MacTaggert, Scott v. Professional Fiduciary Services LLC

CourtDistrict Court, W.D. Wisconsin
DecidedJune 20, 2025
Docket3:22-cv-00371
StatusUnknown

This text of MacTaggert, Scott v. Professional Fiduciary Services LLC (MacTaggert, Scott v. Professional Fiduciary Services LLC) is published on Counsel Stack Legal Research, covering District Court, W.D. Wisconsin primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
MacTaggert, Scott v. Professional Fiduciary Services LLC, (W.D. Wis. 2025).

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WISCONSIN _________________________________________________________________________________

SCOTT MACTAGGERT, on behalf of the Extreme Engineering Solutions, Inc. Employee Stock Ownership Plan, and on behalf of a class of all other persons similarly situated,

Plaintiffs, OPINION and ORDER

v. 22-cv-371-wmc

PROFESSIONAL FIDUCIARY SERVICES, LLC, JOHN MICHAEL MAIER, ROBERT S. SCIDMORE and BRET FARNUM,

Defendants. _________________________________________________________________________________

Plaintiff Scott MacTaggert is a participant in an employee stock ownership plan (“the ESOP”) for employees of Extreme Engineering Solutions, Inc., a company that designs, manufactures and tests computing products. In this putative class action under the Employee Retirement Income Security Act (“ERISA”) 29 U.S.C. § 1001, et al, brought on behalf of the ESOP and other ESOP participants, plaintiff claims that the ESOP overpaid for Extreme Engineering’s stock in a transaction facilitated by defendant Professional Fiduciary Services, LLC (“PFS”). More specifically, plaintiff claims that PFS and its owner, John Michael Maier, violated various ERISA provisions in conjunction with the transaction, as did two executives of Extreme Engineering who sold their shares back to the company in advance of the ESOP transaction. All defendants have moved to dismiss plaintiff’s complaint for lack of standing under Federal Rule of Civil Procedure 12(b)(1) and failure to state a claim under Rule 12(b)(6). The court will grant that motion because plaintiff has failed to plead an injury- in-fact, as required to show that he has standing to sue. However, plaintiff will be given a chance to file an amended complaint, so long as he has a good faith basis for doing so.1

ALLEGATIONS OF FACT2 In 2018, Extreme Engineering, a privately held entity, created the ESOP at issue in this case. The ESOP invests primarily in the employer securities of Extreme Engineering for the benefit of the company’s employees, who were allocated shares of Extreme

Engineering stock that were set up as individual accounts. Extreme Engineering appointed defendant PFS as trustee of the Plan. During the relevant time period, defendant John Michael Maier was the sole member and decision maker for PFS. PFS was responsible for negotiating and authorizing the purchase of Extreme Engineering stock on behalf of the ESOP, including ensuring that the ESOP paid no more than fair market value for the stock. Because Extreme Engineering is not a publicly traded

company, PFS obtained an appraisal to determine the value of the company’s stock. The appraisal included an industry and economic analysis comparing the value of similar companies, as well as financial projections provided by the company to PFS. According to

1 Also before the court is plaintiff’s motion for leave to file a surreply in opposition to defendants PFS and Maier’s motion to dismiss (dkt. #46), which prompted a flurry of additional filings by all parties. Although most of plaintiff’s arguments were repetitive, the motion will be granted and the court has considered all filings by the parties.

2 The following allegations are drawn from plaintiff’s complaint and accepted as true for purposes of resolving defendants’ pending motion to dismiss McCray v. Wilkie, 966 F.3d 616, 618 (7th Cir. 2020), although additional allegations from the complaint are included in the opinion section. plaintiff, however, the comparator companies had “different characteristics than Extreme Engineering” and the “financial projections were unreasonably optimistic.” (Cpt. (dkt. #1) ¶¶ 51, 52.)

To effectuate the ESOP transaction, Extreme Engineering first purchased all of the company’s outstanding shares of common stock from defendant Robert S. Scidmore, the company’s CEO, defendant Bret Farnum, the company’s Vice President of Sales, and other individuals. The ESOP then purchased all of the company’s common stock from Extreme Engineering for $80,377,400, financed by a 50-year loan from Extreme Engineering to the

ESOP, at an interest rate of 3.15%. After the close of the transaction, Extreme Engineering became 100% employee owned. According to plaintiff, the ESOP overpaid for Extreme Engineering stock because PFS failed to perform sufficient due diligence by, among other things, relying on “unrealistic growth projections, unreliable or out-of-date financials, improper discount rates, inappropriate comparable companies, and/or other factors that rendered its valuation

of Extreme Engineering stock in the ESOP transaction faulty.” (Id. ¶ 53.) In addition, plaintiff alleges that the ESOP likely paid a “control premium” for Extreme Engineering stock, but did not obtain control over the company. (Id. ¶ 47.)

OPINION Plaintiff now brings claims against PFS and Maier (“the Trustee Defendants”), as

well as Scidmore and Farnum as officers of Extreme Engineering (“Selling Shareholder Defendants”). Plaintiff contends that the Trustee Defendants: (1) caused the ESOP to engage in a prohibited transaction under 29 U.S.C. § 1106(a) when they purchased stock from interested parties (Count I); (2) breached their fiduciary duties under § 1104(a)(1) by failing to undertake an appropriate and independent investigation of the fair market

value of the Extreme Engineering stock (Count II); and (3) breached their fiduciary duties under § 1110(a) by entering into an indemnification agreement that attempts to relieve the Trustee Defendants’ liability for beach of fiduciary duty under ERISA (Count III). In Count IV, plaintiff claims that the Shareholder Defendants violated § 1132(a)(3), by “knowingly participating” in a prohibited transaction. Plaintiff contends that the Trustee

Defendants are liable to the ESOP for the difference between the price paid by the ESOP and the fair market value of Extreme Engineering shares at the time of the ESOP Transaction. They contend that the Selling Shareholder Defendants are liable to the ESOP for the difference between the price they received and the fair market value of their Extreme Engineering shares at the time of the ESOP transaction. Defendants move to dismiss three of these claims for lack of standing under Article

III of the U.S. Constitution and failure to state a claim under ERISA. Because constitutional standing is a threshold, jurisdictional question, the court will address that first. As discussed below, the court concludes that the allegations in the complaint fail to show that plaintiff has suffered an injury-in-fact and thus, the case must be dismissed for lack of subject matter jurisdiction, although with leave to amend the complaint to address this defect. I. Standing To establish standing to sue, a plaintiff must show three things: (1) plaintiff suffered an “injury in fact”; (2) the injury is “fairly traceable” to the challenged conduct of the

defendant; and (3) the injury “is likely to be redressed” if the plaintiff obtains a “favorable judicial decision” at the close of the lawsuit. Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016). Moreover, “Article III standing requires a concrete injury even in the context of a statutory violation,” so “a plaintiff [does not] automatically satisf[y] the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” Id. at 341 (emphasis added). See also Thole v.

U.S. Bank, 590 U.S.

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MacTaggert, Scott v. Professional Fiduciary Services LLC, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mactaggert-scott-v-professional-fiduciary-services-llc-wiwd-2025.