Coleman v. Brozen
| Docket Number | Civil Action 3:20-CV-01358-E |
| Decision Date | 12 July 2023 |
| Parties | JASON COLEMAN and JESSICA CASEY on behalf of the RVNB Holdings, Inc. Employee Stock Ownership Plan, and on behalf of a class of all other persons similarly situated, Plaintiffs, v. NEIL M. BROZEN, ROBERT PETERSON, JR., VASILIA PETERSON, MIKE PAXTON NICK BOURAS, STERLING INVESTMENT PARTNERS III, L.P., NICOLE PETERSON 2012 IRREVOCABLE TRUST, and BROOKE PETERSON 2012 IRREVOCABLE TRUST, Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Before the Court is Defendants Neil M. Brozen, Robert Peterson, Jr. Vasilia Peterson, Mike Paxton, Nick Bouras, Sterling Investment Partners III, L.P., the Nichole Peterson 2012 Irrevocable Trust, and the Brooke Peterson 2012 Irrevocable Trust's (collectively, “Defendants”) Motion to Compel Individual Arbitration (the “Motion to Compel”). (ECF No. 66). Having considered the motion the response, reply, the parties' respective notices of supplemental authority and responses thereto, the relevant portions of the record, and the relevant law, the Court concludes that the Motion to Compel should be, and therefore is, DENIED.
This case arises from disputes involving an employee stock ownership plan. Plaintiffs Jason Coleman and Jessica Casey (collectively, “Plaintiffs”) are former participants in the RVNB Holdings, Inc. Employee Stock Ownership Plan and initiated this litigation individually and on behalf of a class[1]alleging various violations of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq. The factual background detailed below is taken from Plaintiffs' First Amended Complaint. (ECF No. 33).
Plaintiffs are former employees of All My Sons Moving & Storage (“All My Sons”), which was founded in 1993 by Defendant Robert Peterson, Jr. (“Mr. Peterson”) and his wife Defendant Vasilia Peterson (“Mrs. Peterson”) (collectively, “the Petersons”). At all relevant times, All My Sons was a privately held company. According to the First Amended Complaint, RVNB Holdings, Inc. (“RVNB”) was formed as a holding company in March 2012 to purchase 100% of the stockholders' ownership interests in All My Sons. Plaintiffs allege that RVNB then formed the RVNB Holdings, Inc. Employee Stock Ownership Plan (the “Plan”)-a defined contribution plan designed to invest in RVNB stock. RVNB adopted the Plan effective October 1, 2012. In December 2012, the Plan purchased from the Petersons-who were parties in interest to the Plan- 100% of the outstanding RVNB stock for $85,000,000. Upon close of the sale of the RVNB stock, RVNB became an employee-owned company. During the period in which it owned RVNB, the Plan's only investment was in RVNB's common stock. As a defined contribution plan and an individual account plan, a separate account was established for each participant.
The Plan named RVNB as the Administrator and a “Named Fiduciary.” (ECF No. 67, pg. 89: 2012 Plan: § 12-1).
Accordingly, as members of the RVNB Board of Directors, Mr. Peterson, Mrs. Peterson, and Defendant Mike Paxton (“Paxton”) (the Petersons and Paxton collectively, the “Board Defendants”) were fiduciaries of the Plan. Plaintiffs also allege that Defendant Nick Bouras (“Bouras”)-the Chief Financial Officer of RVNB-was a fiduciary of the Plan because he was one of the persons exercising RVNB's role as Administrator of the Plan. The Plan initially named Reliant Trust Company as its trustee; however, RVNB appointed Argent Trust Company (“Argent”) as Plan trustee in 2014. Eventually, the Board Defendants appointed Defendant Neil M. Brozen (“Brozen”) as Plan trustee on June 29, 2017, replacing Argent.
Plaintiffs allege the Petersons formed the Plan in 2012 with no intention of sustaining the Plan, but rather using it as a vehicle to reap tax benefits from an eventual sale of RVNB to a private equity group. Plaintiffs allege the Board Defendants and Bouras violated their fiduciary duty to the Plan by causing the Plan to receive less than fair market value for its shares of RVNB. Plaintiffs allege that the Board Defendants appointed a compliant trustee-Brozen-to bless the termination of the Plan in 2017[2] and sell the Plan's RVNB shares back to the company. Plaintiffs allege the Board Defendants and Bouras did this so RVNB could sell substantially all of RVNB's assets to the private equity group Defendant Sterling Investment Partners III, L.P., (“SIP”), through SIP's affiliate company Residential Logistic Solutions (“RLS”). Plaintiffs allege RVNB officers and SIP partners formed RLS to serve as a conduit for SIP's later acquisition of RVNB. Plaintiffs allege:
(1) RVNB sold its assets to SIP-through RLS-for substantially more than what the Plan received for those assets; and (2) the Board Defendants intentionally “usurp[ed] the Plan's opportunity to sell RVNB directly to [SIP] and profit therefrom.” (ECF No. 33, pg. 5, ¶ 12).
