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03-2147 Steinman v. Hicks, et al. (60157)

By: dmc-admin//December 15, 2003//

03-2147 Steinman v. Hicks, et al. (60157)

By: dmc-admin//December 15, 2003//

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“Congress, believing employees’ ownership of their employer’s stock a worthy goal, has encouraged the creation of ESOPs both by giving tax breaks and by waiving the duty ordinarily imposed on trustees by modern trust law (including ERISA, 29 U.S.C. § 1104(a)(1)(C); Etter v. J. Pease Construction Co., 963 F.2d 1005, 1010 (7th Cir. 1992); Matassarin v. Lynch, 174 F.3d 549, 567 (5th Cir. 1999); Moench v. Robertson, supra, 62 F.3d at 568) to diversify the assets of a pension plan. 29 U.S.C. §§ 1104(a)(2), 1107(a), (b)(1); Brown v. American Life Holdings, Inc., 190 F.3d 856, 860 (8th Cir. 1999); Kuper v. Iovenko, supra, 66 F.3d at 1458; Moench v. Robertson, supra, 62 F.3d at 568. Since the very purpose of an ESOP is to give employees stock in the employer, it would be anomalous if the ESOP’s trustees were required to sell most of the stock donated by the employer in order to create a diversified portfolio of stocks. Retention would be perilous if ESOPs were intended to replace traditional pension arrangements, but they are not; they are intended to promote the ownership, partial or complete, of firms by their employees. Susan J. Stabile, ‘Pension Plan Investments in Employer Securities: More Is Not Always Better,’ 15 Yale J. Reg. 61, 69 (1998); William R. Levin, ‘The False Promise of Worker Capitalism: Congress and the Leveraged Employee Stock Ownership Plan,’ 95 Yale L.J. 148, 150, 158-59 (1985). We shall see later that Moorman’s ESOP was not the only pension plan for its employees. (As a detail, we point out that an ESOP, when it takes the form of a retirement plan, does not really create a workers’ co-op, because the plan participants include retired as well as current employees, and their interests are not identical.) Given the nature and purpose of an ESOP, it is no surprise that 65 percent of the assets of the MMC Employees Profit Sharing Plan consisted of common stock in Moorman Manufacturing Company, with the other 35 percent being invested in mutual-fund shares.”

Affirmed.

Appeal from the United States District Court for the Central District of Illinois, Mills, J., Posner, J.

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