Lloyd v. Argent Trust Company

Background

Jamaal Lloyd and Anastasia Jenkins, former employees of W BBQ Holdings, Inc., allege that fiduciaries of the company’s employee stock ownership plan caused the plan to overpay for WBBQ stock. The plan purchased 400,000 shares, or 80% of WBBQ’s outstanding shares, in 2016. The plaintiffs allege that the stock was overvalued because of flawed financial projections, foreseeable business costs, possible dilution from warrants, and unfavorable loan terms.

The plaintiffs learned through asset-tracing discovery that Herbert and Gregor Wetanson transferred nearly $70 million in proceeds from the stock transaction to two trusts: the BBQ Trust and the Gregor Wetanson 2015 Gift Trust. The proposed Second Amended Complaint would add those trusts, their trustees, and their beneficiaries as defendants. It would assert claims for restitution, disgorgement, and other equitable relief under Section 502(a)(3) of the Employee Retirement Income Security Act, and a New York Uniform Voidable Transactions Act claim against the Gregor Wetanson 2015 Gift Trust concerning a 2022 transfer of part of Herbert Wetanson’s seller note.

Motion to Amend

The plaintiffs moved for leave to amend on June 2, 2025. Because a scheduling order had set a deadline for amendments, the court applied the requirement that the plaintiffs show “good cause” under Federal Rule of Civil Procedure 16(b), in addition to considering the general amendment standard under Rule 15(a).

Good Cause

The court found that the plaintiffs were diligent. They sought asset-tracing discovery promptly after broader discovery became available in 2023, but the defendants resisted producing the information and the case was later stayed during an appeal concerning arbitration. The plaintiffs received the final verified asset-tracing stipulation on May 23, 2025 and filed their motion slightly more than a week later. The court rejected the defendants’ argument that the plaintiffs had neglected to seek the information earlier.

Futility Arguments

The defendants argued that the trusts could not be sued because trusts are not necessarily separate legal entities. The court held that the current record did not permit a final determination about the trusts’ legal status, and that the uncertainty did not justify dismissal at the pleading stage. The court also noted that the trusts’ trustees and beneficiaries could be named as defendants, making the issue largely one of form.

The defendants argued that the proposed ERISA claims against the trustees and beneficiaries did not adequately allege each person’s participation in the stock transaction. The court concluded that the proposed complaint adequately stated claims by tracing the plan’s funds into trusts for which those individuals were trustees or beneficiaries.

The defendants also argued that the New York claim was unavailable because the challenged stock transaction occurred in 2016, before the New York Uniform Voidable Transactions Act took effect. The court rejected that argument because the proposed claim challenged a separate transfer made in 2022. The court also found that the allegations plausibly claimed that Herbert Wetanson became insolvent as a result of the transfer and that he knew, or reasonably should have known, of potential liability connected to the employee stock ownership plan transaction.

Prejudice and Disposition

The court found that allowing the amendment would not significantly prejudice the defendants. The defendants had long known that the plaintiffs sought recovery of proceeds from the stock transaction, and the proposed amendments focused on those proceeds without significantly changing the case’s core allegations. The court also considered the defendants’ role in delaying the asset-tracing discovery and the plaintiffs’ representation that substantial additional discovery would not be necessary.

Judge Denise Cote granted the plaintiffs’ June 2, 2025 motion to amend.