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Brundle v. Wilmington Trust, N.A.

United States District Court, E.D. Virginia, Alexandria Division

November 3, 2016

TIM P. BRUNDLE, on behalf of the Constellis Employee Stock Ownership Plan, and on behalf of a class of all other persons similarly situated Plaintiff
v.
WILMINGTON TRUST, N.A., as successor to Wilmington Trust Retirement and Institutional Services Company Defendant.

          REDACTED MEMORANDUM OPINION

          LEONIE M. BRINKEMA, UNITED STATES DISTRICT JUDGE

         On October 20, 2016, the Court issued an order denying defendant's Motion to Exclude Expert Testimony of Dana Messina, granting in part and denying in part plaintiffs Motion for Partial Summary Judgment, and denying defendant's Motion for Summary Judgment. This memorandum opinion supplements the reasoning articulated in open court.[1]

         Plaintiff Tim P. Brundle ("plaintiff or "Brundle") is an employee of Constellis Holdings, Inc. ("Constellis"), [2] and was a participant in an employee stock ownership plan ("ESOP") established for the benefit of Constellis employees. Brundle has sued defendant Wilmington Trust N.A. ("defendant" or "Wilmington"), the trustee for the ESOP in connection with two transactions: the ESOP's acquisition of 100% of the outstanding voting shares of Constellis in December 2013 ("2013 Purchase") and the ESOP's sale of the same shares to ACADEMI, Inc., in July 2014 ("2014 Sale"). Specifically, plaintiff alleges that the 2013 Purchase violated the Employee Retirement Income Security Act of 1974's ("ERISA") prohibition on transactions with a "party in interest, " 29 U.S.C. § 1106(a), and that Wilmington received a fee for its services as the ESOP's trustee from Constellis, an interested party, which plaintiff alleges violated ERISA's ban on such a fee, 29 U.S.C. § 1106(b). Wilmington's primary defense is that the 2013 Purchase and its fee were permissible under the exceptions to § 1106 found in 29 U.S.C. § 1108. Defendant also pleaded several other defenses in its Answer to the Third Amended Complaint ("Ans."): (a) failure to state a claim for which relief can be granted; (b) lack of standing; (c) proper discharge of fiduciary duties; (d) ignorance of "facts by reason of which the liability is alleged to exist;" (e) failure to allege facts that form the basis of an award of attorneys' fees; (f) accord, satisfaction, payment, waiver, and release; (g) absence of tangible loss to the plaintiff; (h) absence of particularized injury to the plaintiff; failure to state a claim for any "representative claims;" (i) failure to "adequately represent the interests of the ESOP plan participants as required by Rules 23.1 and/or 23.2 of the Federal Rules of Civil Procedure;" and (j) failure to meet the pleading standards required by Rule 23.1 of the Federal Rules of Civil Procedure.[3] Ans., Dkt. 137 at 8-14. Plaintiff has moved for summary judgment with respect to the defenses of ignorance and accord, satisfaction, payment, waiver, and release.

         I. FACTUAL BACKGROUND

         Constellis is a major government contracting firm that "bills itself as a global provider of security, training and mission support services." Compl., Dkt. 136 ¶ 7; Ans., Dkt. 137 ¶ 7. Before December 2013, Thomas Katis, Matthew Mann, John Peters, and the Howard A. Acheson Trust (collectively, the "Sellers") owned over 85% of the outstanding shares of Constellis and controlled three out of four seats on its board of directors. Pl.SJ Opp., Dkt. 195 at 2. According to Juliet Protas ("Protas"), Constellis' general counsel, the Sellers and Constellis began seriously considering the formation of an ESOP during the summer of 2013. Protas Dep., Dkt. 163-3 at 14:16-15:9. An ESOP is a form of employee retirement benefit plan "designed to invest primarily in securities issued by its sponsoring company." Donovan v. Cunningham, 716 F.3d 1455, 1458 (5th Cir. 1983). Constellis hired law firm Greenberg Traurig and investment bank CSG Partners LLC ("CSG"), including its managing partner George Thacker ("Thacker"), to advise Constellis about whether an ESOP would be a good fit for the company. Def. SJ Memo., Dkt. 167 at 4. Following a presentation from Thacker, Constellis elected to go forward with the formation of the ESOP. Protas testified that the Constellis board was favorably impressed by the "tax savings" the ESOP would achieve, in addition to the prospect of "build[ing] a long-term savings plan for... employees." Protas Dep., Dkt. 167-3 at 25:3-11. Katis and Mann also felt that the ESOP would give them a "long-term exit strategy." Id.

