>United Airlines ESOP
Date Filed: February 28, 2003
Court: U.S. District Court
Location: Illinois
Ticker Symbol: OTCBB: UALAQ

Hagens Berman represents employees in a proposed class action suit against United Airlines, claiming those charged with protecting the interests of the employee-owners in the employee stock ownership plan (ESOP) failed in their duties, costing the employee-owners billions of dollars.

According to the complaint, the plan trustees fell short of their duty when they failed to move ESOP holdings to less risky, more appropriate investments, all while failing to disclose that the stock was an imprudent investment.

The class includes all persons who participated in the UAL ESOP during the time period from November 17, 2001 until July of 2003. The case seeks to recover the damages suffered by these ESOP participants as the result of the precipitous decline in the price of UAL stock.


Recent Developments:

June 10, 2008 - Settlement Inquiries
If you are a former employee or retiree and have questions about the case settlement, you can reach the United HR Operations Center directly at (847) 700-3667 or via e-mail at hrhelp@united.com. When you submit your e-mail please include 'ESOP Settlement' in the subject line.

By contacting United HR directly this helps ensure all requests for address updates, reissued checks, etc. are taken care of quickly and efficiently.

August 14, 2007 - Pursuant to the Settlement Agreement, we have transferred the Net Settlement Fund to UAL for distribution. UAL is working with the ESOP trustee to determine who the eligible Settlement Class members are and how much each is owed. This is a labor intensive process that will take several months to complete. Each Class member's share of the settlement is determined on a pro rata basis, based on the number of shares of UAL stock that he or she held in the ESOP on July 1, 2001. For any current UAL employee, the settlement requires that the amount owed to the individual be deposited in his or her UAL 401(k) plan account.

For any former employee, the settlement requires that his or her amount be distributed directly to the individual. At this time, UAL cannot tell you if you are an eligible member of the Settlement Class or estimate what amount you might be eligible to receive.

If you believe you are a Settlement Class member, you are a former employee, your address has changed since you received the Official Notice of the Settlement in 2005, and you have not sent us your updated address since then, please provide your updated address to Lincoln Lounsbury at benefitsld@united.com who is heading up the distribution process at UAL. Please do not make other inquiries to UAL regarding the distribution as no other information is available at this time.

You do not need to do anything if you are: (i) still an employee at UAL, or (ii) your address has not changed since you received the Official Notice of the Settlement, or (iii) you have already provided us with your updated address -- in that case you should receive your payment under the Settlement automatically (either into your 401(k) account or directly).

August 2, 2007 - Pursuant to the Settlement Agreement, we have transferred the Net Settlement Fund to UAL for distrubtion. UAL is preparing to make the distribution, and this is a labor intenstive process that will take some time. If you believe you are a Settlement Class member and your address has changed since you received the Official Notice of the Settlement in 2005 and you have not sent us your updated address since then, please provide your updated address to Lincoln Lounsbury at benefitsld@united.com who is heading up the distribution process at UAL.

If you are Settlement Class member and you are:
(i) still an employee at UAL or
(ii) your address has not changed since you received the Offical Notice of the Settlement or
(iii) you have already provided us with your updated address

You should receive your payment under the Settlemennt automatically.

February 20, 2007 - The United States Supreme Court has denied our Petition asking them to review the decision of the Seventh Circuit Court of Appeals. Unfortunately, there are no further avenues for relief, and the litigation is now over.

UAL has agreed to handle the distribution of the proceeds of the Settlement with the ESOP Committee members. That Settlement was for a cash payment of $5.25 million. That amount, less the costs of the Court-approved fees and costs, will be distributed to Settlement Class members. Under the terms of that Settlement, Class members who are still employed at UAL will receive a cash distribution into their 401(k) accounts. Class members who are no longer employed at UAL will receive checks. If you are a Settlement Class member and your address has changed, you should notify us if you have not already done so.

September 25, 2006 - We have requested that the United States Supreme Court review the decision of the Court of Appeals. If the Supreme Court grants our request, we will ask the Court to allow the claims against State Street to proceed to trial. We expect to find out by mid-March whether or not the Supreme Court will grant our request to hear the appeal.

If the Supreme Court denies our request, then that will be the end of the litigation, and the proceeds from the partial settlement with the ESOP Committee members will be distributed.

June 28, 2006 � The Seventh-Circuit Court of Appeals has denied our appeal to the summary judgment dismissing all claims against State Street. The court found that State Street did not have a duty to advise the ESOP committee to diversify plaintiffs� stocks prior to the dramatic value decline in 2001 and 2002.

We are currently evaluating petitioning the court for a rehearing, or appealing the decision to the United States Supreme Court.

Click here to view the ruling.

February 6, 2006 - Plaintiffs filed their reply brief in support of their appeal of the trial court's summary judgment order and request for the Seventh Circuit to uphold the trial court's order approving the partial settlement.

January 6, 2006 - State Street filed its brief asking the Seventh Circuit to uphold the trial court's summary judgment order and to reverse the trial court's order approving the partial settlement.

