“Congress, and former Presidents, has consistently encouraged ESOPs for over 30 years,” said ESOP Association President, J. Michael Keeling. “The presumption that ESOP plan fiduciaries act prudently when company stock is the ESOP’s primary asset was decided by the Third Circuit in Moench V. Robertson, a 1995 case that plaintiffs won, making it clear bad actors do not prevail but also acknowledging Congress has endorsed ESOPs and Presidents have signed pro-ESOP laws. This pro-ESOP Moench position has been upheld by a majority of Federal courts for years, and one can only presume from the Solicitor General’s question of Moench that the Justice Department is looking to harm ESOPs.”
There is concern that if the Supreme Court agrees with the Administration, there will be a rise in lawsuits challenging ESOP companies. Numerous anti-ESOP lawsuits would do harm to ESOP companies and their employee owners.
“Since 2010, the ESOP community has been fighting a proposed regulation from the Department of Labor regarding the definition of an ESOP fiduciary. The Solicitor General’s attack on ESOPs is one more dig from an Administration that has demonstrated negative views of employee ownership as evidenced by its budget proposal justifying the reversal of a pro-ESOP tax law because, according to the Administration, employees working for companies with more than 10 – 15 employees are incapable of understanding how their actions impact their company. It’s counter-intuitive to hear the Administration preach about creating jobs and then try to take away a proven policy that sustains jobs,” stated Mr. Keeling.