Sotomayor's Second Circuit ERISA Cases provides commentary on five Second Circuit opinions authored by the Supreme Court nominee Sonia Sotomayor, including one ESOP-related case, Henry v. Champlain Enterprises, Inc., 445 F.3d 610 (2d Cir. 2006):

Participants in an Employee Stock Ownership Plan (ESOP) sued U.S. Trust, the plan fiduciary for violating ERISA in connection with the sale of stock to the ESOP. It was alleged that U.S. Trust violated its fiduciary duty to ESOP participants by failing to ensure that a fair price was paid for the stock. The district court found that U.S. Trust violated its fiduciary duty under ERISA and awarded damages. Sotomayor reversed.

The district court found that U.S. Trust failed to produce sufficient documentation of the investigation it undertook in the months leading up to the sale of the stock. According to Sotomayor, however, the detailed notes taken on behalf of U.S. Trust at a key meeting indicated that U.S. Trust had acted with prudence and gave rise to a strong inference that critical issues had been addressed by U.S. Trust before the sale of the stock.

Conceding that various issues needed to be reconsidered by the lower court, Sotomayor set aside the district court's judgment and damages award and sent the case back to the district court for further consideration.

In addition to providing information about the nominee, it also illustrates the importance of documenting the steps you take to Meet Your Fiduciary Responsibilities.

In case you were wondering, Henry v. Champlain Enterprises, Inc. (N.D.N.Y. 2007) was eventually dismissed:

In view of the foregoing, it is not necessary to reach the preliminary matters identified by the Second Circuit. See Henry IV, 445 F.3d at 621-22. Specifically, because the ESOP sustained no damages regardless of the valuation determination, it is unnecessary to further identify the specific errors in the CommutAir valuation, the reasons that a fiduciary such as U.S. Trust should have in all prudence detected those errors, and why an award of prejudgment interest, attorney fees and costs would be appropriate. All of those issues have been made moot by the Agreement of February 28, 2006.

Accordingly, it is ORDERED that all of plaintiffs' claims are DISMISSED and the complaint is DISMISSED in its entirety.

UPDATE 10/13/2009:

The dismissal of the complaint was reversed in Henry v. U.S. Trust Co., No. 07-0355-cv. Here is one summary:

In an ERISA action challenging a stock purchase under an Employee Stock Ownership Plan (ESOP), the dismissal of the complaint is reversed where, when an ESOP incurs debt to finance a purchase of shares of stock and then later sells the shares in exchange for cancellation of some of that debt, the debt cancellation in the second transaction should not be construed as having reduced the purchase price paid in the first transaction.

Here is another overview:

Where an ESOP incurred debt to finance a stock purchase and then sold the stock in exchange for cancellation of some of that debt, the debt cancellation did not reduce the purchase price in the first transaction for purposes of determining if there was an impermissible windfall under §§ 406 and 408 of ERISA, 29 U.S.C.S. §§ 1106 and 1108.