EAST ST. LOUIS - Former owners of Casino Queen settled a claim that they deliberately sold the casino to employees on terms that nearly wiped out their $180 million pension plan.
Ryan Wheeler of Washington D.C., one of eight lawyers representing pension plan participants, reported the settlement to U.S. District Judge David Dugan on Sept. 3.
He asked Dugan for a Nov. 11 deadline to file a motion for preliminary approval.
Dugan denied certification of a class action this year but plaintiffs asked Seventh Circuit appellate judges for permission to appeal and they granted it in 28 days.
Pension plan participants Tom Hensiek and Jason Gill sued former owners Charles Bidwill III, Timothy Rand, and James Koman in 2020.
Hensiek and Gill alleged fraud, concealment, and breach of fiduciary duties.
The lawsuit named former casino manager Robert Barrows and former president Jeffrey Watson, now a St. Clair County associate judge, as defendants.
Board of directors of Casino Queen Holding Company and trustees of the Casino Queen employee stock ownership plan also were named as defendants.
Plaintiffs claimed defendants couldn’t find a buyer so they created an employee ownership plan and sold the property to the plan for about $180 million in 2012.
They claimed participants received annual statements showing the value of a share increased every year until 2019, when they received a statement that it dropped by 95%.
They later added more defendants and in 2022 they moved for class certification.
Defendants opposed it, arguing that federal law limited retirement suits to six years and state law limited them to five years.
Dugan denied class certification in February, finding superficial common questions did not satisfy class action requirements.
He found it likely that each employee learned different pieces of information that might have affected their knowledge of their claims at different times.
Plaintiff counsel Michelle Yau of Washington, D.C. petitioned for appellate review on March 11.
She claimed Dugan considered individual questions relating to limitation periods but didn’t consider questions that would result in classwide answers.
“This is particularly egregious given that only a single common question is required," Yau wrote.
She claimed the concealment question in retirement cases requires no individual inquiries because proof is based on actions of defendants, not on facts unique to individuals.
She claimed defendants forced employees to purchase Casino Queen for an inflated price.
She also claimed they used a complicated structure to conceal the illegality of the transaction and evade liability.
They were alleged to have hid underlying loans at 17% interest to be paid to the sellers indirectly by the plan while they disclosed 2.4% interest the plan paid directly. Annual statements to participants and annual filings with the U.S. labor department misrepresented the value of stock.
Yau claimed they distributed newsletters and made presentations to employees showing the value of stock was growing over time until its sudden collapse.
She claimed plaintiffs asked common questions about whether U.S. retirement law prohibited the transaction, whether the plan purchased stock for more than market value and whether defendants concealed unlawful conduct.
She claimed they asked a common question about the amount of losses the plan suffered.
She claimed retirement law extends the limitations period for fraud and concealment.
She claimed concealment by its nature is not relied upon and the Seventh Circuit never required proof of reliance in a concealment case.
She claimed the Seventh Circuit held the opposite, that the key to finding fraudulent concealment is some act on the part of a defendant designed to avoid detection.
She claimed not even diligent participants could know the stock price was inflated because they did not have access to full valuations.
She claimed consistent misrepresentations lulled them into a false sense of security.
She claimed the case didn’t need individual inquiries because plaintiffs would restore all losses to the plan.
“How that recovery will be allocated by the plan to different class members is not a question that affects class certification,” she wrote.
Defendants opposed an appeal on March 21 in a brief by Ann Barron of Heyl Royster in Edwardsville, the only local lawyer among 30 lawyers representing defendants.
Barron represents Shauna Bidwill Valenzuela.
She claimed plaintiffs alleged a small subset of defendants made misstatements to conceal the alleged overpayment which they claim they did not discover until 2019.
“Plaintiffs do not allege that defendants made a single uniform fraudulent statement to all participants," Barron wrote.
“Rather, they assert that certain defendants made various misstatements to various employees at various times and in various forms.”
She claimed meetings were staggered to ensure that those on different shifts could attend and information at each session was not identical.
She claimed labor department forms weren’t sent to participants but were available on the department’s website.
“The Order does not require any appellate review, let alone this court’s immediate interlocutory review,” she wrote.
Circuit judges Frank Easterbrook, Ilana Rover and John Lee disagreed and granted an appeal on April 8.
The combination of Dugan’s decision for the defendants and the Seventh Circuit’s decision for the plaintiffs stimulated negotiations.
Dugan stayed his proceedings and plaintiffs didn’t even file an appeal brief.
In August, Dugan extended the stay to Sept. 3.
Wheeler’s settlement notice showed the parties settled on that date.
Roster of defendants:
Corporate defendants: Board of directors of Casino Queen Holding Company, administrative committee of Casino Queen employee stock ownership plan, and trustees of the plan.
Individual defendants: Charles Bidwill III, Timothy Rand, James Koman, Jeffrey Watson, Robert Barrows, Mary Bidwill, Brian Bidwill, Patricia Bidwill, and Shauna Bidwill Valenzuela.
Trust defendants: Karen Hamilton Irrevocable Trust, William Koman Jr. Irrevocable Trust, William Koman Sr. Living Trust, Elizabeth Koman Irrevocable Trust, Janis Koman Irrevocable Trust, James Koman Irrevocable Trust, and all their beneficiaries.