assist us in the prosecution of these allegations, please contact one of the following persons:
Block & Leviton is co-counsel in this litigation with Creitz & Serebin LLP.