Full opinion text
MEMORANDUM-DECISION and ORDER HURD, District Judge. I. INTRODUCTION Plaintiffs Joseph Henry and Michael Malinky (collectively “plaintiff’), who are participants in defendant CommutAir’s Employee Stock Ownership Plan (“ESOP”), brought suit against defendants (Champlain Enterprises, Inc., d/b/a Com-mutAir, Antony Von Elbe, John Arthur Sullivan, Jr., Ernest James Drollette, Andrew Price, William L. Owens, Champlain Air, Inc., and U.S. Trust Company of California, N.A.), alleging three causes of action: Count One — claiming breaches of fiduciary duties in violation of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, 29 U.S.C. §§ 1104, 1105, 1106; Count Two — seeking removal of fiduciaries under the equitable relief provision of ERISA, 29 U.S.C. § 1109(a); and Count Three — claiming breach of fiduciary duty, unjust enrichment, and corporate waste and diversion of assets in violation of state law. The following motions were filed and are pending: (1) plaintiffs and defendants’ motions for partial summary judgment on Count One pursuant to Fed.R.Civ.P. 56, (Docket Nos. 52, 55, 63); (2) plaintiffs motion in limine pursuant to Fed. R. Evid. 104(a) and 702, (Docket No. 70); (3) plaintiffs motion to strike portions of certain affidavits and declarations submitted in support of defendants’ motion for partial summary judgment, pursuant to Fed. R.Civ.P. 37(c)(1) and the parol evidence rule, (Docket No. 71); and (4) defendants’ motion for bifurcation pursuant to Fed. R.Civ.P. 42(b), (Docket No. 54). Oral argument was heard October 3, 2003, in Uti-ca, New York. Decision was reserved. II. FACTUAL BACKGROUND CommutAir is a company based in Plattsburgh, New York that offers regional airline service to cities in the northeastern and midwestern sections of the United States. (Docket No. 65, ¶ 2; Docket No. 66, ¶ 3.) Prior to mid-March of 1994, the company was wholly owned by its founding members, defendants Anthony von Elbe (“von Elbe”), John Arthur Sullivan, Jr. (“Sullivan”), and Ernest James Drollette (“Drollette”) (collectively “the sellers”), who all served on the board of directors. In late 1993, CommutAir and the sellers were investigating ways to raise more capital to expand its regional operation. At the same time, concern was expressed about employee retention and a desire was indicated to expand an already implemented employee profit-sharing program. To accommodate both goals, the sellers began exploring the possibility of establishing the ESOP and selling to it some of their shares of CommutAir stock. Defendant William L. Owens (“Owens”) — who sat on the CommutAir board of directors, became aware of the proposed sale in late 1993, and was told that it would go forward in January of 1994 — was to represent the sellers in the. proposed transaction. (Docket No. 58, Ex. 5, p. 10; Docket No. 64, Ex. 5, pp. 34, 36.) In late 1993 and early 1994, a law firm, Keck, Mahin & Cate (“KMC”), a trust company, defendant U.S. Trust Company of California, N.A. (“Trustee”), and an appraisal firm, Houlihan, Lokey, Howard, & Zukin, Inc. (“HLHZ”), were contacted by the company to discuss aspects of the proposed transaction. (Docket No. 58, Ex. 3, p. 67.) On January 4, 1999, in a letter addressed to seller Sullivan, in his capacity as CommutAir president, KMC offered its services to the Trustee and ESOP in connection with the proposed transaction. (Docket No. 80, Ex. 11.) Defendant Andrew Price (“Price”) — who became aware of the proposed transaction in January of 1994 — was asked by one or more of the sellers to prepare management projections of the company’s future financial performance to be used in connection with the sale. He was made aware that the projections would be used by HLHZ in its appraisal of the company. (Docket No. 79, Ex. 4, pp. 35-36.) He had never before prepared projections for use in such valuations, though he had prepared income projections on prior occasions. Id. at 166. Price could not recall if he had been or was subsequently in communication with HLHZ regarding the projections, id. at 36, though HLHZ claims to have had at least three or four meetings with him discussing the topic, (Docket No. 58, Ex. 4, p. 111.) Price claims, however, that no input on the projections was received from HLHZ. (Docket No. 79, Ex. 4, p. 134.) For the projections, dated January 5, 1994, Price used actual operating results from the company’s performance from 1992 through October of 1993. Id. at 127-28. The years 1990 and 1991 were not used allegedly because of the “growth period” CommutAir experienced in 1992 and 1993. Id. at 129-20. The projections essentially forecasted significant increases in projected revenue, operating profits, and pre-tax profit. Id. at 133. An allegedly revised set of projections was issued on January 17, 1994, though Price could not recall making the document. Id. at 134-35. Plaintiff claims the revision was necessary to correct the projections in light of financial information from the remainder of 1993 that stood in contrast to the increases projected by Price. The company’s actual financial results for the years in the projection period did not attain the levels forecasted by the projections. Price could not recall any information coming to his attention between January 17, 1994, and March 30, 1994, the projected date of closing for the transaction, that would have affected his projections. Id. at ,168. On January 17, 1994, HLHZ sent a letter to the trustee regarding the transaction. By letter dated January 19, 