IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS 

EASTERN DIVISION

James Smith, on behalf of himself and all others 

similarly situated, and on behalf of the Triad 

Manufacturing, Inc. Employee Stock Ownership 

Plan,

Plaintiffs,

v.

GreatBanc Trust Company, the Board of Directors 

of Triad Manufacturing, Inc., David Caito, Robert 

Hardie, and Michael McCormick,

Defendants.

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Civil Action No.: 1:20-cv-02350

The Honorable Judge Ronald A. Guzman

The Honorable Magistrate Judge Young 

B. Kim 

PLAINTIFF’S OPPOSITION TO TRIAD DEFENDANTS’ MOTION TO STAY 

LITIGATION PENDING APPEAL

The Triad Defendants’ Motion to Stay Litigation Pending Appeal, ECF No. 56, should be 

denied. The Triad Defendants’ appeal is meritless because there is no support for their position 

that Mr. Smith can be bound to a plan provision requiring arbitration when he was never given 

notice of the provision, he did not consent to it, and enforcement of the provision would deprive 

him of his statutory right to bring suit in federal court for relief to the Plan as a whole. Moreover, 

the requested stay of discovery would prejudice Mr. Smith and allow the Triad Defendants an 

opportunity to transfer the proceeds of the ESOP Transaction while the appeal is pending to 

frustrate collection of a judgment. For these reasons, Defendants’ motion should be rejected.

First, the Triad Defendants’ appeal is frivolous and thus their motion to stay discovery 

during the appeal should be denied. A district court has the power to declare an appeal from an 

order denying arbitration as frivolous and allow the case to proceed in the district court to avoid 

unreasonable delay and disruption. Bradford-Scott Data Corp. v. Physician Comput. Network, 

Case: 1:20-cv-02350 Document #: 61 Filed: 09/18/20 Page 1 of 8 PageID #:415
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Inc., 128 F.3d 504, 506 (7th Cir. 1997) (citing Britton v. Co–Op Banking Grp., 916 F.2d 1405, 

1412 (9th Cir. 1990) (expressing concern that a litigant could disrupt the district court litigation 

with frivolous appeals)). An appeal is frivolous “when the result is obvious or when the appellant’s 

argument is wholly without merit.” Harris N.A. v. Hershey, 711 F.3d 794, 802 (7th Cir. 2013)

(citation omitted). The Triad Defendants’ argument that Mr. Smith should be bound to arbitrate is 

meritless (and thus frivolous) because the arbitration amendment was added to the Plan after Mr. 

Smith left employment and was never disclosed to Mr. Smith until after he filed this lawsuit. In

their motion to stay discovery and their motion to compel arbitration, Triad Defendants cite 

absolutely no legal support for their position that Mr. Smith should be bound to a contract term 

that he never signed, agreed to, or even set eyes on, and Mr. Smith is unaware of any such authority.

See ECF Nos. 30, 50, 56; Morris v. Jenkins, 819 F.2d 678, 681-82 (7th Cir. 1987) (finding an 

appeal frivolous where party had “arguments and legal precedent of only the most marginal 

relevance to the issues in dispute”); United States v. Souffront, 338 F.3d 809, 827 (7th Cir. 2003)

(stating that arguments without authority in support and contrary to established precedent were 

frivolous). This Court even noted that Defendants cited no contract law in support of their position 

that Mr. Smith would be bound to arbitrate by a contract provision he did not agree to and was not 

provided with. See ECF No. 51 at 4 (the Court’s order noting that generally, an arbitration 

provision cannot bind a non-signatory and that Defendants cite no state law in support of their 

position). 

The Triad Defendants’ sole source of authority to support their position that the parties 

should be compelled to arbitrate is Dorman v. Charles Schwab Corp., 780 F. App’x 510 (9th Cir. 

Case: 1:20-cv-02350 Document #: 61 Filed: 09/18/20 Page 2 of 8 PageID #:416
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2019). See ECF No. 56 at 3. But Dorman is not binding1and, in this context, is non-persuasive.

As Mr. Smith pointed out in his opposition to the motion to compel arbitration (and the Court 

acknowledged in its order, ECF No. 51 at 4-5), the facts of Dorman make that case clearly

distinguishable. The Dorman plaintiff (i) saw; (ii) agreed to; and (iii) physically signed several 

arbitration agreements during the course of his employment. Dorman v. Charles Schwab & Co. 

Inc., No. 17-cv-00285, 2018 WL 467357, at *2, *4 (N.D. Cal. Jan. 18, 2018); ECF No. 46 at 11.