         A PowerPoint presentation prepared by CSG, dated September 13, 2014, corroborates these basic goals for the ESOP. On a slide titled "Overview-Objectives, " five objectives appear: (1) "liquidity for shareholders;" (2) "shareholders retain upside and control;" (3) "tax savings for company;" (4) "incentivize management and employees;" (5) "company's growth and longevity." Dkt. 195-43 at 7. The presentation informed Constellis' board that the shareholders would "retain full control over [Constellis'] operations, " and explained how the transaction would turn Constellis into a "tax-free business." Id. CSG also reported that the ESOP would be a "valuable incentive for [the] management team and employees" that did "not affect shareholders' cash flows." Id.

         Although the presentation made clear that the company had to be "owned 100% by [the] ESOP" to become "fully tax free, " it also cautioned against a "traditional 100% ESOP, " recommending instead "a more advanced 100% structure that CSG developed." Id. at 19. Under the "more advanced" structure, the Sellers would retain "25% of economic value" after the transaction through warrants that would entitle them to acquire around 15, 000 shares of voting stock. Id. at 20; Def. SJ Memo., Dkt. 167 at 13-14. As CSG explained, "Sellers will capture the value of the warrants by (1) selling the warrants back to Triple Canopy[4] in the future, or (2) selling the company. Sellers will control the company post transaction, so retain this flexibility [sic]." Dkt. 195-43 at 20. There is no evidence that Wilmington saw this presentation or knew about its contents before approving the 2013 Purchase.

         According to Protas, CSG recommended that Constellis engage Wilmington as trustee for the ESOP. Protas Dep., Dkt. 163-3 at 36:4-11. Wilmington was hired on September 24, 2013. Pl.SJ Opp., Dkt. 195 at 3. For its work on the 2013 Purchase, Wilmington received a flat $__ fee, although it stood to gain an annual recurring fee of over $__ if the transaction were approved.[5] Dkt. 167-9 at 117. There is no evidence that Constellis shopped around for any other trustee. Wilmington admits that it receives its "largest percentage of referrals from CSG and earned more fees from CSG-referred deals than any other source." Pl.SJ Opp., Dkt. 195 at 3. According to Thacker, Wilmington was selected in part because of its large fiduciary insurance policy and fidelity bond amount, and because it was one of approximately three firms with substantial experience in ESOP transactions. Thacker Dep., Dkt. 163-4 at 153:15-154:22.

         A Wilmington vice president, Greg Golden ("Golden"), was Wilmington's primary point of contact for the Constellis ESOP transactions. Def. SJ Memo., Dkt. 167 at 5. Wilmington had a Fiduciary Services Sub-Committee (FSSC) consisting of four voting members who had the authority to give final approval to any transaction involving Constellis. Id. at 6. The FSSC members were Golden; Jennifer Matz ("Matz"), another Wilmington vice president and the chair of the FSSC; John Lindak ("Lindak"); and Boyd Minnix ("Minnix"). Id.[6]

