Settlement approved in Thalhimer ESOP lawsuit; remaining claims dismissed

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Cushman & Wakefield | Thalhimer’s headquarters in Short Pump. (BizSense file photo)

Local real estate firm Thalhimer has officially rid itself of a nearly two-year legal dispute with a former longtime employee.

A federal judge last week approved a settlement that ends the lawsuit filed in fall 2017 by Steven Brincefield, who retired from Thalhimer in 2012 as head of property management.

Brincefield claimed Thalhimer leadership was to blame for a then-decline in the value of its employee stock ownership plan in the wake of financial troubles and an accounting scheme at its now-defunct construction subsidiary, MGT Construction.

(BizSense file photo)

Thalhimer denied the allegations from the outset, claiming Brincefield’s case had no merit and was fueled by “conspiracy theories and unabashed rage.” The company chipped away at Brincefield’s claims, successfully getting some dismissed, while stating throughout that the ESOP since had been made whole from any damage caused by the problems with MGT, which is still going through bankruptcy.

As the case dragged on and with a trial date looming, the two sides ultimately decided to settle, prompted by a threat from Judge John Gibney to send the case to a so-called special master, which would have prolonged the case further and driven up costs for all involved.

The settlement calls for a total of $1.75 million to be paid by insurance policies covering Thalhimer and the trustee who previously oversaw the company’s ESOP. The total includes $700,000 to be paid to Brincefield, $825,000 for Brincefield’s lawyers and $225,000 to be paid into the stock plan.

The settlement allowed Thalhimer to end the case without admitting fault or liability and to untether itself from any future attachment to Brincefield, by having him turn over his remaining shares of Thalhimer stock.

“We are pleased to put this behind us,” Thalhimer CEO Lee Warfield said in an email. “Our company has pushed through the distraction and remained intensely focused on serving our clients, growing our business. We’ve been successful at both. It’s a testimony to the strength of our brand and the tenacity of our associates.”

The settlement was related only to Brincefield’s alleged counts of breach of fiduciary duty and breach of contract against Thalhimer, as well as alleged violations of provisions of ERISA, the federal statute that governs employee stock ownership plans.

As part of the settlement, Brincefield’s derivative claims – those filed by him on behalf of Thalhimer and his fellow shareholders – were dismissed.

Judge Gibney, who throughout the case expressed frustration with both sides, continued that theme at last week’s hearing. In the end, he questioned whether the Thalhimer executives named as defendants ultimately would benefit financially from the settlement money being paid into the ESOP. He also pushed Brincefield’s camp on why it settled for an amount that’s far less than what it had sought.

Judge had concerns

Gibney, before ruling to approve the settlement, expressed his concern that derivative claims were tossed aside for a settlement that largely paid Brincefield and his attorneys.

“The problem is this case deals with the rights of 400 people,” Gibney said, referring to the 400 or so participants in the Thalhimer ESOP. “You can’t just drop a derivative claim and say, ‘I’m abandoning all these clients.’ It’s other peoples’ money that we’re dealing with.”

The defendants in the suit were Warfield; former longtime Thalhimer CEO and Chairman Paul Silver; executive vice president Evan Magrill; CFO David Dustin; Jeff Bisger, former head of what’s now Thalhimer Realty Partners; and Lance Studdard, an ESOP consultant hired by the company.

Thalhimer and its executives were represented by Charles Sims of O’Hagan Meyer and a group from Williams Mullen led by Laura Windsor.

Brincefield was represented in the case by John and Michelle Craddock of Craddock Law Firm. They had no comment on the outcome.

The settlement first had to gain approval from the trustee overseeing the ongoing bankruptcy of MGT Construction. The Chapter 7 case remains active, with trustee Harry Shaia and a group of attorneys continuing to dig for assets to repay to MGT’s many creditors. Its February 2018 bankruptcy filing showed more than $28 million in debt owed to more than 500 creditors.

Federal authorities, including the FBI, earlier this year began to investigate the scheme that led to MGT’s downfall. No charges have resulted and it’s unclear whether that investigation continues.

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