EAST ST. LOUIS - On Feb. 26, U.S. District Judge David Dugan denied certification of a class action for Casino Queen employees whose pension plan collapsed.
Dugan detected too many differences among three plaintiffs and hundreds of potential class members about when their claims accrued.
He found it likely that each employee learned different pieces of information that might have affected their knowledge of their claims at different times.
“Commonality does not exist when different employees receive a different mix of various communications,” he wrote.
Dugan’s decision doesn’t limit plaintiffs to individual claims, because they can seek recovery for the collapsed pension plan.
From 2005 to 2011, former casino owners searched for a buyer without success.
In 2012, they created an employee ownership plan that purchased the casino for $170 million.
The plan borrowed $130 million from Wells Fargo, $25 million from the owners, and $15 million from a third party.
In 2013, the plan sold the casino’s real assets to Gaming and Leisure Properties for $140 million and the casino company leased the assets at $14 million a year for 15 years.
Dugan found the asset sale provided the casino and the pension plan with cash to pay the balance of loans from the owners.
Plan members received positive reports until 2019 when they learned their assets plunged to almost nothing.
Plan members Tom Hensiek and Jason Gill sued the casino in 2020, alleging violation of federal retirement income security law.
They alleged breach of fiduciary duty against former casino president Jeffrey Watson, who by that time had taken his current position as associate judge.
They also alleged breach of fiduciary duty against former casino manager Robert Barrows and former directors Charles Bidwill, Timothy Rand and James Koman.
The plan members claimed directors knew or should have known their unrealistic financial projections dramatically inflated the price the plan paid.
They also claimed the defendants knew or should have known that revenue dropped significantly due to loss of market share as the number of casinos in the area grew.
They added that a six year limit on federal retirement claims didn’t begin to apply until 2019 because defendants actively concealed their violations.
The plan members claimed the defendants told employees in mandatory meetings that the plan would provide significant retirement savings and wealth.
However, the defendants allegedly misreported the stock price and the plan’s debt in annual reports to the U.S. labor department.
The defendants also allegedly misrepresented the growth of the casino’s value in annual reports.
The plaintiffs proposed a class action for plan members who numbered 529 as of 2018.
They later added plan member Lillian Wrobel as a third plaintiff, and they added defendants from families of owners and their trusts.
Dugan opened his order on class certification by stating an individual may bring an action to enjoin any violation of retirement income security law including breach of fiduciary duty.
He quoted from the law that a fiduciary who breaches duties shall be personally liable to make good any losses resulting from the breach.
He added that a fiduciary must restore any profit from use of a plan’s assets.
“This relief is available for the plan itself rather than individual beneficiaries,” he wrote.
Dugan found an active concealment theory requires proof of reliance by each class member and a self concealing theory requires proof of diligence by each class member.
He added that an action under the federal law must normally start within six years after a violation or three years after a plaintiff had actual knowledge of a violation.
He found an exception for fraud and concealment allows an action to start six years after a plaintiff discovered a violation.
Dugan found that while circumstances might exist where the exception could be resolved on a class wide basis, the specific facts didn’t lend themselves to uniform resolution.
“Indeed, the current record reveals that the alleged fraud and concealment efforts were made by various defendants in various forms and at different times,” he wrote.
Dugan found statements at mandatory meetings were not uniform or in writing.
He found meetings occurred at different times with different presenters and attendees.
He found plaintiffs Hensiek and Wrobel didn’t attend the same meetings, and Gill began his employment after the meetings.
He added that Hensiek testified that he heard a statement that employees would be able to purchase second homes.
Dugan found Watson made the statement.
“This statement was not otherwise contained in the written materials presented at the 2013 meetings,” he wrote.
Dugan found slight variations in statements could have conveyed different impressions and the degree of reliance would vary significantly from person to person.
He also found variation in encounters of plaintiffs with the labor department form.
Dugan found Hensiek and Wrobel reviewed annual account statements, and Gill didn’t recall receiving them.