Chicago Judge Greenlights ESOP Class Action Suit
The consulting firm West Monroe Partners is charged with shortchanging workers who cashed out of its defined contribution employee stock ownership plan.
A federal judge in Chicago certified a class of former employees suing the consulting firm West Monroe Partners, allowing their claims to proceed collectively based on allegations that the company undervalued its stock and shortchanged workers cashing out of its defined contribution employee stock ownership plan.
In a ruling issued March 27 in Daly v. West Monroe Partners Inc., U.S. District Judge John Robert Blakey, presiding in U.S. District Court for the Northern District of Illinois, allowed the case to move forward as a class action under federal rules governing group litigation. The decision covers about 146 former participants in the company’s employee stock ownership plan who sold their shares in 2021 based on a company valuation of $515.18 per share.
The complaint centers on a striking discrepancy. Weeks after those employees were paid out, West Monroe sold a 50% stake in the company to a private equity firm at $1,616 per share—more than three times the earlier valuation, raising questions about whether employees were paid fair market value.
The plaintiffs argue that the earlier valuation “grossly undervalued” the company and that fiduciaries failed to act prudently or disclose key information that might have influenced employees’ decisions to sell.
As such, the plaintiffs, led by former employee Matthew Daly, contend that West Monroe and its advisers breached their duties under the Employee Retirement Income Security Act by conducting a flawed 2020 valuation and using it to buy back shares from departing employees.
Common Claims
In granting class certification, Blakey concluded that the plaintiffs had met the requirements to proceed as a group, emphasizing that all class members were affected by the same alleged conduct of selling their shares at the 2020 valuation.
The court found that the claims shared a “common nucleus of operative facts,” including whether fiduciaries breached their duties by using the disputed valuation and failing to disclose material information.
Blakey also rejected arguments by the defendants that differences among plan participants or potential conflicts should block certification, finding no meaningful intra-class conflict at this stage.
ESOP Litigation in Focus
The decision highlights the growing scrutiny on ESOPs, particularly those in private companies, with valuations often less transparent than in public markets.
Such plans, which invest primarily in employer stock, can expose workers to significant risk if valuations are inaccurate or influenced by company insiders. The plaintiffs in this case allege that West Monroe’s leadership stood to benefit by repurchasing shares at a lower price before announcing a higher valuation tied to the private equity deal.
According to Encore Fiduciary, there were 14 class lawsuits targeting ESOPs in 2025, all alleging improper valuations of company stock or insider benefit from a transaction. Last year also saw 11 settlements in ESOP complaints, with awards ranging from $450,000 to $84 million.
However, Daniel Aronowitz, the assistant secretary of Labor and current head of the Employee Benefits Security Administration, swore to “end the war on ESOPs” during his confirmation hearing last year. Under President Donald Trump, the Department of Labor has deemphasized ESOP enforcement.
Additionally, ESOPs recently have received favorable views from members of Congress on a bipartisan basis. The Senate unanimously passed ESOP bills in 2025 that would both mitigate valuation risks and add two representatives of ESOP interests to the DOL’s ERISA Advisory Council.
It is still too soon to tell how those changes might influence ongoing or future ESOP litigation.
As for the West Monroe case, it now moves into the next phase of litigation, in which the merits of the plaintiffs’ claims—whether the valuation process was flawed and whether fiduciary duties were breached—will be tested.
Sanford Heisler Sharp McKnight LLP and Berger Montague P.C. represent the plaintiffs, while Cassiday Schade LLP and Morrissey Legal Group represent the defendants.