December 6, 2005 - Plaintiffs filed their brief appealing the trial court's summary judgment order and asked the Seventh Circuit to allow the case to go to trial.

November 23, 2005 - The United States Court of Appeals for the Seventh Circuit consolidated Plaintiffs' appeal of the trial court's grant of summary judgment with State Street's appeal of the partial settlement. The two cases will be briefed and decided together. Briefing will be complete on February 20, 2006. No date has been set for argument, and it is impossible to predict when the appeals will be decided.

November 10, 2005 - State Street filed a notice appealing the partial settlement with the ESOP Committee. As a result, there will be no distribution of the settlement funds to the ESOP participants until the appeal has been resolved.

October 12, 2005 - The court granted summary judgment in favor of Defendant State Street Bank & Trust ("State Street"), and dismissed Plaintiffs' claims against State Street. State Street was the one remaining defendant in this action after the partial settlement with the ESOP Committee Defendants. Therefore, the trial that had been scheduled to begin on October 17, 2005 is canceled. Plaintiffs will file an appeal of the summary judgment decision in the United States Court of Appeals for the Seventh Circuit. Plaintiffs anticipate that their opening brief will be filed in late November, but it is impossible to predict how long it will be before the Court of Appeals renders its decision on the appeal. Further information on the appeal will be posted here as soon as it becomes available.

The Court also granted final approval to the partial settlement with the ESOP Committee.

August 23, 2005 - Class plaintiffs and the United Airlines Employee Stock Ownership Plan (ESOP) Committee have reached a proposed partial settlement. The suit against the remaining defendant, State Street Bank & Trust Company, will still proceed.

The court has granted preliminary approval of the settlement, and has scheduled a final approval hearing for Oct. 12, 2005.

For more information, read a copy of the proposed settlement and class notice.

March 24, 2005 - The court has set a trial date for October 17, 2005 in the UAL ESOP litigation. Hagens Berman Sobol Shapiro is preparing for the summary judgment briefing and the trial. Please continue to check www.hbsslaw.com for updates about the case.

February 21, 2005 - Late last week, U.S. District Court Judge Samuel Der-Yeghiayan granted Hagens Berman Sobol Shapiro's motion for class certification, allowing the case against the ESOP committee and State Street Bank to move forward. This is a great victory for class members and assures that they will have their day in court. The case will include every participant in or beneficiary of the UAL ESOP from July 19, 2001 to July of 2003.

To view the release announcing class certification, click here. To read the judge's order click here.

Though no trial date has been set, Hagens Berman Sobol Shapiro will continue with the discovery process, gathering evidence through depositions and other activities. Please continue to check the Web site for updates and court documents as the case moves forward.

February 11, 2005 - Hagens Berman has been hard at work on the case, handling a number of critical procedural issues. Here are the key developments of the last few months:

  • In December, we filed a motion for class certification on behalf of all participants in the UAL Employee Stock Ownership Plan from July 19, 2001 through the plan's termination in July 2003. If approved by the court, class representatives will be able to seek recovery of all the losses suffered by plan participants during this time period. Hagens Berman expects the court to issue a decision sometime in the next few months.

  • Since December, we have been working through the discovery phase. In this, we are gathering evidence supporting our case through depositions and other activities. The depositions include eight witnesses, including committee members Barry Wilson and Ira Levy, and the vice president of State Street, Kelly Driscoll, who oversaw the sales of UAL stock by the Plan.

  • We have heard from some class members about recent media coverage regarding UAL's Chapter 11 status, specifically relating to the company's pension plan. Please know that these issues have nothing to do with our case. Our case deals specifically with the employee-owned stock plan (ESOP).

Looking forward, there are some important dates to keep in mind:

  • February 9: Reports from our experts were due.

  • February 23: Expert reports from the defendants are due.

  • March 9: Discovery period ends.

  • April 8: The defendants will ask the court to issue a summary judgment, a routine request in cases of this type. We will then answer their motion and expect the court to rule later in the year.

Please continue to check www.hagens-berman.com for updates and court documents.

December 14, 2004 - Class representatives Jerry Summers, George Lenormand, Jeffrey Crites, Louise Van Rensburg, and James E. Shambo have filed a motion asking the court to certify this case as a class action, on behalf of all participants in the UAL Corporation Employee Stock Ownership Plan from July 19, 2001 through the plan's termination in July of 2003.

The briefing on this motion will be complete by the end of this year, and a decision is expected early in the new year. If successful, this motion will allow the class representatives to seek to recover all the losses suffered by plan participants during this time period.

Read the class certification brief for more information.

November 24, 2004 - Plaintiffs filed a Third Amended Complaint adding three new class representaives: Jeffrey Crites, Louise Van Rensburg and James Shambo, in addition to the original class representatives, Jerry Summers and George Lenormand. With the addition of these representatives, the Third Amended Complaint now has strong representatives from a spectrum of current and former UAL employees, and plaintiffs will soon be filing their motion for class certification.

