Opinion ID: 75658
Heading Depth: 3
Heading Rank: 3

Heading: Pre-Sale Undervaluation

Text: 47 The EBSCO Defendants proffer two broad arguments against the district court's certification of the claim that they breached their fiduciary duties through their roles in the alleged undervaluations of the EBSCO stock in the years preceding the 1994 sale. First, they say that Piazza has no standing to raise this claim because he suffered no injury in fact from this alleged breach of their fiduciary duties. Second, they contend that there are irreconcilable conflicts among the members of the class. Both of these arguments have at their heart the assertion that any pre-sale undervaluations only harmed those who retired while that undervaluation was in effect and actually benefitted those who retired later. Since we agree with this idea, and that Piazza does not have standing as a consequence, we need not address the EBSCO Defendants' conflicts argument to reach our conclusion that the district court abused its discretion by certifying a class on this claim. 48 Each Plan participant's retirement distribution is calculated as a share of the value of the assets in the Plan when that participant retires. Up until the sale of the Plan's EBSCO stock in 1994, the Plan's trustee, AmSouth, calculated a value for the Plan's EBSCO stock each year and used that value as a basis for determining the retirement distributions for those who retired during that year. 8 If the Plan's EBSCO stock was undervalued when a participant retired, that participant would receive less than he would have if his retirement distribution had been calculated based on the true value of the Plan's assets. Any participant who retired while the Plan owned EBSCO stock, therefore, would be injured by an undervaluation of the EBSCO stock at the time of his retirement. 49 It should be obvious that Plan participants are not injured by any undervaluation that occurs after they retire, since their retirement distributions are not affected by the value of the Plan's assets after they retire. Less obvious, however, is the fact that Plan participants are actually benefitted by undervaluations that precede their retirement, so long as the stock remains in the Plan. This is so since undervaluations reduce the size of the distributions to participants who retire when the undervaluation is in effect, and therefore leave more assets in the Plan for later retirees. 9 50 After the stock sale, the Plan no longer held any EBSCO stock, holding in its place the funds which had been used by EBSCO to purchase the stock (or other assets that the Plan purchased with those funds). Post-sale retirees, like Piazza, would have been harmed by the sale of the EBSCO stock at an improperly low price, because that left the Plan with a less valuable pool of assets than it had before the sale. They would not, however, have been harmed by any earlier undervaluations. In fact, pre-sale undervaluations of the EBSCO stock would have reduced the value of retirement distributions paid to pre-sale retirees, leaving more assets in the Plan than if their retirement distributions had been based on the true value of the Plan's EBSCO stock, and actually increasing the value of distributions to later retirees. 51 Since Piazza was not injured by the alleged pre-sale undervaluations (which, if anything, increased his retirement distributions), he lacks standing to raise a claim based on the pre-sale undervaluation of the EBSCO stock. 10 SeeLujan, 504 U.S. at 560, 112 S. Ct. at 2136 (As we have noted, to satisfy the first element of the irreducible constitutional minimum of standing . . . the plaintiff must have suffered an 'injury in fact'--an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.) (citations and quotation marks omitted). It therefore was an abuse of discretion for the district court to certify a class represented by Piazza against the EBSCO Defendants on the claim that they breached their fiduciary duties by undervaluing EBSCO stock between 1983 and the 1994 stock sale. Prado-Steiman, 221 F.3d at 1279 ([T]here cannot be adequate typicality between a class and a named representative unless the named representative has individual standing to raise the legal claims of the class.).