US Court Grants Motion to Dismiss with Prejudice in Appvion Corporation Federal Lawsuit

August 28, 2020

Willkie represents 13 former Appvion officer and director defendants in the case.

On August 28, the US District Court, Eastern District of Wisconsin, granted a motion to dismiss with prejudice in a federal lawsuit brought against a group of 13 former officers and directors of Appvion Corporation , the successor to a large Wisconsin paper manufacturing company. The lawsuit alleged that the company executives breached their state corporate law fiduciary duties to the corporation by allegedly artificially inflating the company’s stock value through improper business forecasts, stock valuations and calculations, and created improper corporate dividends by forgiving intra-company loans related to the repurchasing obligations under the company’s employee stock ownership plan (“ESOP”).

The case was brought by the Appvion Bankruptcy Liquidation Trustees on behalf of the company’s bankruptcy creditors alleging damages totaling potentially $250 million. The case was originally brought in the US Bankruptcy Court for the District of Delaware, but in October 2019, the Court granted the former officers’ and directors’ motion to transfer the case to the Eastern District of Wisconsin, where it was joined with another lawsuit against over 30 former officers and directors and their spouses involving the ESOP, which the same Court dismissed last month. In this case, the Court found that all of the state law corporate fiduciary duty and improper dividend claims were preempted by the Employee Retirement Income Security Act (“ERISA”) because all of the claims involved the ESOP’s administration and benefit distribution requirements. The Court also found that the Liquidation Trustees lacked standing under ERISA to bring fiduciary duty breach and prohibited transaction claims against the former officers and directors, and dismissed the claims with prejudice.

Willkie represents the former officer and director defendants in this case. Craig C. Martin, who led the team, commented: “We are very pleased with the District Court’s well-reasoned and thoughtful decision, finding that ERISA preempted all of the state law claims in this case.”

The team, all of whom are based in Willkie’s recently launched Chicago office, also includes partner Amanda Amert, counsel Michael Graham and associate Sara Kim.