Read the Third Amended Complaint.

July 28, 2004 - Federal District Court Judge Der-Yeghiayan granted plaintiffs' motion to file an amended complaint in the United Airlines (UAL) ESOP class action. The court rules require that a plaintiff obtain permission before making substantive changes to a complaint.

The original complaint, filed February 28, 2003, represents a class of UAL employees, seeking to recover approximately $2 billion dollars in losses they suffered when United Airlines stock declined as the company descended into bankruptcy.

The most significant change in the amended complaint is the addition of State Street Bank and Trust Company (State Street) as a defendant. The amended complaint claims that State Street breached its fiduciary duties as trustee of the ESOP. The ESOP committee and its members remain defendants, although their liability is limited to coverage provided under any available insurance policy or policies.

The claims against State Street were added as a result of documents Hagens Berman obtained pursuant to a stipulation in the bankruptcy court between the ESOP Plaintiffs, the ESOP Committee, and UAL. As a result of the stipulation, the bankruptcy court entered an order on June 18, 2004 that allowed Plaintiffs' claims to proceed in the district court.

Based on newly obtained documents including the ESOP Committee meeting minutes, the amended complaint alleges the following:

  • State Street served as the Trustee to the ESOP, and had fiduciary obligations to the ESOP participants under ERISA.

  • "As of the beginning of the Class period [July of 2001], UAL faced imminent bankruptcy; yet, although State Street attended every meeting of the ESOP Committee, State Street never questioned the actions of the ESOP Committee until August 20, 2002. By this time UAL stock had lost most of its value."

  • "Even after placing UAL stock on its 'watch list' in February of 2002 due to the Company's precarious state and the risk of bankruptcy, State Street continued to hold and acquire UAL stock and did not question the Committee Members' inaction or even inform the Committee that State Street had placed UAL stock on the watch list and that ERISA mandated an objective assessment as to the continued prudence of maintaining all of the Plan's assets in UAL stock."

  • "Significantly, once State Street belatedly informed [ESOP] Committee Members as to the scope of their duties under ERISA and informed them that ERISA required that the Plan requirement of 100% investment in UAL stock must be disregarded when such holdings became imprudent, the Committee Members were quick to appoint State Street as Investment Manager. As State Street recognized, it was at all times under a duty to monitor the prudence of UAL stock as an investment, and to override any orders to buy or hold UAL stock if such order was itself disloyal, imprudent, or otherwise inconsistent with ERISA. Throughout the Class Period, all orders to buy or hold UAL stock were imprudent and contrary to ERISA and should have been overridden by State Street."

  • "Regardless of the wording of the ESOP documents, all Defendants were bound by their duties of prudence and loyalty to disregard the Plan's requirements when, as here, following the Plan's requirements was itself disloyal and imprudent. Regardless of any terms of the Plan, all Defendants had a duty under 29 U.S.C. � 1104(a)(D) to: (1) cease making purchases of Company stock in the ESOP, and (2) sell all or large portions of the Company stock that was then in the ESOP."

Click HERE to read the amended complaint.

January 6, 2004 - United Airlines (UAL) ESOP plaintiffs today objected to a proposed claims estimation procedure that "clearly designed to permit [UAL] to manipulate the claims estimation process to their benefit." The claims estimation procedure will determine what, if any, relief goes to ESOP members whose retirements were diminished or wiped out in the company's bankruptcy.

Filed in Illinois bankruptcy court, the objection lists several deficiencies of the proposed claims estimation process, including complete control over the discovery process and the presentation of evidence by UAL.

More information is available in the court filing.

Update - October 21, 2003
Bankruptcy Judge Eugene Wedoff, the judge presiding over UAL's bankruptcy, has issued an order staying our claims on behalf of the ESOP. Read the court order.

This order means that the claims against the ESOP Committee and its members cannot proceed in the normal District Court. Even though the claims were against the ESOP Committee and its members, the bankruptcy court found that the claims were essentially against UAL itself, since UAL has an obligation to "indemnify" the Committee members for any damages they may be ordered to pay to the ESOP participants.

Hagens Berman has filed a "proof of claim" in the bankruptcy court against UAL on behalf of a proposed class of ESOP participants and beneficiaries alleging that UAL itself breached its fiduciary obligations under ERISA and thereby caused plan participants and beneficiaries to lose massive amounts of money.

Because UAL is facing thousands of claims from thousands of creditors, the airline is in the process of proposing a methodology for resolving the claims against it through summary proceedings in bankruptcy. These proceedings will include discovery, attempts by UAL to dismiss the claim, and - if the claim survives UAL's efforts to dismiss it - an estimation of the value of the claim will occur.

While it is impossible to predict how long the bankruptcy proceedings will last, and how much ESOP participants will recover in the bankruptcy proceedings, if any amount at all, Hagens Berman will take all necessary actions within the bankruptcy proceedings to maximize participants' chances of obtaining some recovery. In addition, Hagens Berman continues to investigate the potential liability of other parties.