Here, by contrast, Mr. Smith never saw, agreed to, or signed any arbitration agreement. In fact, the 

arbitration provision was not added to the Plan Document during his employment with Triad, and 

Defendants never provided him notice of the arbitration amendment. The first time Mr. Smith saw 

the arbitration clause was when Defendants attached it to their motion to compel arbitration in this 

litigation. Mr. Smith requested a copy of the Plan Document from the Plan Administrator prior to 

filing suit, ECF No. 46 at 3-4, but the Plan Administrator failed to send Mr. Smith the Plan 

Document or any of the amendments, including the amendment adding the arbitration clause. Id.

Instead, the Plan Administrator sent Mr. Smith the Summary Plan Description, which expressly 

states that a plaintiff is permitted to file suit in federal court. Id. The Triad Defendants’ position 

that a party can be bound by an arbitration provision unilaterally added to the Plan when the 

participant never received notice of the provision nor agreed to it is completely lacking any 

authority or support. Accordingly, this Court should hold that the Triad Defendants’ appeal is 

frivolous and decline to grant the stay. 

Second, Defendant GreatBanc is not a party to the purported arbitration agreement, has 

already answered the Complaint, has not appealed the district court ruling denying arbitration, and 

1 As the Court pointed out in its order, ECF No. 51 at 4, Dorman is an unpublished, nonprecedential opinion from another circuit, which makes it non-binding on this Court.

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has not sought to stay the litigation. See ECF Nos. 30, 45, 55. Per the Seventh Circuit’s ruling in 

Bradford-Scott, discovery may proceed against GreatBanc. Bradford-Scott, 128 F.3d at 506-07. If 

discovery against the Triad Defendants is stayed while discovery proceeds against Defendant 

GreatBanc, Mr. Smith will be prejudiced and the case will develop two separate tracks for trial. 

Discovery in this case will heavily involve the details of the ESOP Transaction, of which the Triad 

Defendants and Defendant GreatBanc likely have different documents—for example, GreatBanc, 

the Trustee, would have documents such as the valuation report, while the Triad Defendants would 

have documents underlying the financial valuation of Triad and minutes of the Triad Board

discussing the ESOP Transaction. Bifurcating discovery against these Defendants would prevent 

Mr. Smith from obtaining a full set of documents to prepare a case against GreatBanc, which would 

greatly prejudice him. In contrast, if document discovery proceeded against all Defendants 

simultaneously, Mr. Smith would have access to all relevant documents when preparing his case 

against GreatBanc. Moreover, staying discovery against the Triad Defendants would create two 

separate tracks for trial. To avoid these inefficiencies and the resulting prejudice to Mr. Smith, the 

Court should allow discovery to proceed against both GreatBanc and the Triad Defendants. See 

Jones v. Travco Ins. Co., No. 1:13–cv–01069, 2014 WL 1404726, at *2 (S.D. Ind. Apr. 9, 2014) 

(denying stay of discovery because “[i]t is extraordinarily inefficient for the court to divide 

discovery into two wholly separate tracts”); RR Donnelley & Sons Co. v. Xerox Corp., No. 12–cv–

6198, 2013 WL 6645472, at *4 (N.D. Ill. Dec. 16, 2013) (denying motion to stay discovery based 

on “substantial efficiencies resulting from reviewing common documents”). 

Contrary to the Triad Defendants’ argument that allowing discovery to proceed against 

them may result in “wast[ing] a substantial amount of time and resources” in the event that their 

appeal is successful, ECF No. 56 at 2, discovery will be required even if the Seventh Circuit orders 

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arbitration. Mr. Smith will need to take discovery concerning the amount of proceeds the Triad 

Defendants received from the ESOP Transaction and the current location of those proceeds 

whether or not the case stays in federal court or proceeds to arbitration. Thus, there will be little 

waste of efforts in the event the Seventh Circuit reverses the order denying arbitration.

Nonetheless, if this Court stays discovery while the case is on appeal, Mr. Smith

alternatively requests that (i) he be permitted to conduct limited discovery on the amount of 

proceeds the Triad Defendants received from the ESOP Transaction and the current location of 

those proceeds; and (ii) the Court order the Triad Defendants to preserve all relevant documents 

and enjoin the Triad Defendants from transferring or dissipating any Transaction proceeds during 

the pendency of the appeal. The appeal to the Seventh Circuit may take a year or even more, during 

which the Triad Defendants remain in sole possession and control of the proceeds of the ESOP 

Transaction and may be incentivized to transfer those assets to make collecting any potential 

judgment for the class much more difficult for Mr. Smith.