Finally, Plaintiffs allege that, after RVNB sold all of its assets to SIP, RVNB became a shell company and the Petersons merged it into RVNB Holdings, LLC (“the LLC”)-a Delaware limited liability company formed in 2012. Plaintiffs allege that the LLC has just four members: Mr. Peterson, Mrs. Peterson, the Nichole Peterson 2012 Irrevocable Trust, and the Brooke Peterson 2012 Irrevocable Trust (the trusts together, “the Peterson Trusts”). Plaintiffs allege Mrs. Peterson has the power and authority to direct the actions of the Peterson Trusts with respect to the governance and operation of the LLC. According to the First Amended Complaint, once RVNB was merged into the LLC, the Plan had a new plan sponsor-the LLC-and a new Employer Identification Number. Plaintiffs allege that no members of the alleged class were ever employed by the LLC and the LLC had no employees at any relevant time.
After amendments to the Parties' agreements discussed in the next section, Plaintiffs filed this suit in the United States District Court for the Eastern District of Texas on September 27, 2019. (See ECF No. 1). Plaintiffs assert various causes of action under ERISA against Brozen, the Petersons, Paxton, Bouras, SIP, and the Peterson Trusts (collectively, “Defendants”). On May 6, 2020, this case was transferred to this Court pursuant to a forum-selection clause. (ECF No. 49). On June 22, 2020, Defendants moved to compel individual arbitration of Plaintiffs' ERISA claims.
On May 18, 2018, the four members of the LLC-Mr. Person, Mrs. Peterson on behalf of herself, and Mrs. Peterson on behalf of the two Peterson Trusts-unanimously adopted an amendment to the Plan (the “2018 Amendment”). (ECF No. 67, pg. 5: June 2020 Decl. of Robert Peterson, ¶¶ 4-7).
The 2018 Amendment included, among other things, a forum-selection clause selecting this Court[3]and a “Mandatory and Binding Arbitration Procedure” (the “Arbitration Procedure”). Defendants have moved to compel individual arbitration pursuant to the Arbitration Procedure, the relevant portions of which are excerpted below:
Section A-2 - Mandatory and Binding Arbitration Procedure ("Arbitration Procedure"): As a condition to (i) any Employee becoming eligible to participate in the Plan, (ii) any Employee, Participant, or Beneficiary receiving any contributions to his or her Plan account, and/or (iii) any Employee, Participant, or Beneficiary receiving any benefit under this Plan, such Employee, Participant, or Beneficiary shall be bound, and hereby is bound, to follow and comply with the provisions of this Arbitration Procedure to resolve all Covered Claims....
. The Arbitration Procedure provides that any “Covered Claims,” as defined by the Arbitration Procedure, “shall be settled by binding arbitration.” (ECF No. 67, pg. 8: 2018 Amendment, § A-2(a)). The Arbitration Procedure includes a section entitled “No Group, Class, or Representative Arbitrations.” (the “Class Action Waiver”). The Class Action Waiver states:
All Covered Claims must be brought solely in the Claimant's individual capacity and not in a representative capacity or on a class, collective, or group basis. Each arbitration shall be limited solely to one Claimant's Covered Claims and that Claimant may not seek or receive any remedy which has the purpose or effect of providing additional benefits or monetary or other relief to any employee, participant or beneficiary other than the Claimant. For instance, with respect to any claim brought under ERISA § 502(a)(2) to seek appropriate relief under ERISA § 409, the Claimant's remedy, if any, shall be limited to (i) the alleged losses to the Claimant's individual Plan account resulting from the alleged breach of fiduciary duty, (ii) a pro-rated portion of any profits allegedly made by a fiduciary through the use of Plan assets where such pro-rated amount is intended to provide a remedy solely to Claimant's individual Plan account, and/or (iii) such other remedial or equitable relief as the arbitrator deems proper so long as such remedial or equitable relief does not include or result in the provision of additional benefits or monetary relief to any employee, participant or beneficiary other than the Claimant, and is not binding on the Plan Administrator or Trustee with respect to any employee, participant or beneficiary other than the Claimant. The requirement that (x) all Covered Claims be brought solely in a Claimant's individual capacity and not in a purported group, class, collective, or representative capacity, and (y) that no Claimant shall be entitled to receive, and shall not be awarded, any relief other than individual relief, shall govern irrespective of any AAA rule...
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