1994, addressed to Trustee representative Norman Goldberg (“Goldberg”) from seller Sullivan, the general terms of the proposed transaction were outlined. The next day, on January 20, 1994, the law firm, KMC, sent a memorandum to Goldberg, representatives from HLHZ, sellers Sullivan and von Elbe, and Price, summarizing issues that had been discussed at a meeting the week before. The general terms of the proposed transaction were again outlined, including the sellers “anticipat[ion] that the size of the transaction will be $60 million, as they believe[d] that COMMU-TAIR [was] worth at least $200 million.” (Docket No. 81, Ex. 27.) The sellers’ opinion of the company’s value was apparently based on discussions it had in the months and, perhaps, years prior to 1994 with “quote, unquote investment bankers” regarding possible mergers in which Com-mutAir was valued from $150 million to $250 million. (Docket No. 58, Ex. 4, p. 53; Docket No. 64, Ex. 1, pp. 20-21.) No independent analysis was done by the company to arrive at the $60 million proposed purchase price. (Docket No. 64, Ex. 1, p. 82; Id. at Ex. 5, p. 35; Docket No. 79, Ex. 4, pp. 218-20.) The KMC-authored letter opined that a number of steps would have to be undertaken prior to the closing on the transaction, which was “tentatively scheduled for March 15[, 1994].” (Docket No. 81, Ex. 27.) The desire was expressed to have this completed “by the end of February (and hopefully sooner)[.]” Id. First, the sellers had to finalize their initial offer. (Docket No. 64, Ex. 6.) Defendants claim the above letter written to the Trustee dated January 19, 1994, was the initial offer. In that letter, written to Goldberg from seller Sullivan, the sellers “propose[d] to sell to an employee stock ownership plan to be formed (“ESOP”) not less than thirty (30%) of the outstanding stock of [CommutAir] for a total purchase price of $60,000,000.” (Docket No. 60, Ex. A.) The sellers indicated their anticipation that the purchase would be financed through two loans — a cash loan from Com-mutAir for a fraction of the purchase price, to be used as a down payment, and promissory notes issued to the sellers for the remainder of the purchase price. Id. The loans were to be secured by the stock being purchased. The stock sold would comprise a yet to be formed class of convertible preferred stock that was to issue to the sellers just prior to the sale. The stock would pay a cumulative dividend of “6%-7%,” the proceeds of which would be used, along with mandatory contributions to the ESOP from CommutAir, to pay down the indebtedness on the loans. Id. No independent appraisal or investment banking firm was used to value the company and come up with the terms of the offer. (Docket No. 58, Ex. 5, p. 61.) Then, per the January 20, 1994, memorandum, the law firm (KMC) and the appraisal firm (HLHZ), on behalf of the Trustee, had to conduct a due diligence investigation of CommutAir to determine the fairness of the offer. This investigation involved engaging independent contractors to prepare an appraisal and/or fairness opinion on the proposed transaction by visiting the company, interviewing management, and reviewing CommutAir’s financial and other records. Id.,Ex. 3, pp. 40-42. Assuming no issues arose regarding the value of the company during such investigation, KMC and HLHZ were to advise the Trustee on the fairness of the offer presented. On January 26, 1994, CommutAir’s board of directors, which included the sellers, officially hired the Trustee to be the sole representative of the ESOP in its purchase of the convertible preferred stock. (Docket No. 65, ¶¶ 3-4.) Around the same time, the Trustee retained KMC as legal counsel for the ESOP. (Docket No. 60, ¶ 2.) About a week later, HLHZ sent an engagement letter to seller Price, asking that all three original copies of the engagement be sent to the Trustee, who would then return a copy to CommutAir for its records. HLHZ was to act as the plan’s financial advisor. The engagement letter was signed by a CommutAir representative on February 9, 1994, but was not signed by the Trustee until February 14, 1994, ten days after it was written. (Docket No. 58, Ex. 4, p. 26.) The letter noted that Price and an HLHZ representative “expect[ed] to derive preliminary valuation conclusions within the next 7-10 days.” (Docket No. 64, Ex. 8.) By this time, the Jan 5 and/or Jan 17 management projections were presumably in the possession of HLHZ. In February of 1994, “fare wars” broke out among the airlines, resulting in slashed ticket prices. HLHZ was aware, at the very least, that a CommutAir competitor had entered the market and was reducing ticket prices. (Docket No. 58, Ex. 4, p. 112.) The competitor’s program slashing ticket prices lasted six months. (Docket No. 79, Ex. 4, p. 178.) Price was also aware of the fare wars. Id. at 172-73. Despite what plaintiffs claim are the negative impacts such wars had or would have on CommutAir’s financial performance, neither Price nor any other member of the company’s management submitted adjusted financial projections to the appraisal firm. Price contends that he did not revise the projections because, from his experience in the airline industry, fare wars are a “short-lived phenomenon.” Id. at 176. In his view, the competitor’s slashing of ticket prices was “simply an action by a carrier that was trying to promote new business and it may or may not succeed.” Id. at 177. By letter dated March 7, 1994, HLHZ presented to Goldberg its first draft in connection