The U.S. Court of Appeals for the Eleventh Circuit issued an order Monday granting en banc rehearing in *Bolton v. Inland Fresh Seafood Corporation of America*, a class action lawsuit brought by Employee Stock Ownership Plan participants against their employer and company officials. The court's decision to rehear the case before the full panel of active judges vacates the previous three-judge panel opinion and signals the potential importance of the legal issues at stake.
The case, designated as No. 24-10084, involves five named plaintiffs: Rani Bolton, Alison Mercker, James Armstrong, Benjamin Lyman, and Melissa Suter. The plaintiffs sued individually and as representatives of a class of participants and beneficiaries of the Inland Fresh Seafood Corporation of America Employee Stock Ownership Plan. The defendants include Inland Fresh Seafood Corporation of America and several individual defendants: Joel Knox, Bill Demmond, Chris Rosenberger, and Les Schneider, among others.
The appeal originated from the U.S. District Court for the Northern District of Georgia, where the case was designated as 1:22-cv-04602-LMM. The district court case was filed in 2022, indicating the litigation has been ongoing for approximately three years.
En banc rehearings are relatively uncommon in federal appellate courts and typically occur only when a case presents issues of exceptional importance or when the panel decision conflicts with prior circuit precedent. According to the court's order, the rehearing was granted after a member of the court in active service requested a poll on whether the appeal should be reheard en banc, and a majority of the active judges voted in favor of granting the rehearing.
The order was issued by the full complement of active judges on the Eleventh Circuit, including Chief Judge William Pryor and Circuit Judges Jordan, Rosenbaum, Jill Pryor, Newsom, Branch, Grant, Luck, Lagoa, Brasher, Abudu, and Kidd. This represents all 12 active judges on the circuit, indicating unanimous participation in the en banc process.
Employee Stock Ownership Plans are retirement benefit plans that invest primarily in employer stock. ESOP litigation often involves claims that plan fiduciaries breached their duties under the Employee Retirement Income Security Act by paying excessive prices for company stock or failing to properly diversify plan investments. Such cases frequently raise complex questions about fiduciary duties, valuation methodologies, and the scope of protections available to employee-participants.
While the specific legal issues in *Bolton* are not detailed in the brief order, ESOP class actions typically involve allegations that company officials violated federal law governing employee benefit plans. Common claims include assertions that fiduciaries paid inflated prices for company stock, failed to conduct adequate due diligence, or otherwise mismanaged plan assets to the detriment of employee-participants.
The decision to grant en banc rehearing suggests that the original panel decision may have addressed novel legal questions or created potential conflicts with existing precedent. En banc review allows the full court to speak with one voice on important issues and ensures consistency in circuit law.
The vacatur of the panel opinion means that the previous ruling no longer has precedential value, and the legal landscape returns to the status quo ante pending the en banc court's decision. This creates uncertainty for both the parties in this case and other litigants with similar claims, as the ultimate resolution of the legal questions remains pending.
For ESOP participants and employers, the case could have broad implications depending on the specific issues addressed. ESOP litigation has grown increasingly common in recent years, with participants challenging various aspects of plan administration and stock valuations. The Eleventh Circuit's eventual en banc decision could provide important guidance for similar cases throughout the circuit, which encompasses Alabama, Florida, and Georgia.
The case also highlights the ongoing legal complexities surrounding employee benefit plans and the fiduciary duties owed to plan participants. As ESOPs have become more prevalent as employee benefit vehicles, courts have grappled with how to apply traditional fiduciary duty concepts to these unique arrangements where employees effectively own shares in their employer.
The en banc rehearing will provide an opportunity for the full Eleventh Circuit to address whatever legal issues prompted the initial panel decision and the subsequent request for rehearing. The court has not indicated a timeline for briefing or oral arguments in the en banc proceeding, but such cases typically involve expedited schedules given their significance.
The outcome of the en banc rehearing could influence ESOP litigation strategies and fiduciary obligations throughout the Southeast and potentially serve as persuasive authority for courts in other circuits facing similar issues. The case represents a significant development in the evolving landscape of employee benefits law and fiduciary duty enforcement.