Opinion ID: 794065
Heading Depth: 2
Heading Rank: 6

Heading: U.S. Trust's Windfall Claim

Text: 39 U.S. Trust argues that the district court's $15.5 million award for damages and prejudgment interest greatly exceeds the ESOP's actual economic loss and thereby result in a windfall. U.S. Trust alleges that the district court made two errors that resulted in a windfall for the plaintiffs-appellees. First, it argues that the court erroneously assumed that the ESOP paid $60 million (the amount agreed upon in the stock purchase agreement) for shares worth $52.25 million (the value determined by the district court). The parties jointly stipulated that as of January 2001, the ESOP had paid only $54,519,801 million in principal for the shares it received in the transaction. U.S. Trust argues that the ESOP's actual economic loss of principal is at most $2.27 million — the difference between the amount the ESOP actually paid and the amount the court determined the ESOP should have paid — and not the $7.75 million awarded by the court. 5 40 Second, U.S. Trust argues that the ESOP may already have been fully compensated for its economic loss. Section 5.7 of the Stock Purchase Agreement between the sellers and the ESOP provides that if the IRS, the DOL, or a court makes a final determination that the ESOP paid more than the fair market value of the CommutAir shares, the sellers must pay the ESOP an amount equal to the difference between the purchase price and the fair market value of the shares, plus reasonable interest. Under the Agreement, the sellers are permitted to satisfy the difference in cash or in the form of shares valued in accordance with their actual fair market value as of March 15, 1994. In February 2004, after the district court found that the IRS had made a final determination that the ESOP had overpaid for its CommutAir stock, Henry I, 288 F.Supp.2d at 228, the sellers executed the § 5.7 remedy, agreeing to provide the ESOP all the shares it was entitled to receive on March 15, 1994, see Henry IV, No. 1:04-CV-0201(DNH), slip op. at 5 (N.D.N.Y. Aug. 25, 2005). U.S. Trust maintains that even if it is determined ultimately that the ESOP overpaid for the CommutAir stock it received on March 15, 1994, this stock payment restores the ESOP to the position it would have occupied absent the overpayment and thus constitutes a complete remedy. As such, U.S. Trust contends, it renders any further recovery by the ESOP a prohibited windfall. 41 The aim of ERISA is to make the plaintiffs whole, but not to give them a windfall. Jones, 223 F.3d at 139 (citation and internal quotation marks omitted). If the district court determines on remand that the plaintiffs-appellees are entitled to recover damages from U.S. Trust, the court should explain why those damages do not result in a windfall to the ESOP.