EAST ST. LOUIS – U.S. District Judge David Dugan stayed depositions about the collapse of Casino Queen’s pension plan for 30 days so they wouldn’t affect settlement negotiations.
He granted a stay on Oct. 2, three days after defendants moved for an order.
Dugan didn’t wait for plaintiffs to respond, finding he was vested with broad discretion to decide whether a stay was justified.
Lead plaintiff Thomas Hensiek sued Casino Queen Holdings Company, former president Jeffrey Watson, former casino manager Robert Barrows, and former shareholders Charles Bidwill III, James Koman, and Timothy Rand in 2020.
The plaintiffs claimed the defendants couldn’t find a buyer for the casino so they created an employee ownership plan and sold the casino to it for $170 million.
The defendants allegedly concealed the value of the property and told employees it would provide a comfortable retirement.
The plaintiffs claimed they learned in 2019 that the stock price dropped by more than 90%.
The defendants answered the complaint by moving to enforce an arbitration clause in the plan.
At a hearing, Ronald Norwood of St. Louis, representing Bidwill and Koman, said owners added the clause to the plan by amendment.
Dugan said, “Doesn't that kind of incentivize the fraudster to do a better job of defrauding by hiding it so that an amendment can be made or is made and that pushes it into arbitration?”
He told Norwood he’d like to hear what he had to stay.
Norwood said, “We have these former employees but we also have current employees who would be covered by this class action, and the fact of the matter is that there is a provision in the plan that permits that amendment.”
He said, “This issue about whether or not the fraudsters -” and he stopped.
He continued, “They haven't said it's unconscionable because of the fact that the fraudsters did -” and he stopped again.
“They are talking about the notion of, well, we didn't have consideration,” he said.
“They get into a whole lot of other issues but some of those issues actually are going to properly be before the arbitrator with respect to the damages and how that all works out,” he added.
Plaintiff counsel Michelle Yau of Washington said at least 600 employees or former employees lost virtually their entire retirement savings.
She said she struggled with the right word to make clear what happened.
“It was a big sham,” she said.
Yau said defendants couldn’t sell the casino on a public market, “and they couldn’t even verify the price that their stock really was.”
She said it plummeted just after the statute of limitations expired.
She added that Hensiek’s account for five or six years as a manager was worth less than $3,000.
Yau also said Hensiek left before the arbitration provision was added, so he had no way to accept it.
She said Bidwill, Koman, and Rand wanted to disavow responsibility; but they were board members of Casino Queen Holding, which was the sponsor of the plan.
Dugan asked Norwood if he wanted a separate arbitration proceeding for each claimant, and Norwood said yes.
Dugan asked Norwood if each claimant would have to prove the fraud they alleged, and he said, “They would have to establish a breach of fiduciary duty as to them, that is correct.”
Dugan denied arbitration in 2021.
Plaintiffs amended the complaint to add trusts of Bidwill, Rand, and Koman as defendants.
They also added Bidwill’s brother Brian Bidwill and sisters Patricia Bidwill and Shauna Bidwill-Valenzuela.
Watson, Barrows, and Casino Queen Holdings asserted cross claims against Bidwill, Koman, and Rand.
Koman asserted a cross claim against Bidwill and Rand.
The Bidwills, Rand, and their trusts moved to dismiss the plaintiff’s complaint, and Dugan denied it this March.
He found plaintiffs pleaded fraudulent concealment with enough particularity at this stage.
He also found they specifically alleged that Bidwill and Rand coordinated with their families to misrepresent the value of the stock and not disclose accurate terms of the transaction.
“If Defendants wish to argue that these actions did not in fact conceal Defendants’ breaches, they may pursue their theory in discovery,” he wrote.
Dugan found the complaint plausibly suggested that Brian Bidwill, Patricia Bidwill, and Shauna Bidwill-Valenzuela were parties in interest as relatives of a fiduciary.
Koman moved for summary judgment that corporate documents cleared him of liability.
Dugan denied the motion, finding the complaint raised questions that corporate documents alone might not resolve.
“Indeed, in evaluating fiduciary liability, there are situations where the particular circumstances involved causes a fiduciary’s liability to extend further than it might appear to extend on paper,” he wrote.
In June, Dugan ordered the parties to mediate through former district judge Michael Reagan.
Dugan stayed proceedings for 120 days but permitted further discovery to the extent it was necessary for fruitful mediation.
Reagan conducted a session on Aug. 24.
On that date, Dugan received a report about a dispute over depositions.
On Sept. 1, he directed the parties to depose Brian and Patricia Bidwill on or before Nov. 15.
Dugan stated he didn’t desire to pick an arbitrary date, but he’d do it if the parties didn’t agree.
On Sept. 29, all defendants moved to stay discovery, claiming plaintiffs scheduled depositions of two individuals on Oct. 4 and 5.
They didn’t identify the individuals.
They claimed Reagan made significant progress.
Defendants also claimed plaintiffs scheduled five depositions in the next 30 days.
They argued that the depositions would detract from settlement efforts.
They added that plaintiffs would suffer no prejudice or harm.
Dugan found a stay was warranted while settlement efforts were ongoing.
He found it would reduce the burden on the parties and the court.
He also found it wouldn’t cause prejudice or disadvantage for plaintiffs.
He stayed all proceedings and discovery for 30 days or until completion of mediation.
“Should circumstances change such that additional discovery becomes necessary or a recognizable prejudice befalls one or more of the parties during this stay, the parties may move to modify the stay as may be appropriate,” he wrote.
Dugan directed the parties to file a joint status report by Nov. 2.