Judge Holds That Plaintiff Cannot See Transaction Valuation Report in California ESOP Case

On September 9, 2024, the Court issued an order granting in part and denying in part Defendants’ motion for summary judgment.¹

The Court held that the transaction valuation report that Stout Risius Ross (“SRR”) prepared (the “Stout Report”) in connection with the 2021 sale of 100% of the stock of KPC Healthcare Holdings, Inc. by the KPC Healthcare, Inc. ESOP (the “KPC ESOP”) to Victor Valley Hospital Acquisition, Inc. does not fall within the category of documents described in ERISA § 104(b)(4), because Defendants produced evidence that the transaction price exceeded the value range set forth in the Stout Report, so even if Plaintiff were to obtain the Stout Report, she would not know the total sale price or the value of her benefits. The Court also noted that Plaintiff did not cite any legal authority that stated that valuation reports akin to the Stout Report were covered by ERISA § 104(b)(4).

Similarly, the Court found that Plaintiff did not identify any legal authority that would compel Defendants’ production of the Stout Report under ERISA § 404, since the Stout Report does not “relate[] to the provision of benefits or the defrayment of costs.”

However, the Court rejected Defendants’ argument that Plaintiff’s claim for annual valuation reports was outside the scope of Plaintiff’s second amended complaint, because the record demonstrates that Defendants have “repeated[ly]” referred to Plaintiff’s request for annual valuations since the beginning of the case.

The Court agreed that the individual Defendants were not liable for violations of ERISA § 104(b), since the KPC ESOP Committee was the “plan administrator,” and Plaintiff cited no authority that permitted recovery of penalties from individual committee members. The Court also held that Plaintiff did not produce any evidence of “wrongdoing” by Defendants Hippert, Van Arsdale, and Dr. Chaudhuri in connection with the Committee’s failure to produce annual valuation reports, but Defendant Thomas “made a conscious decision on behalf of the Committee not to provide an annual valuation report to Plaintiff,” so he is not entitled to summary judgment on Plaintiff’s ERISA § 404 claim.

We will update this blog as further developments in the case occur.

¹ Order Granting in Part and Denying in Part Defendants’ Motion for Summary Judgment, Truong v. KPC Healthcare, Inc. Employee Stock Ownership Plan Committee, No. 8:23-cv-01384-SB-BFM (C.D. Cal. Sept. 9, 2024), ECF No. 188.