On October 1, 2014, the Rainbow Disposal Co., Inc. ESOP (the “Rainbow Disposal ESOP”) sold 100% of the outstanding shares of Rainbow Disposal Co., Inc. (Rainbow Disposal), a California corporation that provided trash and rubbish pickup, transport, and disposal services for residential, commercial, and income properties, to Republic Services, Inc. for approximately $50,000,000 (the “Transaction”).
Several participants in the Rainbow Disposal ESOP, including Antonio Hurtado, filed a class-action complaint on September 15, 2017, alleging that, among other things, (1) GreatBanc Trust Company (GreatBanc), the Rainbow Disposal ESOP’s trustee, did not obtain a qualified appraisal for the Transaction; (2) the Rainbow Disposal ESOP’s participants were not afforded the opportunity to vote on the Transaction; (3) the Defendants failed to disclose details regarding the Transaction, such as the assessment of fair market value; and (4) the Transaction was not for adequate consideration.
On July 27, 2020, the Plaintiffs filed an Unopposed Motion and Notice of Motion for Preliminary Approval of Settlement. Pursuant to the terms of the Settlement Agreement, the Defendants agreed to pay $7,900,000.00 into an escrow account. In addition, the Settlement Agreement stated that no provisions of the Agreement constituted “any finding of wrongdoing by Defendants or [gave] rise to any inference of liability,” nor did they constitute “any admission by any such Party with respect to the truth of any fact alleged by Plaintiffs or the validity of any claim that had been or could have been asserted in the Action.” The case is pending.
Takeaways
- Per the terms of the parties’ proposed Settlement Agreement, (i) the Defendants agreed to pay $7,900,000.00 into an escrow account; and (ii) the Defendants did not admit any wrongdoing.
1 Plaintiffs’ Unopposed Motion and Notice of Motion for Preliminary Approval of Settlement, Hurtado v. Rainbow Disposal Co., Inc. Employee Stock Ownership Plan Committee, No. 8:17-cv-01605-JLS-DFM (C.D. Cal. July 27, 2020), ECF No. 209.
