Court Rules on Motion in Illinois ESOP Case

    August 21, 2020, 12:03 PM

    On August 21, 2020, the Court denied the motion of the Board of Directors (the “Board”) of Triad Manufacturing, Inc. (“Triad”) and the Co-Presidents of Triad (collectively with the Board, the “Triad Defendants”) to compel arbitration and/or dismiss filed in Smith v. GreatBanc Trust Company, a Northern District of Illinois case that relates to the December 2015 purchase of 100% of the outstanding stock of Triad by the Triad Manufacturing, Inc. ESOP (the “Triad ESOP”).1 In their motion, the Triad Defendants contended that the Plaintiff must be compelled to arbitrate his claims in accordance with the arbitration amendment to the Triad ESOP plan document that was adopted in 2018 (the “Arbitration Amendment”).

    The Court held that there was a “lack of an enforceable agreement to arbitrate,” because the Plaintiff never received notice of the Arbitration Amendment. In addition, the Court held that the Arbitration Amendment was unenforceable on public-policy grounds, since the Amendment, among other things, “eliminate[d] [the Plaintiff’s] right to pursue plan-wide statutory remedies that are expressly granted under ERISA § 502(a)(2).” On September 3, 2020, the Triad Defendants appealed the Court’s Order to the Seventh Circuit (case no. 20-2708); the appeal is pending.


    • The Court denied the Triad Defendants’ motion to compel arbitration and/or dismiss, because the Plaintiff was not notified of the Arbitration Amendment, and the Amendment’s elimination of the Plaintiff’s “right to pursue plan-wide statutory remedies” was unenforceable.

    1 Memorandum Opinion and Order, Smith v. GreatBanc Trust Company, No. 1:20-cv-02350 (N.D. Ill. Aug. 21, 2020), ECF No. 51.