2 Allowing him to conduct limited 

discovery on the ESOP Transaction proceeds immediately and enjoining the Triad Defendants 

from moving or dissipating all proceeds from the Transaction that they have received or receive in 

the future would guard against this possibility while the Seventh Circuit rules on the appeal. 

Additionally, ordering the Triad Defendants to preserve all relevant documents will serve the 

2 This strategy is not uncommon for individual defendants in ESOP or other ERISA cases, which 

leads to lengthy collection proceedings that are detrimental to the class obtaining the recovery 

ordered by the Court. See, e.g., Chesemore v. Fenkell, No. 3:18-cv-00724 (W.D. Wis.) (collection 

proceeding against defendant in an ESOP case after favorable judgment for plaintiffs and 

defendant fraudulently transferred proceeds of the ESOP transaction to avoid paying judgment);

Severstal Wheeling, Inc. Retirement Comm. v. WPN Corp., No. 9:19-cv-81583 (S.D. Fla.) 

(collection proceeding against ERISA defendants after favorable judgment for plaintiff and 

transfer of proceeds).

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interest of justice by preserving evidence during the appeal and preventing spoliation.

3

See Pine 

Top Receivables of Ill., LLC v. Banco De Seguros Del Estado, No. 12 C 6357, 2013 WL 3776971, 

at *2 (N.D. Ill. July 18, 2013) (rejecting a motion to stay discovery while arbitration order was 

appealed but agreeing to order that relevant evidence be preserved); Gilman v. Walters, No. 3:12-

cv-114, 2013 WL 1327354, at *3 (S.D. Ind. Jan. 31, 2013) (stating that “[p]ursuant to the rules of 

law and their inherent powers of equity, federal district courts have the power to appoint receivers 

to preserve assets and rights during litigation” and appointing a receiver to prevent dissipation of 

assets while certain issues were referred to arbitration); see also Cohn v. Guar. Rate, Inc., 318 

F.R.D. 350, 354 (N.D. Ill. 2016) (noting a district court’s inherent power to order sanctions for 

spoliation of evidence/failure to preserve evidence).

In conclusion, Mr. Smith respectfully requests that the Court deny the Triad Defendants’ 

motion to stay discovery, or in the alternative: (1) allow him to conduct immediate limited 

discovery on the amount and location of all proceed obtained from the ESOP Transaction; (2) 

enjoin the Triad Defendants from moving or dissipating all proceeds from the Transaction that 

they have received or receive in the future; and (3) order that Defendants preserve all relevant

evidence during the pendency of the appeal.

By:_/s/ Michelle C. Yau___________________

Michelle C. Yau, pro hac vice

Mary J. Bortscheller, Illinois Bar: 6304457

Daniel R. Sutter, pro hac vice

Jamie L. Bowers, pro hac vice

Cohen Milstein Sellers & Toll PLLC

1100 New York Ave. NW ● Fifth Floor

3 Mr. Smith broached the topic of document preservation at the Rule 26(f) conference held on May 

29, 2020, but Defendants stated that they were unwilling to discuss at that point. See Declaration 

of Michelle Yau ¶¶ 3-7. Mr. Smith has no information on what Defendants have done to preserve 

relevant documents for discovery and thus requests that the Court take steps to ensure this 

preservation if it is inclined to stay discovery during the Triad Defendants’ appeal.

Case: 1:20-cv-02350 Document #: 61 Filed: 09/18/20 Page 6 of 8 PageID #:420
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Washington, DC 20005

(202) 408-4600

myau@cohemilstein.com

mborscheller@cohenmilstein.com

dsutter@cohenmilstein.com

jbowers@cohenmilstein.com

Carol V. Gilden, Illinois Bar: 6185530

190 South LaSalle Street, Suite 1705

Chicago, IL 60603

(312) 357-0370

cgilden@cohenmilstein.com 

Plaintiff’s Counsel 

Case: 1:20-cv-02350 Document #: 61 Filed: 09/18/20 Page 7 of 8 PageID #:421
CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true and correct copy of the foregoing Plaintiff’s 

Opposition to Triad Defendants’ Motion to Stay Litigation Pending Appeal was served, this 18th 

day of September, 2020, upon counsel of record via the Court’s CM/ECF system.

_____/s/ Jamie Bowers____________________

Jamie Bowers

Case: 1:20-cv-02350 Document #: 61 Filed: 09/18/20 Page 8 of 8 PageID #:422