         Wilmington hired its own legal counsel, Taylor English Duma ("Taylor English"), and financial advisor, Stout Risius Ross ("SRR"), to assist it in evaluating the proposed ESOP. According to Golden, Wilmington hired SRR "based on [its] knowledge on [sic] the finance and ESOPs, " and Taylor English "based on the knowledge they have on [sic] ESOPs." Golden Dep., Dkt. 163-7 at 41:12-17. Rather than starting from scratch every time Wilmington had to hire a new valuation firm, it maintained a list of approximately 12 preapproved firms; SRR was one of them. Matz Dep., Dkt. 163-5 at 28:1-17. Firms seeking to be on the list had to fill out a "due diligence questionnaire." Dkt. 167-12 at 1. In its questionnaire, SRR represented that it had 15 professionals working in its ESOP group. Id. "Typical valuation credentials" of those professionals included Chartered Financial Analysts ("CFAs"), Certified Public Accountants ("CPAs"), Accreditations in Business Valuation ("ABVs"), and Accredited Senior Appraisers ("ASAs"). Id. at 2. SRR reported that it worked on "at least 20 transactions each year providing fairness and solvency opinions for ESOP trustees" and had provided "hundreds of fairness opinions" in its history. Id. at 1. SRR had "a large number of clients in the defense/government contracting and engineering industries." Id. The majority of SRR's work for Wilmington on the Constellis ESOP transaction was performed by Scott Levine ("Levine"), CPA/ABV, CFA, ASA, and Aziz El-Tahch ("El-Tahch"), CFA. Def. SJ Memo., Dkt. 167 at 7 n.8.

         When considering transactions such as the 2013 Purchase and 2014 Sale, there are two key metrics of a company's value: enterprise value and equity value. Enterprise value is "the amount the business is worth, looking at... the left-hand side of the balance sheet, " meaning before taking into account any liabilities. Def. SJ Memo., Dkt. 167 at 10 n.l 1. Equity value is the enterprise value minus the company's debts, or "the value that the owners of the company have." Id. There are two commonly employed methods for arriving at enterprise and equity value: the discounted cash flow ("DCF") method, which uses cash flow projections and then discounts them to arrive at an estimate, and the guideline public company method ("GCM"), which uses "metrics of other businesses of similar size in the same industry" to estimate a value.[7] The parties agree that in the context of valuing a privately-held corporation like Constellis, the DCF method is generally more reliable than the GCM method, but disagree sharply about the proper application of each method to the 2013 Purchase. See Def. SJ Memo., Dkt. 167 at 10-11; Pl. SJ Opp., Dkt. 195 at 26.

         Before the ESOP was created, Constellis had been appraised regularly for five years by Andy Smith of The McLean Group ("McLean"), most recently on January 31, 2013. Pl. SJ Opp., Dkt. 195 at 4. That valuation was conducted "to estimate the Fair Market Value of the common stock [of Constellis] on a per share basis for [Constellis'] equity compensation plan and financial reporting purposes." Dkt. 167-2 at 5. The valuation was based on a minority stake; consequently, McLean discounted its value for "lack of control, " which it considered necessary "since a minority interest does not have the ability to apply significant influence over the decisions of a company." Id. at 66. It applied a second discount, for lack of marketability, because "there are generally no active markets to freely trade a minority interest in a privately-held company." Id. The McLean report arrived at an estimated enterprise value of $__and an equity value of $__. Id. at 11. It then divided that number by the number of shares to arrive at a pro rata fair market value for each share. Id. It was only at this phase that McLean applied the two discounts described above. Id. After applying those discounts, McLean estimated the fair market value of a single share of Class A voting stock as of January 31, 2013, as $__B. Id.

         SRR began the process of valuing Constellis by collecting revenue projections from management, which were supplied by CSG. El-Tahch Dep., Dkt. 163-8 at 45:5-11. El-Tahch testified that it is SRR's usual practice to rely on management representations about future revenues, on which SRR performs "due diligence." Id. at 46:3-9. According to El-Tahch, SRR considered criteria such as who prepared the projections, the quality of analysis, the company's experience preparing projections, how the company has performed relative to prior projections, and general industry conditions. Id. at 46:3-49:14. In the case of Constellis, El-Tahch found that the projections were prepared by non-shareholders, meaning the preparing employees had no "apparent" incentive to inflate their estimates. Id. at 47:15-19. Constellis also had experience formulating projections, doing so "at least annually and sometimes updated... midyear." Id. at 47:22-48:1. El-Tahch also considered the underlying records and analysis to be better-than- average, observing that Constellis' system for tracking contracts was 'Very robust" and that Constellis had a "very granular understanding of the company's growth prospects." Id. at 46:10-16. Likewise, he found Constellis' revenue projections to be supported "based upon... due diligence and e-mail correspondence, " a finding buoyed by his conclusion that Constellis' projections "were more conservative than what their backlog would suggest." Id. at 48:7-11.

