Donovan v. Cunningham
The Secretary of the United States Department of Labor initiated this action against members of the Administrative Committee of the Employee Stock Ownership Plan (ESOP) of Metropolitan Contract Services, Inc. (MCS), alleging violations of ERISA. Specifically, the plaintiff claimed fiduciaries breached their duties by causing the ESOP to purchase MCS stock from Defendant Cunningham for more than adequate consideration and engaging in prohibited transactions. After a bench trial, the court found that the defendants acted in good faith, reasonably relied on an independent appraisal, and that the stock was purchased for no more than adequate consideration. Consequently, all claims brought by the Department of Labor were dismissed with prejudice, and judgment was entered in favor of the defendants. The court also ordered the Department of Labor to pay the defendants' attorney's fees and costs, and awarded fees to Allied Bank of Texas against Defendant Cunningham.