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Casino Queen's parent company has agreed to settle a proposed class action lawsuit filed by employees, who alleged that an overinflated stock purchase through their Employee Stock Ownership Plan (ESOP) cost them tens of millions of dollars. The settlement was outlined in a joint filing Thursday in an Illinois federal court.

U.S. District Judge David W. Dugan granted a pause in the case on Tuesday, allowing the parties to finalize their agreement. The workers and CQ Holding Co. Inc.'s board of directors are working toward a full settlement, which will also resolve an appeal pending before the Seventh Circuit. The casino’s parent company had challenged the district court’s earlier decision to keep the case out of arbitration.

The judge set a deadline of Nov. 12 for the parties to file a motion for preliminary approval of the settlement.

Casino Queen Worker settlement : Overinflated Stock Purchase at Issue

The dispute stems from Casino Queen’s 2012 sale of $170 million worth of company stock to its employee ESOP. Workers, led by plaintiffs Tom Hensiek, Jason Gill, and later Lillian Wrobel, filed the lawsuit in April 2020. They claimed the casino's stock was significantly overvalued in the deal, violating the Employee Retirement Income Security Act (ERISA). The workers allege the company had failed to find an external buyer for the casino, located in East St. Louis, Illinois, and instead pushed the stock onto the ESOP at an inflated price.

The workers said they discovered in 2019 that the stock was worth much less than what they were told during the 2012 transaction. The lawsuit accuses CQ Holding Co.'s board, the plan's administrative committee, and several individuals of breaching their fiduciary duties under ERISA by not acting in the best interests of the plan participants.

Arbitration Dispute and Class Action Scope

Casino Queen attempted to move the lawsuit into arbitration, citing a 2018 amendment to the ESOP that required binding individual arbitration for claims related to the plan. The amendment was applied retroactively to 2017. However, Judge Dugan ruled in January 2021 that the arbitration agreement unfairly favored the company, finding it invalid.

The proposed class of plaintiffs in the Casino Queen worker settlement consists of around 620 participants in the employee stock plan, all of whom were affected by the alleged stock overvaluation.

Casino Queen Worker settlement : Settlement and Next Steps

The Casino Queen worker settlement is expected to resolve both the class action and the pending appeal in the Seventh Circuit. Once finalized, the settlement will be submitted for court approval, with a motion for preliminary approval set to be filed by Nov. 12.

Legal Teams Involved

The workers are represented by attorneys Michelle C. Yau and Ryan A. Wheeler of Cohen Milstein Sellers & Toll PLLC, as well as Shaun Martin of Stris & Maher LLP. Casino Queen and the other defendants are represented by a large team of attorneys from firms including Groom Law Group, Dentons US LLP, Heyl Royster, and others.