         Golden circulated SRR's draft "preliminary valuation analysis" on November 12, 2013. Dkt. 195-30 at 1-2. That analysis purported to rely on several sources of information including, but not limited to, "Constellis' audited financial statements, " its internal projections, a site visit, "discussions with certain members of the senior management of Constellis, " and "publicly available information and financial data on publicly traded companies considered similar to [Constellis]." Id. at 9. SRR used both the GCM and DCF methods to calculate value, merging the two in a weighted average that put a greater emphasis on the DCF method. Id. at 39. In a short, generalized analysis, SRR concluded that "[b]ased on the facts and circumstances related specifically to the Constellis equity, we applied a 10.0% control premium to the stock prices of the guideline companies used in the Guideline Company Method to account for any enhanced benefits that may be realized by a controlling shareholder of Constellis." Id. at 84. SRR also decided to include only a 5% discount for limited marketability, concluding that "unlike typical, privately held, non-ESOP companies, Constellis will have a repurchase obligation (often referred to as a 'put' option) to redeem shares from terminated employees. The effect of such put option is that it greatly improves the marketability of the underlying closely held Company's shares." Id. at 40. SRR's valuation determinations are summarized in the following table:

ENTERPRISE VALUE RANGE

GCM Method

DCF Method

Combined

$_ million to $_ million

$_ million to $_ million

$_ million to $_ million

FAIR MARKET VALUE OF EQUITY RANGE

$_ million to $_ million

MEDIAN FAIR MARKET VALUE OF EQUITY

$_ million

FAIR MARKET VALUE OF EQUITY PER SHARE RANGE

$_ to$_

FAIR MARKET VALUE OF EQUITY PER SHARE MEDIAN

$_

Id. at 41.

         The parties dispute Wilmington's level of activity during the period when SRR was preparing the report. Defendant argues that Golden and Bonn were "working with SRR throughout the due diligence process." Def. SJ Memo., Dkt. 163 at 10. The minutes of a meeting held on October 24, 2013, among SRR, Taylor English, Greenberg Traurig, and Constellis show that although Bonn, the non-voting member of Wilmington's FSSC, attended, no voting member of the FSSC was at that meeting. Dkt. 195-38. Additionally, one email between SRR and Taylor English shows that Bonn was copied, but it does not show Bonn participating in the discussion. See Dkt. 167-16 at 4-5. According to FSSC chairwoman Matz, Golden was the FSSC member "most intimately involved" with the Constellis ESOP transaction, Matz Dep., Dkt. 185-8 at 54:19; however, none of the emails or depositions cited by defendant demonstrate any involvement by Golden between Wilmington's decision to retain SRR and his circulating SRR's draft evaluation on November 12, 2013. See Dkts. 167-16 at 4-5, 13-18, 26- 29; 167-17 at 4-8; 163-5; 163-6; 163-7. Moreover, as of two days before the FSSC was scheduled to review the draft valuation report, Golden had not seen the draft and believed the meeting was going to be cancelled because he had not yet heard anything about the draft report from SRR. Dkt. 195-31 ("I assume since we have not had any calls on this one I can cancel the full committee meeting for Constellis on Thursday ... Please confirm.")-[8] As for the other voting FSSC members, Matz has acknowledged that she was not involved in the transaction during that time, and there is no deposition testimony from Lindak and Minnix or any other evidence that they engaged with the Constellis ESOP transaction during the preparation of SRR's report.