with the proposed transaction. (Docket No. 58, Ex. 4, p. 29.) In early March, the Trustee spent “considerable time” going over the appraisal firm’s initial “valuation.” Id. at Ex. 3, p. 79; see also id., Exh. 6, p 54. Representatives of the Trustee also spent time reviewing the management projections Price provided to HLHZ. Id.; see also id., Ex. 6, pp. 44-45. On March 10, 1994, HLHZ sent to the Trustee a fax concerning events that were material or potentially material to the appraisal firm’s work on the proposed transaction. Id., Ex. 6, pp. 69-70. Among the issues addressed in the fax was the fare wars. Id. Defendants claim the initial offer by the sellers was rejected. (Docket No. 60, ¶ 3.) According to Goldberg, after the ESOP legal counsel provided him with a draft sheet of certain terms he hoped to incorporate into the transaction, (Docket No. 59, ¶ 5), negotiations were undertaken with CommutAir to enhance the value of the proposed stock, (Docket No. 58, Ex. 3, p. 78.) These negotiations mainly pertained to the dividends to which the stock was entitled, and eventually resulted in alterations favorable to the ESOP. There is no evidence the purchase price was ever directly discussed as part of the negotiations. In March of 1994, after completion of its due diligence obligations, HLHZ submitted to the Trustee an “Opinion Memorandum.” (Docket No. 81, Exh. 17.) In the document, the appraisal firm states that it “relied upon and assumed, without independent verification, that the financial forecasts and projections provided to [it] ha[d] been reasonably prepared and re-fleet[ed] the best currently available estimates of future financial results and condition of [CommutAir], and that there ha[d] been no material adverse change in the assets, financial condition, business or prospects of [CommutAir] since the date of the most recent financial statements made available to [it].” Id. The letter went on to note that HLHZ “ha[d] not independently verified the accuracy and completeness of the information supplied to [it] with respect to [CommutAir] and d[id] not assume any responsibility with respect to it. [It] ha[d] not made a complete physical inspection or any independent appraisal of any of the properties or assets of [Commu-tAir]. [Its] Opinion [wa]s necessarily based on business, economic, market and other conditions as they exist[ed] and c[ould] be evaluated ... at the date of th[e] letter.” Id. The two main valuation methodologies used by HLHZ were the market capitalization approach and the discounted cash flow method. Despite finding the total equity value of the company to be $174 million — and not the $200 million “anticipated” by the sellers— HLHZ determined that the proposed transaction was reasonably stated at $111.11 per share for a purchase price of $60 million because the value of the stock was increased by dividend rights and other features. On March 15, 1994, the CommutAir board of directors, including the sellers, adopted resolutions recapitalizing the company, creating the new class of stock consisting of the soon to be sold convertible preferred stock, creating the ESOP and the trust agreement, and amending its certificate of incorporation to reflect these changes. (Docket No. 80, Ex. 26.) Previously, the sellers had owned all of the company’s outstanding shares, which consisted of 180 shares of voting common stock. Per the amendment, the sellers were to surrender those shares in exchange for 1.26 million shares of common stock and 540,000 shares of convertible preferred stock. The sellers were then to sell the 540,000 shares to the ESOP for $60 million, or $111.11 per share, after the convertible preferred stock was appraised and the transaction approved by the Trustee. As stated in the initial offer, the down payment of the purchase price was to be loaned to the ESOP from Commu-tAir, and the remainder of the purchase price was to be covered through the issuance of promissory notes to the sellers. The convertible preferred stock was to serve as security for the loan. Any dividends earned by the stock, and contributions made to the ESOP by CommutAir, would be used to pay down the loans. As the loans were paid down, shares would be released from collateral and placed either in an ESOP participant’s account or paid to him or her directly. That same day, March 15, 1994, a stock purchase agreement was signed by Com-mutAir, the sellers, and the Trustee. (Docket No. 60, Ex. F.) Per the agreement, the sellers agreed to sell the ESOP 540,000 shares of convertible preferred CommutAir stock for the purchase price of $60 million. The sellers collective!y retained the 1.26 million issued and outstanding shares of CommutAir common stock. To facilitate the purchase, the ESOP made a $9 million down payment with a loan from CommutAir, to be paid back on a periodic basis with interest. For the remainder of the purchase price, the ESOP issued to the sellers promissory notes totaling $51 million in value, to be paid in installments with interest. Section 5.7 of the purchase agreement provided for the following: In the event of a final determination by the Internal Revenue Service, the Department of Labor, a court of competent jurisdiction or otherwise that the fair market value of the shares of ESOP Convertible Preferred Stock as of the Closing is less than the Purchase Price, then the Sellers, jointly and severally, shall pay to the [ESOP] an amount equal to the difference between the Purchase Price and said fair market value for such