International Paper has settled an ERISA suit filed by shareholders in 2020 for an amount equal to a $30 million judgment. The company further asserted that it had purchased company stock in order to receive a matching percentage, which it claimed was in violation of Section 5702.5 of ERISA. International Paper agreed to a consent decree resolving the suit, but retained its intent to appeal the verdict and award.
In October 2020, International Paper shareholders won a preliminary injunction against International Paper Company’s practice of “controlling” a plaintiff’s litigation by acquiring a controlling interest in the litigation through a third party. In other words, International Paper could not acquire a controlling interest in a plaintiff’s lawsuit until it filed an ERISA suit against the defendant. As a result of the ruling, International Paper agreed to pay a civil penalty and refrain from engaging in similar practices in the future. The consent decree also required International Paper to provide a full accounting of its practices relating to its acquisitions of a controlling interest in a litigation case.
In August 2020, International Paper announced that it was going to pursue a review of the consent decree and contest the validity of the ERISA claim against it. The company’s attorney stated, “International Paper and its Board of Directors have made every effort to ensure that the lawsuit was resolved in the appropriate manner.” The attorney stated, “However, the decision by the District Court denied the plaintiffs the opportunity to present their evidence in support of their claim.”
The complaint filed against International Paper included a copy of the ERISA notice provided to the defendant. The complaint included a copy of the complaint provided to International Paper by the U.S. District Court for the Eastern District of Texas. The complaint also included a copy of the complaint provided to International Paper by the U.S. District Court for the Southern District of Texas. A copy of the complaint received by International Paper from the Securities and Exchange Commission was also included in the complaint.
On November 8, 2020, the plaintiffs filed a second complaint against International Paper, this time claiming that the case should have been dismissed because the district court did not properly grant discovery. to International Paper or allow for the production of documents. records and depositions in connection with the case. Further, the complaint alleged that the district court failed to order the production of documents that were critical to the plaintiffs’ claims, such as accounting statements, bank statements, tax returns, corporate minutes of the Board of Directors meeting, etc.
On November 13, the district court ordered the case closed. The court ordered that International Paper submit a notice of settlement. This notice of settlement stated, in part, that, “We have determined that this lawsuit should be dismissed without prejudice, meaning that the case is over, but we will continue our investigation of the matter and take actions that are appropriate in the future. No settlement will be finalized until the investigation is complete.” The court ordered International Paper to submit an accounting and other financial statements related to the case.
On January 5, 2020, the district court entered into an agreement and entered an order dismissing the lawsuit. The court stated that it had determined, “The district court erred in granting a decree of settlement requiring International Paper to pay a civil penalty and notifying International Paper of the findings and decisions in this case.” The court noted that the district court had “erred in awarding discovery” and ordered the case to be dismissed because it had found that, “there was no valid basis for the ERISA notice.”
On March 6, the United States Court of Appeals for the Fifth Circuit affirmed the dismissal of the complaint. According to the court, “the district court abused its discretion in granting discovery” and, “there was no indication from the district court that it could reasonably infer that an ERISA notice would assist the plaintiffs’ case.” Accordingly, the court concluded, “International Paper’s complaint is dismissed without prejudice.”
