Seventh Circuit Affirms That ESOP Fiduciaries Did Not Breach Their Duties or Engage in a Prohibited Transaction in Approving the Sale of an ESOP-Owned Company

In Rush v. GreatBanc Trust Co., No. 25-1736, — F.4th —-, 2026 WL 2071139 (7th Cir. July 17, 2026), the Seventh Circuit affirmed a defense judgment entered after a three-week bench trial in a suit brought by a participant in the employee stock ownership plan that wholly owned Segerdahl Corporation, a direct-mail printing company. Plaintiff, a Segerdahl vice president and ESOP shareholder, alleged that GreatBanc Trust Company, the plan’s named trustee, along with the company’s former CEO, its then-current CEO, and three outside directors, breached their fiduciary duties of prudence and loyalty and engaged in a prohibited transaction under ERISA by organizing and approving the 2016 sale of the company to a private equity firm for $265 million, a price Plaintiff contended was below fair market value.

Reviewing the district court’s legal conclusions de novo and its factual findings for clear error, the court declined to resolve whether the individual defendants were fiduciaries, concluding that Plaintiff’s claims failed even assuming they were. On the standard of review, the court rejected Plaintiff’s contention that the district court applied an overly deferential abuse-of-discretion standard drawn from Armstrong v. LaSalle Bank National Ass’n. The court held that Armstrong’s deferential standard was not confined to decisions balancing the competing interests of different participant groups, and that well-settled trust law principles, the Supreme Court’s decision in Firestone Tire & Rubber Co. v. Bruch, and the plan document’s grant of sole and absolute discretion to the administrator all supported deferential review of the fiduciaries’ discretionary decisions where no conflict of interest was shown.

Applying clear-error review, the court found no error in the district court’s rejection of each of Plaintiff’s five theories of fiduciary breach. As to the decision to market the company to financial buyers rather than strategic buyers, the court held that the district court permissibly credited testimony that the company excluded competitors from the diligence process to protect competitively sensitive information and that the two potential strategic buyers were in poor financial condition to complete the transaction, and reasonably found that the individual defendants, whose stock appreciation rights were tied to the sale price, had no incentive to seek a lower-paying buyer. On the decision to resume negotiations with the private equity firm after it lowered its offer, the court found the district court soundly rejected Plaintiff’s theory that the individual defendants rushed the deal to avoid personal tax liability, noting the risk of IRS action was speculative and that the defendants’ prolonged, aggressive negotiation to raise the price was inconsistent with any need for speed. The court likewise found no clear error in the district court’s crediting of the defendants’ explanations for disclosing the company’s 2015 valuation to the buyer, in its finding that the buyer independently discerned it was the only bidder rather than learning so through a leak, and in its conclusion that the trustee discharged its obligations through its own investigation rather than merely deferring to its independent advisors.

Turning to the prohibited-transaction claims under 29 U.S.C. § 1106, the court affirmed the rejection of Plaintiff’s § 1106(b) self-dealing claim against the then-current CEO, holding that the district court reasonably credited testimony that the buyer, not the CEO, drove her decision to remain as CEO and roll over her equity, and that Plaintiff failed to show she acted against her own pecuniary interest by depressing the sale price. As to the § 1106(a)(1) claim against the trustee, the court agreed with the district court that a mere showing that the trustee approved a transaction knowing an officer intended to invest in the post-sale entity did not establish a violation, reasoning that Plaintiff’s proposed bright-line rule would produce absurd results inconsistent with ERISA’s purposes, as reflected in the court’s decisions in Leigh v. Engle and Albert v. Oshkosh Corp. The court further held that, even if the sale qualified as a prohibited transaction, the defendants had proved their adequate-consideration affirmative defense under § 1108(e)(1), the substantive component of which overlapped with the damages inquiry.

On damages, the court found no clear error in the district court’s determination that the price the buyer paid after diligence and arms-length negotiation was a better approximation of fair market value than the estimate offered by Plaintiff’s expert, which the district court declined to credit because it presumed a hypothetical buyer without establishing that an actual buyer would have paid the higher price. The court also held that the district court did not clearly err in declining to credit Plaintiff’s uncorroborated testimony that the investment banker had claimed the company could have been sold to a strategic buyer for $320 million, and in finding that the defendants had in fact marketed the sale-leaseback, the tax election, and the pending fraud-litigation settlement to the buyer, which simply valued them lower than Plaintiff believed they were worth. The court affirmed.