Western Global pilots reach agreement over stock plan class action
25 / 09 / 2024
Source: Carlos Yudica/Shutterstock
Western Global pilots have reached an agreement over a class action lawsuit alleging that an employee share ownership plan (ESOP) overpaid for airline stock.
The two pilots that led the lawsuit reached an agreement with Western Global Airlines and its investment manager worth $14.5m, which will be paid out pro rata to approximately 353 members of the ESOP scheme.
The Delaware District Court gave its preliminary approval to the settlement saying it was “fair, reasonable, and adequate” and “was the product of informed, good-faith, arm’s-length negotiations between the Settling Parties and their counsel”.
A final approval hearing will take place on January 14 while there will also be a chance for class members to object to the settlement.
The plaintiffs allege that the defendants (shareholder and trustee) violated the Employee Retirement Income Security Act (ERISA) when they allegedly caused the ESOP to pay more than fair market value for shares of Western Global Airlines.
Court documents show that the ESOP purchased 37.5% of Western Global from shareholders in the airline for $510m.
The company later went through bankruptcy resulting in the elimination of all shares, including those held by the ESOP.
The defendants have denied the allegations, which they say were not proven, and also deny any wrongdoing or liability.
“The Shareholder Defendants have asserted that they acted in good faith, in the best interests of Western Global and the ESOP Participants, followed all of the recommended best practices – including those supported by the US Department of Labor, and relied upon exceptionally qualified experts and advisors, in full compliance with all ERISA and ESOP requirements,” the court documents read.
They also stated that they were not involved in the selection of the ESOP trustee or in the selection of the independent appraiser and did not determine the value of the ESOP Shares.
The shareholders added that the only valuation information made available to them indicated that the ESOP was paying less than fair market value and that the value of the company increased in the first full year following the launch of the ESOP.
Meanwhile, the trustee defendants “asserted that they acted prudently, in good faith, and in the best interests of the ESOP participants, engaged in a thorough due diligence process prior to the ESOP Transaction with the assistance of highly-qualified advisors, and zealously negotiated the terms of the ESOP Transaction on behalf of the ESOP”.
They also said that the purchase price was “within the range of fair market value for WGA’s stock”, and that they complied with ERISA and all other applicable laws with respect to the transaction.
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