shares of ESOP Convertible Preferred Stock, plus interest at a reasonable rate from the date of Closing to the date of such payment. Such payment may be made either in cash, or in the form of shares, valued in accordance with their actual fair market value as of the Closing. (Docket No. 27, First Amended Compl., Exh. A.) (emphasis added). Section 5.7 was drafted by the ESOP’s legal counsel, KMC. Defendants claim that it was the intent of the ESOP legal counsel and Owens, representing the sellers, that the provision would serve as an alternative theory of recovery in the event that a court should determine that the purchase violated ERISA. (Docket No. 59, ¶ 7.) In other words, defendants argue the provision would only apply if the issue of the stock’s actual fair market value at the time of the purchase was actually litigated and decided. (Docket No. 65, ¶ 6.) Per the purchase agreement, an ESOP administrative committee was to be formed to, inter alia, supervise and monitor the Trustee and act on the ESOP’s behalf. On the date of the purchase, no individual or entity was appointed to the ESOP administrative committee. The day after the purchase, in a special meeting of the CommutAir board of directors, a motion was made and carried to appoint Owens to the committee. (Docket No. 80, Ex. 13.) On April 8, 1994, seller Drollette signed a document entitling Owens to act alone on the ESOP’s behalf. (Docket No. 53, Ex. A, Tab 5; Docket No. 65, ¶ 7.) In 1996 or 1997, the Internal Revenue Service (“IRS”) conducted an audit of CommutAir for the 1992 and 1993 tax years, and issued to it notices of deficiency. The parties subsequently settled the claim in 1997, forcing the sellers, who in 1992 and 1993 were the only shareholders, to incur several million dollars in tax liability. In a November 1997 meeting of the Com-mutAir board of directors, on which all the sellers, along with Price and Owens, then sat, it was proposed that the company issue to the sellers promissory notes, totaling nearly six million dollars, to compensate them for the tax liabilities imposed on them as a result of the audit. (Docket No. 58, Ex. 7; Docket No. 65, ¶ 9.) Owens presented the proposal to the Trustee, who a few months later approved the issuance of the notes, contingent on the payment of a pro rata dividend to the ESOP. (Docket No. 65, ¶¶ 10-11.) Meanwhile, in 1997 or 1998, the IRS conducted a second audit on CommutAir, this time for the tax years of 1994 through 1996, focusing specifically on the sale of the convertible preferred stock to the ESOP. On August 28, 1998, the IRS sent to the company a notice claiming an income tax deficiency in the amount of $3,767,157, and a penalty in the amount of $753,431.20, based on a disallowance of deductions taken for the company’s contributions to the ESOP. (Docket No. 58, Ex. 9; Docket No. 65, ¶ 14.) A second notice, dated October 7, 1998, was sent to the company, claiming that, because the IRS found the fair market value of the stock purchased by the ESOP to be far below the purchase price, a first tier excise tax deficiency in the amount of $3 million dollars was owed for each of the years from 1994 to 1997. (Docket No. 58, Ex. 8.) The notice also claimed that if the company did not make a correction with respect to the transaction by paying to the ESOP the difference between the fair market value of the shares as determined by the IRS, which was $27 million, and the purchase price, which was $60 million, a second tier deficiency tax in the amount of $60 million would be owed. Id. The notice also claimed that an additional total of $2.7 million was to be added to the company’s taxes for the years covered by the deficiency. Id. The deficiency notices were based on a report dated January 31, 1998, in which an IRS employee found that the methodologies used and eventual fair market value determined by the appraisal firm, HLHZ, were incorrect, and that the true fair market value of the stock purchased by the ESOP was well below the purchase price. (Docket No. 53, Ex. 19.) Specifically, he determined that the total equity value of the company was $90 million, and that the fair market value of the convertible preferred stock at the time it was purchased was $27 million, or $50.00 per share. He found HLHZ to be in error for, inter alia, not giving consideration to the lack of marketability of the stock issued to the ESOP, or for the large amount of stock still in possession of the sellers after the transaction. He also determined that some of the companies selected for comparison in the market capitalization approach were “unacceptable” because their size, revenue, book value and other financial elements placed them in “a totally different class of airlines.” Id. He also found improper the use of the discounted cash flow method because of the use of a terminal value and because projecting future income and profits in CommutAir’s case was “very difficult.” Id. CommutAir and the sellers referred the IRS report to Owens, the Trustee, and HLHZ for review. (Docket No. 65, ¶ 15.) The Trustee admits that it could have been sued if, as the IRS report indicated, it had allowed the ESOP to be overcharged for the purchase, but contends that any conflict of interest it may have had in reviewing the report was “more theoretical than real” and essentially “dissipate[d]” because the flaws in the report were so fatal. (Docket No. 58, Ex. 3, pp. 324-26.) The flaws, according to Goldberg and the defendants, were three-fold: (1) that the IRS incorrectly