         Ordinarily, Wilmington requires that it receive a draft valuation report at least 48 hours before an FSSC meeting to enable its personnel to discuss that report. Dkt. 195-53 at 3. SRR missed that deadline by about three and a half hours. Golden circulated the report to the FSSC at 4:58 p.m. on Tuesday, November 12, 2013, for a meeting scheduled to begin at 1:30 p.m. on Thursday, November 14, 2013. Dkt. 195-30; Dkt. 195-11. Golden testified that he "read basically all" of the report in that time, but admitted that he had not read "every single sentence." Dkt. 163-7 at 86:9-10. Matz did not specifically remember reading the SRR draft report, but testified that reading such drafts is "standard practice" and she was accordingly "sure [she] read it." Dkt. 185-8 at 75:9-22.

         Neither of the two deposed FSSC members, Matz and Golden, recalls the November 14 meeting in significant detail, although both claim that Wilmington asked several questions about the basis of SRR's valuation. See Dkt. 185-8 at 102:19-106:6; 163-7 at 86:11-20. Both took handwritten notes at the meeting and directed counsel to refer to them when asked at their depositions about what the group discussed on November 14. Dkt. 163-7 at 86:14; Dkt. 185-8 at 78:19-22. Mate's notes primarily relay topics of conversation including: "setting price for tender offer;" the requirements for minority shareholder notification; SRR's final fair market value price; an overview of Constellis' market position; the "conservative" nature of the projections; the low potential for headline making news; a potential for an action to recover money Constellis had overcharged the government on a particular contract;[9] the differences between GCM and DCF valuation; the transaction's financing; the post-transaction value of Constellis; and the price the trustee was willing to offer per share (which appears to have been anywhere below SRR's reported median). Dkt. 195-11. Those notes do not reflect any substantive information about the topics. Golden's notes, which are harder to follow, also primarily list these topics. Dkt. 195-32. Of significance to some of plaintiffs arguments, these handwritten notes do not appear to indicate that Wilmington raised any questions about the appropriateness of the 10% control premium SRR applied in valuing the stock.

         Golden testified that he was aware of the McLean valuation before approving the 2013 Purchase, but there is no indication that it was discussed at the November 2013 meeting and he admits that he never personally reviewed it. Dkt. 238-4 at 13:15-14:1. In explaining that decision, Golden testified in an extremely unconvincing manner: "You know, they were discussed and I discussed them with individuals that I understood did review them, but just the pertinence to what we-the relativity. You know, those reports relative to what we were-you know, our task. I didn't think they were applicable once I understood the nature of the reports." Id. at 14:6-13. Asked why they were not applicable, Golden continued, "Those McLean reports, it was a valuation firm... hired by the company... [t]o value itself. ... It was to value internal-I believe internal transfers of stock, or for maybe tax reporting or something like that It was-and they would have been on-you know, for one, it was an independent valuation as we would see that. It was-you know, it was-a valuation firm hired by the company to value itself, and just the purpose of the reports with the-I think they were done, to my understanding, was on the minority non-controlling interest. And it just wasn't-just the overall applicability to what we were doing wasn't relative."[10] Id. at 14:6-15:12.

         On November 13, one day before the FSSC meeting, Constellis and the Sellers, acting through CSG, initially priced the shares at $__. Dkt. 167-17. On Friday, November 15, at 3:02 p.m., Constellis reduced the asking price to $H per share. Dkt. 195-12 at 8. At 4:28 p.m., Thacker wrote in an email to Wilmington, "I received the Trustee's offer via the telephone for $__ which [Constellis] declines. We would propose $__as the appropriate per share value for the term sheet. In the interest of time, please respond to this valuation offer while the term sheet is being finalized (we expect to send it within the next 30 minutesD]." Id. at 7 (emphasis in original). Taylor English responded at 4:50 p.m. that Wilmington's "best and final offer" was $__per share, the exact number that SRR reported as the median of its fair market value range. Id. at 6. CSG and Constellis accepted that offer nine minutes later. Id. Negotiations over other terms continued until Friday, November 22, 2013, most notably over the "strike price" of the warrants that the Sellers would hold, or the price at which they would be able to exercise their option to repurchase voting stock in Constellis after the sale to the ESOP. Id. at 1-6. Ultimately, Constellis decided to use the same price that the ESOP was paying per share as the strike price, which Thacker represented was better for the ESOP than the strike price originally included in the term sheet. Id. at 2. Closing was set for December 20, 2013.

