Lawsuit alleges breach of duty
A lawsuit against The Scooter Store founder Doug Harrison and others who managed the company’s employee stock ownership plan (ESOP) could end in a settlement, says the attorney representing the plaintiffs.
Three former employees filed a class-action lawsuit on behalf of 2,938 plan members in U.S. District Court for the Western District of Texas April 23, seeking to recover damages as a result of “the defendants’ multiple breaches of fiduciary duty.”
The plaintiffs contend the value of the ESOP plan nosedived from $36.9 million in 2008 to $8.5 million in 2009.
“The goal is to recover as much of the value of the ESOP plan as possible,” said Jon Powell, an attorney at Powell Law Firm in San Antonio, Texas.
The ESOP has 13.48% equity in The Scooter Store, according to the company’s recent bankruptcy filing. Members who are vested can sell their shares when they retire or leave the company.
The lawsuit alleges that Harrison, Principal Life Insurance Company and First Banker Trust Services failed to diversify the assets in the ESOP.
“You could see the strong likelihood the company was going to have problems and the stock price was going to go down—it would have been more sensible to diversify that,” said Powell.
Also among the allegations:
Harrison “usurped opportunities” available to the ESOP when he sold or otherwise transferred or conveyed his shares on or after Feb. 1, 2011, to Sun Capital Partners.
Harrison, in coordination with TSS Holdings, TSS and Houlihan Lokey Financial Advisors, also manipulated the price per share.
Powell says most lawsuits of this type settle out of court, something the plaintiffs are willing to consider. Otherwise, it will go to a jury trial.