assigned no value to the dividend rights attached to the stock; (2) that it used a valuation methodology incorrectly; and (3) that the IRS made statements concerning valuation methodologies that were contrary to accepted practice. (Docket No. 60, ¶ 11.; see also id. at Ex. B; Docket No. 59, ¶ 9, describing report as “seriously deficient and without merit”). Neither the Trustee nor Owens sought a second, independent opinion on the value of the convertible preferred stock. Id. at ¶ 12; see also Docket No. 65, ¶ 15. The Trustee communicated its beliefs to CommutAir, which then asked, through Owens, for the Trustee’s assistance in defending the company’s position. (Docket No. 58, Ex. 3, pp. 357-58). On November 24, 1998, CommutAir and the sellers, believing the IRS to be in error, filed a protest with the United States Tax Court on both of the deficiency notices issued to it in 1998. (Docket No. 60, Ex. C.) Thereafter, in late 1998 through early 1999, Owens engaged in discussions with the IRS, (Docket No. 65, ¶ 16), while Price, who was appointed to the ESOP administrative committee in January of 1999, (Docket No. 66, ¶ 10), served as the point of contact for the agency auditor, id. at ¶ 10. By the spring of 1999, Owens notified the Trustee and the ESOP legal counsel that the IRS was interested in settling the matter, because, according to Owens, “[i]t became apparent ... that the IRS’[s] concern was not the value of the stock, but the level of deducti-bility of the company’s contributions to the ESOP which were substantially in excess of the generally applicable IRS limits because of the large benefits for the Commu-tAir employees relative to their compensation.” (Docket No. 65, ¶ 16.) He claims that the company and the IRS eventually agreed that a 15% reduction in the level of deductibility and a modest penalty represented an appropriate disposition of the matter. Id. In January of 1999, after becoming aware of the IRS investigation, plaintiff Henry, an employee of CommutAir and ESOP participant, asked Price for a copy of HLHZ’s 1994 appraisal, (Docket No. 80, Ex. 22, p. 68), with the alleged intent of obtaining an unbiased opinion concerning the “financial integrity” of the appraisal, id. at 84. His request was denied, and neither plaintiffs Henry and Malinky nor any other ESOP participant received a copy of the appraisal until discovery in the instant case. Id. at 292. Shortly thereafter, on January 21, 1999, Price, on behalf of the board of directors, sent a memorandum to CommutAir employees. (Docket No. 80, Ex. 25.) In the memorandum, the IRS investigation and resulting deficiency notice were deemed “completely unfounded.” Id. In support, the memorandum alleged that the dispute was over a “technical financial issue” on which the company had done more work than the IRS on the issue, and outlined the qualifications of the Trustee, KMC, and HLHZ. Id. Price could not recall whether, in referring to the dispute as being over a “technical financial issue,” he meant that the IRS was pursuing a “technicality” or that the issue concerned the technical aspects of a financial issue. (Docket No. 79, Ex. 4, p. 18.) Price testified at his deposition that, by asserting that the IRS had not put in as much effort as the company, he was speaking of HLHZ’s effort. Id. at 38. Regardless, the memorandum opined that the situation presented “a case of ‘assess as much as you can, and see what sticks.’ ” (Docket No. 80, Ex. 25.) The memorandum further opined that “the incomplete and haphazard effort put together by the IRS represents taxpayer harassment” and promised to “seek remedy” under, “recent revisions to the Tax Code” that allegedly prohibited the same. Id. There is no evidence such a remedy was sought. On September 27, 1999, the Tax Court entered decisions stipulated to by the parties which settled the dispute with respect to both deficiency notices. (Docket No. 79, Ex.7.) According to the decision entered on the August 28, 1998, deficiency notice, the deficiency in income tax for 1994 was reduced to $598,843, and it was agreed that CommutAir would incur additions to its taxes in the amount of $59,884. (Docket No. 60, Ex. E.) According to the decision entered on the October 7, 1998, deficiency notice, it was agreed that CommutAir was deficient in first-tier excise taxes in the amount of $373,500 plus interest, (Docket No. 79, Ex. 7), which was later determined to be $80,281.25. It was also agreed that no second-tier taxes were owed, and that there would be no additions to the company’s income tax for the tax years ending 1994 through 1997. Id. By decisions entered the same day, it was determined that each seller owed excise taxes for the taxable years ending 1994 through 1997 in the amount of $124,500, with no second tier taxes or additions to income tax. Id. It appears all of these stipulated amounts were calculated on the basis of a $51 million transaction. After the settlement, Owens claims meetings were held with the Trustee and KMC, the law firm, to determine what course of action, if any, would be taken as a result of the settlement. The IRS engineer’s report that formed the basis of the deficiency notices was referred to HLHZ, the appraisal firm, for evaluation. Defendants allege that an investigation was undertaken into whether to pursue payment from the sellers pursuant to Section 5.7, but that it was determined that no viable claim existed. The Trustee claimed that the settlement did not mean that an agreement had been reached that the