As we have already seen, the terms of the various transaction agreements have been considered by some ESOP administrators as «good practices». However, given that the material provisions of the NBL agreement are identical to the material terms of the GBTC agreement, it remains to be seen whether only the provisions of the GBTC agreement and the NBL agreement should be regarded as «good practices» and that the other provisions that may appear in one or more other agreements are indeed tangential or specific to the particular circumstances of any agent referred to in those agreements. The case is Scalia v. The Farmers National Bank of Danville, U.S. District Court (S.D. Ind.), Case No. 1:20-cv-674 (February 28, 2020). Click here to see the order of approval and judgment as well as the integrated procedural agreement. On the basis of previous DOL disputes by ESOC, it should come as no surprise that this latest procedural agreement now prohibits the requirements of the process with respect to control. This is due to the fact that the Control attribute in a transaction with an ESOP has been one of the main topics negotiated in recent years in more than a dozen cases by DOL, the decision in the Vinoskey/Sentry Equipment2 case being the most recent before this case with WealthSouth. Indeed, informal studies of ESOP litigation indicate that the Control attribute is the second or third issue at issue.3,4 This is the sixth such procedural agreement that dol has entered into with defendant agents.
It is said that the agreements only bind the parties, here ETF. At the same time, the agreements guide the ESOP community as a whole on the priority issues of the DOL when reviewing ESOP transactions and the positions of the DOL on the topics covered. The long-changing point is that THE DOL has failed to adopt final regulations that provide legal guidance and guarantees to those involved in ESOP transactions. The WealthSouth Procedural Agreement is similar to the five previous procedural agreements with DOL, with the notable exception of the addition of control (and compensation) requirements in ESOP transactions of more than 50 per cent of the property. These requirements are generally consistent with the positions taken or reported by the DOL in previous ESOP litigation. Similarly, the provisions of the ETF`s «compensation» agreement raise as many questions as they do. If the ETF agreement limits any compensation provision that covers the ESOP fiduciary company in the event of a violation of ERISA`s rights, regardless of the percentage of ownership of the ESOP, this is a departure from existing jurisprudence and DOL guidelines. It appears that DOL does not appear, as it has found in a number of application applications, that compensation agreements for ESOP directors are, in all cases, out of step, even if these agreements are opposed to compensation for directors who have breached their ERISA obligations. (If such agreements were not implemented, other provisions of the ETF agreement regarding fee advances and receivable invoices would not be necessary.) However, under the ETF agreement, DOL now appears to extend the more restrictive standard applied to 100% of its own companies (i.e., based on the weight of current jurisprudence, not to allow compensation to a company for infringements committed against fiduciary directors) and to apply to all companies that own the ESOP, regardless of their small percentage. It is interesting to note that, in accordance with DOL`s own regulatory statements, this restrictive standard does not apply to a company that does not own ESOP property; in the case of a non-ESOP, the company is entitled to completely exempt an agent from its offences. This new provision of the ETF agreement dictates a position that had not previously been expressed by either DOL or a court, and appears to exclude an agreement whereby a company, partly owned by an ESOP, could deter ESOP from the cost of compensation.