Western Global Airlines Seeks Dismissal of Class Action on ESOP Claims

Shareholders of Western Global Airlines (WGA) are actively seeking the dismissal or reduction of claims arising from a class action suit related to the company’s employee stock ownership plan (ESOP). The suit alleges prohibited financial transactions, and the U.S. Department of Labor (DOL) is conducting its own investigation into the circumstances surrounding the ESOP transactions.

The Neff family shareholders, in response to the class action, are requesting the U.S. Bankruptcy Court in Delaware to subordinate the ESOP claims to those of general unsecured creditors and to potentially reduce them to zero or disallow them entirely. In their objection filed on October 17, WGA and its debtor subsidiaries, currently under Chapter 11 bankruptcy protection, argue that the ESOP claims should be disallowed for the purpose of voting on the airline’s restructuring plan.

A court hearing is scheduled for November 13 before Judge Karen B. Owens, with the possibility of the court granting the order without further notice or hearing if no responses to the shareholders’ objection are filed.

The class action suit, filed in the Delaware District Court, alleges that the ESOP’s fiduciaries and the company’s owners violated the Employee Retirement Income Security Act (ERISA) by selling a significant portion of the airline’s stock to the ESOP at a “grossly inflated” price, causing detriment to employees whose retirements are held in the plan. The DOL is concurrently investigating the ESOP transaction and the role of the Neff family, claiming wrongful receipt of $182 million more than their stock was worth.

In response to the class action suit, the Neff family submitted a 103-page response to the Delaware District Court, asserting that they acted in the best interests of the company’s employees when establishing the ESOP. They defended the fairness of the settlement and alleged that the lawsuit was solicited by third-party lawyers targeting employees. The Neff family is confident in proving the falsity of the material allegations and emphasizes that the allegations have caused irreparable harm to the company and its employees.

As the legal battle unfolds, stay tuned for updates on the resolution of the class action suit against Western Global Airlines.