purchase price should have been $51 million. Rather, as Goldberg claims, “I understood that going forward, the company could only deduct interest [from its contributions to the ESOP used to pay off its debts] based on a purchase price of $51 million. I never understood it to be an adjustment of the purchase price.” (Docket No. 58, Ex. 3, p. 405; see also id., Ex. 5, pp. 180-81: “The agreement was reached that we would, for purposes of IRS alone, treat the question of calculation of interest deductions based upon the $51 million value. We did not reach an agreement that the value was $51 million”; Docket No. 79, Ex. 4, p. 38.) According to Owens, there was no agreement between the IRS and CommutAir as to the fair market value of the stock at the time it was purchased; if the agency had proposed it, he claims he would have rejected it “because [he] knew that the IRS did not have an independent valuation and that it did not want to pay for one.” (Docket No. 65, ¶ 16.) The ESOP legal counsel adds that in the stipulated decisions, there is no admission of wrongdoing or error with respect to the valuation, and no reference to a correction of any overcharge. (Docket No. 59, ¶ 12.) Consequently, neither the trustee nor Price nor Owens demanded that the company reduce the original sale price or that the sellers reimburse the ESOP for the difference between the purchase price ($60 million) and the $51 million (the calculation basis for the IRS settlement). III. PLAINTIFF’S CLAIMS AND RELIEF SOUGHT On November 1, 2001, plaintiff filed suit against defendants. (Docket No. 1.) On February 21, 2003, it filed a First Amended Complaint, alleging three Counts. (Docket No. 27.) In Count One, plaintiff appears to allege four separate breach of fiduciary claims against defendants. Specifically, it is alleged that fiduciary duties were breached in: (1) permitting the ESOP to be overcharged for the purchase of the convertible preferred stock from the sellers; (2) permitting the ESOP to engage in a transaction prohibited by ERISA; (3) failing to pursue and demand payment from the sellers pursuant to Section 5.7 after the September 1999 settlement with the IRS; and (4) failing to monitor, supervise, and/or remove certain parties from their fiduciary capacities. Plaintiff claims the sellers individually, as ESOP fiduciaries, are responsible for the first and third alleged breaches; the Trustee, as an ESOP fiduciary, is responsible for the first three alleged breaches; Owens, as a de facto ESOP fiduciary or an ESOP co-fiduciary, is responsible for all four alleged breaches; Price, as an ESOP co-fiduciary, is responsible for all four alleged breaches; and CommutAir, as an ESOP fiduciary, is responsible for the fourth alleged breach. For relief, plaintiff seeks to have the sellers, the Trustee, Price, and Owens restore any losses to the ESOP caused by the breaches of fiduciary duty, and, as to the sellers alone, as parties in interest to a prohibited transaction, plaintiffs seek a disgorgement of profits in the amount of $9 million that they allegedly received as a result of the stock purchase. Count Two seeks an order removing the Trustee as ESOP trustee, and Price and Owens from their positions on the ESOP administrative committee. Count Three asserts only state law claims against Price, Owens, the sellers, and defendant Champlain Air, Inc. While only the claims in Count One are implicated in the pending motions, discussion of Count Three and comment on Count Two are appropriate. See infra. Do not mistake this lengthy opinion as resolving any terribly difficult questions of law, for none exist. Rather, attribute the extended discussion to an effort to clarify precisely the claims and issues to be resolved at trial, and those that have no merit. IV. DISCUSSION There are several motions pending, the most prominent of which are plaintiffs and defendants’ motions for “partial” summary-judgment on Count One. A moving party is entitled to summary judgment “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). The ultimate inquiry is whether a reasonable jury could find for the nonmoving party based on the evidence presented, the legitimate inferences that could be drawn from that evidence in favor of the nonmoving party, and the applicable burden of proof. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In determining a motion for summary judgment, all inferences to be drawn from the facts contained in the exhibits and depositions “must be viewed in the light most favorable to the party opposing the motion.” United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962); Hawkins v. Steingut, 829 F.2d 317, 319 (2d Cir.1987). Nevertheless, “the litigant opposing summary judgment ‘may not rest upon mere conclusory allegations or denials’ as a vehicle for obtaining a trial.” Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir.1980) (quoting SEC v. Research Automation Corp., 585 F.2d 31, 33 (2d Cir.1978)). A. Duties of an ERISA Fiduciary “ERISA is a comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). To that end, the statute imposes upon fiduciaries of benefit plans certain duties when acting on behalf of the plan. Where, as here, the plaintiffs allegations amount to a claim that the alleged fiduciaries have sacrificed the interests of the plan’s beneficiaries in favor of those of non-beneficiaries, “the strict prudent person standard” found in Section 1104(a), and not the arbitrary and capricious standard, is employed when adjudging the fiduciaries’ actions or inaction. See John Blair Communications, Inc. Profit Sharing Plan v. Telemundo Group, Inc. Profit Sharing Plan, 26 F.3d 360, 367 (2d Cir.1994). Section 1104(a) has been described by the Second Circuit as mandating the following: “ ‘[a] fiduciary must discharge his duties solely in the interests of the participants and beneficiaries. He must do this for the exclusive purpose of providing benefits to them. And he must comply with the care, skill, prudence, and diligence under the circumstances then prevailing of the traditional prudent man.’ ” Devlin v. Blue Cross and Blue Shield, 274 F.3d 76, 88 (2d Cir.2001) (quoting Donovan v. Bierwirth, 680 F.2d 263, 271 (2d Cir.1982) (Friendly, J.) (internal quotations and citation omitted)). This “strict” standard, derived from the law of trusts, Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 152-53, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985), has been described as “ ‘the highest known to law.’ ” Flanigan v. General Elec. Co., 242 F.3d 78, 86 (2d Cir.2001) (quoting Donovan, 680 F.2d at 272 n. 8); see also Morse v. Stanley, 732 F.2d 1139, 1145 (2d Cir.1984) (stating that duty “imposes [upon] fiduciaries an unwavering duty ... to make decisions with single-minded devotion to a plan’s partiei-pants and beneficiaries”). Thus, the duties delineated in Section 1104(a) “must be enforced without compromise to ensure that fiduciaries exercise their discretion to serve participants in the plan.” John Blair, 26 F.3d at 367. Plaintiff claims in Count One that defendants breached their fiduciary duties under ERISA. As noted, this claim appears to have four primary bases: (1) that defendants breached their fiduciary duties in permitting the ESOP to purchase the stock from the sellers at an allegedly inflated price; (2) that defendants breached their fiduciary duties in permitting the ESOP to engage in a transaction prohibited by ERISA; (3) that defendants breached them fiduciary duties in failing to pursue payment from the sellers of the difference between the purchase price and the fair market value pursuant to paragraph 5.7 of the stock purchase agreement, after CommutAir and the sellers settled the dispute over the second audit with the IRS; and (4) that defendants breached their fiduciary duties in failing to monitor, supervise, and/or remove the Trustee, Price, and Owens from their fiduciary positions. Each basis will be discussed inasmuch as it is relevant to disposition of the summary judgment and other pending motions. B. Basis One: Permitting the Alleged Overcharge The first basis for Count One, that it was a breach of fiduciary duty to permit the ESOP to purchase the stock from the sellers for - $60 million, focuses upon the actions and knowledge of the fiduciary or fiduciaries before and at the time of the purchase. The parties do not seem to dispute that whether a breach of fiduciary duty occurred — i.e., “whether the [fiduciary], at the time [it] engaged in the challenged transaction[ ], employed the appropriate methods to investigate the merits of the [transaction] and to structure the [transaction],” Flanigan v. General Elec. Co., 242 F.3d 78, 86 (2d Cir.2001) — presents questions of fact in need of resolution at trial. However, they do dispute whether defendants should be permitted to offer the testimony and report of Robert Dana (“Dana”) that is arguably relevant to one of the issues that will be considered in determining whether a breach occurred— the actual fair market value of the convertible preferred stock on the purchase date. In the event it is found that permitting the transaction to occur was a breach of fiduciary duty, the parties also dispute whether the sellers, Price, and Owens can be held responsible therefor. Thus, while adjudication of the actual merits of this part of Count One is reserved for trial, plaintiffs’ motion in limine and Price’s and Owen’s motions for partial summary judgment are properly before the court and in need of determination. 1. Motion to exclude Plaintiff has moved to exclude the testimony and report of defendants’ valuation expert, Dana, from being presented and admitted as evidence at trial. Expert testimony is only admissible if it is both: (1) relevant and (2) reliable. Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). An expert opinion is “relevant” if it “will assist the trier of fact to understand the evidence or to determine a fact in issue.” Fed.R.Evid. 702; Daubert, 509 U.S. at 591, 113 S.Ct. 2786. Here, because Dana’s report and testimony purport to aid in the determination of the fair market value of the convertible preferred stock at the time it was purchased — an issue certainly germane to whether it was a breach to permit the ESOP to engage in the transaction — it cannot be excluded on the basis that it is irrelevant. The only question remaining, therefore, and the one to which plaintiff directs its motion in limine, is whether Dana can offer reliable testimony and evidence. Plaintiffs motion to exclude Dana’s report and testimony as unreliable is premised on two overall arguments — that he is unqualified to render an opinion in the specific area of an ESOP transaction, and that his methodologies were flawed. Defendants admit that his qualifications to render an opinion on the value of the stock purchased by the ESOP are not based on specific educational background or topical publications. Rather, defendants claim he is qualified on the basis of his years of experience as a banker who has performed valuations on Wall