EAST ST. LOUIS – U. S. District Judge David Dugan denied stacks of motions to dismiss pension fraud claims against former Casino Queen owners on March 6 and March 8.
He dismissed no one except defendants who died, and he dismissed them without prejudice.
Attorney Michelle Yau, chair of Cohen Milstein's practice focusing on the Employee Retirement Income Security Act, commended the ruling.
"We are very pleased that the court has denied - yet again - dispositive motions filed by defendants," Yau said. "My clients look forward to trial where they get a chance to prove their claims after years of delay by defendants."
The defendants sold the casino to an employee stock ownership corporation in 2012, as a pension provider under federal retirement law.
In 2019, participants and beneficiaries learned the stock’s value dropped 95%.
Plaintiffs Tom Hensiek and Jason Gill filed a class complaint in 2020, alleging fiduciary violations.
They named former casino president Jeff Watson, now an associate judge in St. Clair County, as a defendant along with former manager Robert Barrows.
They also named sellers Charles Bidwill III, Timothy Rand, and James Koman as defendants.
The defendants moved to dismiss for failure to state a claim and Dugan denied it last year.
Hensiek and Gill found that relatives of Bidwill, Rand, and Koman owned stock at the time of the sale, so they amended the complaint to add the relatives as parties in interest.
The relatives moved to dismiss the complaint.
Bidwill and Rand moved to dismiss, again, this time claiming plaintiffs sued too late.
Koman moved to dismiss, again, this time asking for judgment on the pleadings.
Dugan’s March 6 order dealt with Bidwill, Rand, and Koman.
He sketched the history from the complaint, which he took as true for purposes of their motions.
Dugan found Casino Queen initially succeeded but revenue suffered when casinos opened nearby.
He found shareholders attempted to sell it from 2005 to 2011, without success.
He also found shareholders created a holding company in 2012, exchanged their stock for holding company stock, and established an employee ownership plan.
Dugan found the holding company exercised power and control over the plan.
He found the holding company board appointed two of its own members, Watson and Barrows, as trustees of the plan.
He found the plan purchased 100% of the holding company for $170 million.
The plan borrowed $130 million from Wells Fargo, $25 million from the sellers, and $15 million from a third party, and the holding company guaranteed the debt.
Dugan found the plan sold almost all Casino Queen’s property to Gaming and Leisure Properties for $140 million in 2013.
The holding company agreed to lease the property back to Gaming and Leisure for $210 million over 15 years.
Dugan found the transaction was made without regard to how the employees would vote.
He added that the transaction provided the holding company and the plan with cash to pay off the plan’s outstanding loans.
Dugan found the price the plan paid was unrealistic.
He found the asset sale left Casino Queen as a shell company with no real property assets and not enough cash flow to service its debts.
He found the asset sale expedited repayment of the sellers’ loans, which they repaid in 2014.
Dugan found Bidwill, Rand, and Koman relinquished memberships in the holding company after they repaid their loans.
He added that the defendants misreported the plan’s stock value and its debt to the labor department.
Dugan closed the history and took up the motion of Bidwill and Rand to find he lacked jurisdiction because plaintiffs didn’t timely file the complaint.
He noted a proposal from Bidwill and Rand that if he found he had jurisdiction he could convert their motion to one for summary judgment.
He ruled that they could convert it but not until plaintiffs can conduct discovery.
Next Dugan took up Koman’s motion, finding plaintiffs argued the documents he attached weren’t authenticated by a witness with personal knowledge.
He found attachments can be part of the pleadings, but “this is a narrow exception aimed at cases interpreting, for example, a contract.”
“Such cases make the exception appropriate because it is clear from the face of the complaint that the contract will play an essential role in the litigation,” he wrote.
Dugan found the plaintiffs raised questions that corporate documents might not resolve.
He added that there are situations where circumstances cause a fiduciary's liability to extend further than it might appear to extend on paper.
He found Koman argued that the holding company appointed third party GreatBanc as an independent fiduciary but plaintiffs proffered that it wasn’t properly appointed.
He concluded that Bidwill and Rand have moved to dismiss the complaint again, for lack of standing, and briefing isn’t complete.
Dugan’s March 8 order dealt with relatives of Koman and Bidwill and trusts belonging to the relatives.
He found they didn’t dispute the allegations, but they maintained that a statute of limitations ran out five years after the sale.
He found that the defense wasn’t clear, particularly with conflicting theories concerning plaintiffs’ knowledge of their claims and defendants’ involvement in the ownership plan.
He added that the complaint plausibly alleged that plaintiffs didn’t learn of their injuries until 2019.
Dugan noted that some defendants pointed to news articles from 2012 to argue that plaintiffs could have discovered their claims long before 2019.
He concluded the existence of the articles didn’t conclusively establish that plaintiffs were on notice of the terms of the transaction.
He also rejected a challenge to the status of the relatives and trusts as parties interest.
Dugan found plaintiffs alleged that each selling shareholder had actual or constructive knowledge of the circumstances.
He found plaintiffs alleged that each seller participated in efforts to actively conceal details and effects of the transaction.
He also resolved a dispute about whether siblings fit the definition of relatives in retirement law by advising them to make that case at summary judgment.
Last of all he granted a motion of plaintiffs to withdraw claims against Bidwill Succession Trust, Bidwill Kasino Trust, and their beneficiaries.
He found discovery efforts confirmed that beneficiaries of the Bidwill Succession Trust died and Kasino Trust was never formed or funded.