         In the day or two leading up to closing, [11] the FSSC met again to issue a final approval of the sale. Mate's handwritten notes suggest that the FSSC members discussed the ownership structure in place before the 2013 Purchase closed, the Board structure to be put in place after the transaction, the final fairness analysis, the strike price, and the $___ million audit underway. Dkt. 195-13.

         In connection with the closing, SRR issued its final valuation and transaction fairness opinion, dated December 20, 2013.[12] Although the final median fair market value per share calculation was the same, other figures in the final valuation departed from the November draft. The following table shows the two side-by-side for comparison:

Valuation Metric

November 2013

December 2013

ENTERPRISE VALUE RANGE GCM Method DCF Method Combined

$_ million to $_ million

$_ million to $_ million

$_ million to $_ million

$_ million to $_ million $_ million to $_ million $_ million to $_ million

FAIR MARKET VALUE OF EQUITY RANGE

$_ million to $_ million

(The December report did not contain this line item)

MEDIAN FAIR MARKET VALUE OF EQUITY

$_ million

(The December report did not contain this line item)

FAIR MARKET VALUE OF EQUITY PER SHARE RANGE

$_to $_

$_ to $_

FAIR MARKET VALUE OF EQUITY PER SHARE MEDIAN

$_

$_[13]

Compare Dkt. 195-30 at 41, with Dkt. 167-3 at 66. The differences can be explained in part by a downward revision in Constellis' cash on hand. The November report relied on a projected December 31, 2013, figure of $__million Dkt. 195-30 at 39. The December report instead used the November 30, 2013, balance sheet, which reflected $B million cash on hand. Dkt. 167-3 at 64. Another revision from November to December was the dilution from stock options that Constellis would need to pay in connection with the 2013 Purchase. The November report estimated this dilution to be between $___ million to $___ million. Dkt. 195-30 at 41. In December, SRR concluded that "only 200 stock options with a strike price of $___ were exercised as part of the Transaction, " and consequently changed the estimate range to $__ to $__ Dkt. 167-3 at 65. This revision largely offset the $___ million difference in cash on hand when it came to the final valuation.

         Incorporating these revisions, SRR opined "that the transaction was for fair market value, the interest rate[s]... [were] not in excess of a reasonable rate, the financial terms ... are at least as favorable to the ESOP as ... a comparable loan, resulting from arms-length negotiations between independent parties, the exercise price of the Warrants was at least equal to 90% of the fair market value of the underlying common stock on a per share basis, and the terms and conditions of the ESOP Transaction are fair to the ESOP." Def. SJ Memo., Dkt. 167 at 12-13.

         On December 20, 2013, the 2013 Purchase closed. Def. SJ Memo., Dkt. 167 at 13. "The ESOP purchased 47, 586.55 shares of Class A common stock from the Sellers, representing 88.4% of the Sellers' total shares, for $__" which amounted to a rate of $__ per share. Id. at 13-14. "Concurrent with the ESOP's purchase, Constellis redeemed the remaining voting stock, so that the ESOP became the holder of 100% of Constellis voting stock." Id. The ESOP purchased the Constellis stock by paying 31.4% of the price in cash and covering the remaining 68.6% with promissory notes issued by the ESOP to the Sellers in the aggregate amount of $__ million, bearing interest at an annual rate of 5.0% with an eight-year term.[14] Id. The cash for the transaction came from Constellis in the form of a loan bearing an annual interest rate equal to the long-term Applicable Federal Rate ("AFR"), amortized with level principal payments, and having a term of 25 years. Id. "Following the ESOP purchase, the remaining 6, 227.35 shares of Class A Common stock were exchanged for 125 shares of newly issued nonvoting stock and warrants (the 'Warrants') to acquire 15, 737.18 shares of Class A Voting Common Stock. One-half of the Warrants would expire in 10 years (the 'Series A Warrants'), and the other half would expire in 15 years (the 'Series B Warrants')." Id. (internal citations omitted).[15]

