Tharaldson Motels, Inc. Employee Stock Ownership PlanCohen Milstein is prosecuting a putative class action lawsuit on behalf of current and former Tharaldson Motels, Inc. Employee Stock Ownership Plan (the "Plan" or the "ESOP") participants and their beneficiaries alleging violations of the federal pension law (ERISA) in connection with two Transactions in which Gary Tharaldson and his family sold a total of 10,000,000 shares to the ESOP for $500 million in December 1998 and December 1999. The goal of this litigation is to recover the proceeds from Gary Tharaldson and his family which were received in excess of the fair market value of the stock at the time of the Transactions and/or restore losses suffered by the ESOP as a result of fiduciary breaches engaged in by Gary Tharaldson as Trustee of the ESOP in connection with the Transactions. If successful, any recovery by the ESOP would be allocated to the accounts of former and current participants of the ESOP who were affected by the alleged fiduciary breaches. The lawsuit is captioned: Hans v. Tharaldson, No. 05-115 (D.N.D.). Summary of the Claims This lawsuit alleges that Gary Tharaldson caused the Tharaldson ESOP to purchase the stock in Tharaldson Motels, Inc. ("TMI") from him and his family at more than fair market value and as a result the ESOP paid too much for the stock and incurred an excess amount of debt in the Transaction. In order to purchase the shares from the Tharaldsons, the ESOP incurred debt, which was financed in large part by loans from Gary Tharaldson and his family. This lawsuit alleges that these loans were designed to allow Gary Tharaldson to nominally place the ownership of the company in the hands of the ESOP while retaining management control and draining the company’s entire cash flow in order to service the debt undertaken by the ESOP to finance the purchase of these shares. The lawsuit also claims that the ESOP paid too much for the shares purchased in the second transaction because the price was not adjusted to take into account the effect of the debt from the first transaction, and alleges that the debt imposed by the second transaction substantially reduced the value of the ESOP. As a result, the lawsuit alleges that these transactions were undertaken not in the interest of the ESOP and its participants, but for the benefit of Gary Tharaldson and his family. As a result, the lawsuit seeks relief against Gary Tharaldson and family for the amount of the purchase price which they received in excess of fair market value at the time of the Transaction. Status of the Litigation
On September 26, 2007, the Court issued its opinions as to Defendants' Motions to Dismiss by granting in part and denying in part their motions. The Court granted the Motions to Dismiss as to the Plaintiffs who had taken distributions from the plan prior to the filing of the complaint. The Court found that these plaintiffs lacked standing to sue. The Court denied Defendants' Motion to Dismiss as to the Plaintiffs who still had account balances in the plan at the time of the filing of the Complaint, but became plan participants only after the Transactions. Additionally, the Court denied the Motion to Dismiss filed by the non-fiduciary defendants who sold their shares of stock to the ESOP in the transactions, finding that Plaintiffs had sufficiently alleged claims for equitable relief. To Contact For More Information Regarding This Lawsuit: If you have any information that may be useful to this lawsuit or are interested in discussing the possibility of serving as a class representative in such a lawsuit, please contact us via our toll free number, email or mail. Bruce F. Rinaldi, Esq., brinaldi@cmht.com
R. Joseph Barton, Esq., jbarton@cmht.com
Abby Gustafson, Paralegal, agustafson@cmht.com
Cohen, Milstein, Hausfeld & Toll, P.L.L.C.
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Washington, D.C. 20005
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