Lawsuit Targets SaveATree Subsidiary ESOP, Trustees

Two companies have sued co-trustees of the Arborwell Inc. Employee Stock Ownership Plan, alleging eight fiduciary breaches that harmed participants’ retirement assets. 

Plaintiffs Arborwell LLC and CI Quercus Corp. Inc., represented by law firm Shartsis Friese LLP, brought a complaint on June 5 under the Employee Retirement Income Security Act, alleging ESOP co-trustee defendants—Alerus Financial, Andrew LaVelle, Anne Sortwell, Peter Sortwell and Neil Woolner—knowingly participated in transactions prohibited by ERISA. The suit, filed in U.S. District Court for the Northern District of California, claims the defendants orchestrated for their benefit the 2020 stock sale of Arborwell LLC’s predecessor entity, Arborwell Inc., by the Arborwell Inc. ESOP to CI Quercus, for less than fair market value.

“By allowing the Sortwells, LaVelle and Woolner to use the ESOP’s 2020 Sale of Arborwell, Inc. stock to unjustly enrich themselves at the expense of the ESOP and its participants, Alerus breached its fiduciary duties, and knowingly participated in the fiduciary breaches of the Sortwells, LaVelle and Woolner,” states the complaint. “Alerus then further breached its fiduciary duties by failing to take necessary action to remedy the Sortwells, LaVelle and Woolner’s fiduciary breach and to enforce the [Stock Purchase Agreement] SPA.”

ERISA prohibits a plan fiduciary from causing a plan to engage in a sale or exchange of any property with an interested party and also bars trustees from causing the plan to engage in a transaction that constitutes a direct or indirect transfer to a party in interest of any assets of the plan.  

“Out of the $34,700,000 total CI Quercus paid at closing pursuant to the terms of the Stock Purchase Agreement … the ESOP only received $12,467,810 for 100% of the shares of Arborwell, Inc. stock,” the complaint states. “The 2020 Sale and subsequent termination of the ESOP were premature, taking place just over three years after the ESOP had been established in 2017.”

The plaintiffs are seeking monetary damages of more than $75,000, restitution to the plan and other relief that the court deems just and proper, according to the complaint, Arborwell LLC et al. v. Alerus Financial et al. The plaintiffs also requested trial by a jury, should the lawsuit proceed to trial. 

Alerus is a nationally chartered bank; CI Quercus Corp. is a holding company for a family of professional tree shrub and law cares businesses operating throughout the U.S. Those companies include SavATree, which provides tree care services on the East Coast, in the Midwest and on the West Coast, through its 2021 acquisition of Arborwell.

Requests for comment were not returned by the defendants.

This is at least the fifth lawsuit brought against an ESOP this year. In a similar case earlier this month, Three Churchill Mortgage Corp. employees sued fiduciaries, members of the board of directors and the trustee of the Churchill Holdings Inc. Employee Stock Ownership Plan, alleging fiduciary breaches that harmed workers’ vested retirement assets.