California Business Conglomerate Cuts $1.25M Deal to End ESOP Lawsuit

Westlake Services Holding Co., based in Los Angeles, has agreed to a proposed $1.25 million preliminary settlement to resolve fiduciary breach claims brought by Mary Nguyen and a putative class of participants in the company’s employee stock ownership plan 401(k).

The lawsuit is Mary Nguyen et al. v. Westlake Services Holding Company et al. In the complaint, brought in U.S. District Court for the Central District of California, the accuser and other terminated employees alleged they received less than the fair market value for their Westlake stock sold in a June 2020 sale forced by the defendants’ decisions.

Attorneys for the plaintiff filed an unopposed notice of settlement, asking the court for preliminary approval.

“[The] settlement spares litigants the uncertainty, delay, and expense of a trial, and reduces the burden on judicial resources,” attorneys wrote.

The notice is an unopposed motion for preliminary approval of settlement and approval of class notice, and a memorandum of points and authorities in support thereof.

The Lawsuit

In 2013, fiduciaries for the Westlake ESOP amended and restated the plan. The fiduciaries claim the plan was changed properly and allowed for a special valuation that was ultimately performed in March 2020—as the economic effects of COVID-19 thrust financial markets into volatility, the plaintiffs argued in the complaint, filed in May 2023.

The complaint accused defendants Westlake Services Holding Co.; Westlake Services Holding Co. Employee Stock Ownership Plan; and members of the Westlake Services Holding Co. Stock Ownership Committee Don Hankey, Bret Hankey, Ian Anderson, Paul Kerwin, Eugene Leydiker and Gracia Ang of fiduciary breaches under the Employee Retirement Income Security Act.

The Settlement Proposal

Court approval of the proposed preliminary settlement is appropriate because it resulted from “arm’s-length negotiations” with attorney Robert Meyer, a mediator and arbitrator at JAMS, a private alternative dispute resolution provider, attorneys for the plaintiff wrote in the court filing.

The notice requests a court order giving preliminary approval to the settlement, certifying the proposed settlement class and setting a final approval hearing at least 120 calendar days after entry of the proposed preliminary approval order.

Additionally, Nguyen’s attorneys request that the court appoint them as class counsel and authorize the issuance of notice to settlement class members.

The defendants have agreed to pay the settlement, including attorneys’ fees and costs, as well as the class representative’s compensation and the costs of administering the settlement agreement, Nguyen’s attorneys wrote in the notice of settlement.

The proposed class consists of 185 former participants in the plan whose employment with Westlake or its affiliates terminated between January 1, 2019, and March 31, 2020, with account balances greater than $5,000 in the plan, and their beneficiaries.

The Westlake Services Holding Co. Employee Stock Ownership Plan held $506.2 million in retirement assets for 2,044 participants, according to the most recent Form 5500 filing to the Department of Labor for the 2022 plan year.

Neither the attorneys for the plaintiff nor the counsel for the defendants responded to requests for comment. Representatives for Westlake did not respond to request for comment.

Nguyen is represented by attorneys with Miller Shah LLP. Westlake and the defendants are represented by attorneys from Morgan Lewis & Bockius LLP.