         The Investor Rights Agreement ("IRA") provided that, after the transaction, Constellis' board of directors would "consist of five individuals, at least one of whom shall be independent from management of [Constellis], who shall be selected by the remaining members of the Board, provided that as of the date of this Agreement the Board may consist of four individuals, and the Board shall have six months from the date of this Agreement to select and appoint the initial independent member of the Board."[16] Dkt. 195-54 at 6 (emphasis in original). With respect to choosing directors, the IRA provided that "for so long as all of the Series A Warrants have not been exercised or terminated, the holders of at least 51% of the outstanding Series A Warrants shall have the right to designate three of the members of the Board, and to select the replacement Board member in the event of the resignation, death or incapacity of any member of the Board designated by such holders, in each case provided that such designation does not cause the Trustee to violate its fiduciary obligations under ERISA." Id. Triple Canopy's by-laws also provided that "the holders of not less than one-fifth of all the outstanding shares of the Corporation entitled to vote on" a matter to hold a "Special Meeting" of the board to discuss a matter, which defendant argues could be used by the ESOP or its trustee to "remove and replace" the board. Dkt. 167-9 at 100. The IRA also gave Wilmington, as the trustee, the right to "such regularly prepared annual financial reports... and projections ... and... such other financial information as the Trustee reasonably requests from time to time; provided that [Constellis] shall only be obligated to deliver information already in its possession and shall not be required to prepare additional information to comply with the Trustee's request." Dkt. 195-54 at 5 (emphasis in original).

         On December 31, 2013, "[a Constellis] contribution was accrued... and paid into the [ESOP] in May 2014 in the amount of $__ which included accrued interest. [Constellis'] contribution not only reduced the amount due on the ESOP loan to $___ but also released $___ million in stock to participant accounts." Def. SJ Memo., Dkt. 167 at 15 (internal citations omitted).

         Constellis experienced several setbacks in the first part of 2014. "For instance, in 2010, [Constellis] won a fixed price 'KBOSSS' contract to provide fixed site security at two military bases in Kuwait for the U.S. Army. In February 2014, [Constellis] was informed by the prime contractor that it intended to run a formal competition for the portion of the contract for which Constellis was the teaming partner." Def. SJ Memo., Dkt. 167 at 15 (internal citations omitted). In January 2014, the Department of State rescinded a major contract to perform work on several task orders in the Worldwide Protective Services program, which required Constellis to resubmit a "best and final offer." Id. These two changes and alterations to "other smaller contracts" resulted in a diminution of Constellis' value. Id. at 16.

         In February of 2014, ACADEMI, one of Constellis' major competitors, expressed an interest in acquiring Constellis. Def. SJ Memo., Dkt. 167 at 16. Constellis retained Wilmington to act as trustee for the proposed sale, and Wilmington brought SRR and Taylor English back on board to advise it. Id. ACADEMI's initial offer was to pay $___ million, with no consideration to the ESOP. Id. "ACADEMI, Constellis, and the Trustee engaged in several back and forth negotiations of the sale price. On March 25, 2014, [Constellis] received a letter of intent from ACADEMI that offered total consideration of $__million to purchase [Constellis], including $| million of proceeds payable to the ESOP. After further negotiations, on April 28, 2014, the offer was an implied Enterprise Value of $__ million, with proceeds to the ESOP of $___ million and a $__ million discount on the Seller Notes. The ESOP executed a ...


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