Street for fifteen years. An expert’s opinion may be based on experience alone so long as the expert “explain[s] how that experience leads to the conclusion reached, why that experience is a sufficient basis for the opinion, and how that experience is reliably applied to the facts.” Fed.R.Evid. 702, Advisory Committee Notes (2000 Amendments). However, “[ljiberality and flexibility in evaluating qualifications should be the rule; the proposed expert should not be required to satisfy an overly narrow test of his own qualifications.” Bunt v. Altec Indus., Inc., 962 F.Supp. 313, 317 (N.D.N.Y.1997) (quoting Lappe v. American Honda Motor Co., 857 F.Supp. 222, 226 (N.D.N.Y.1994), aff'd, 101 F.3d 682, 1996 WL 170209 (2d Cir.1996)); see also Fed.R.Evid. 702, Advisory Committee Notes (2000 Amendments) (stating that “[a] review of the case law after Daubert shows that rejection of expert testimony is the exception rather than the rule”). “Accordingly, assuming that the proffered expert has the requisite minimal education and experience in a relevant field, courts have not barred an expert from testifying merely because he or she lacks a degree or training narrowly matching the point of dispute in the lawsuit.” Canino v. HRP, Inc., 105 F.Supp.2d 21, 21 (N.D.N.Y.2000) (citations omitted). While some measure of wariness is indeed expressed as to Dana’s qualifications, it is here found, certainly at this stage of the proceedings, that his experience in the financial/securities field is sufficient. He has a degree in economics from Yale, and an MBA from Columbia. He has prepared or assisted in the preparation of several valuations, including at least some where an ESOP was involved. As noted, the fact that his experience is not exclusively or largely devoted to valuing stock on behalf of a purchasing ESOP is not enough to exclude his testimony. Plaintiff may take issue with his qualifications on cross-examination. Id. at 28 (“The Second Circuit has held that ‘quibble’ with [a] proposed expert’s training or knowledge on specific points may be properly explored on cross-examination at trial”) (citation omitted). With respect to the methodologies used by Dana in his expert report, plaintiff argues that the use of a software program, the use of certain specific tools in the valuation methodology (such as the optimal capital structure and certain pricing multiples), and the failure to account for the impact of the fare wars, render Dana’s opinion unreliable. However, the use of his methodologies in general, especially the discounted cash flow method, is accepted, and, in any event, “[disputes as to the strength of [an expert’s] credentials, faults in his use of [a particular] methodology, or lack of textual authority for his opinion, go to the weight, not the admissibility, of his testimony,” McCulloch v. H.B. Fuller Co., 61 F.3d 1038, 1044 (2d Cir.1995); see also Ulico Cas. Co. v. Clover Capital Mgmt., Inc., 217 F.Supp.2d 311, 318 (N.D.N.Y.2002). In the bench trial, it will be the duty of the court to assess and weigh his credibility. See Katt v. City of New York, 151 F.Supp.2d 313, 351 (S.D.N.Y.2001). Plaintiff may aid in the performance of this duty at trial through “[vigorous cross-examination [and the] presentation of contrary evidence[.]” Daubert, 509 U.S. at 596, 113 S.Ct. 2786; see also McCulloch, 61 F.3d at 1043-44. “On cross-examination counsel may probe the witness’s qualifications, ‘experience, and sincerity; weaknesses in the opinion’s basis, the sufficiency of assumptions, as well as the strength of the opinion.’ ” Blue Cross and Blue Shield of N.J., Inc. v. Philip Morris, Inc., 141 F.Supp.2d 320, 324 (E.D.N.Y.2001) (quoting Michael H. Graham, Expert Witness Testimony and the Federal Rules of Evidence: Insuring Adequate Assurance of Trustworthiness, 1986 U. Ill. L. Rev. 43, 69-71 (1986)). It is also important to note that, with respect to these issues, Dana will be presenting his testimony in the context of a bench trial, and this judge is quite confident in his ability to separate the wheat from the chaff, so to speak, on the valuation issue. Plaintiffs motion to exclude Dana’s testimony and report must be denied without prejudice to renew at trial. 2. Responsibility for breach Assuming for the sake of argument that it was a breach of fiduciary duty to allow the ESOP to purchase the stock from the sellers, there is no question that the Trustee, as the entity charged with representing the ESOP in the transaction, would be liable for the breach. Plaintiff also claims, however, that Price and Owens, through concealment or misrepresentation, are liable for the alleged breach, on the bases that Owens is a de facto fiduciary, and that both are co-fiduciaries under 29 U.S.C. § 1105. a. Owens as a “de facto”fiduciary Plaintiff argues that because no one was appointed to the ESOP administrative committee the day of the transaction, there was no one supervising the Trustee in its representation of the ESOP in the transaction. Because, argues plaintiff, the power to appoint the Trustee and other fiduciaries was vested in the Com-mutAir board of directors, that supervising responsibility fell to all board members, including Owens, on the day of the transaction. In support of this proposition— that by virtue of membership on the appointing committee, Owens was a fiduciary with respect to the transaction—plaintiff cites Reach v. U.S. Trust Co., N.A., 234 F.Supp.2d 872 (C.D.Ill.2002). In Reach, the court held that a company’s executive board members were de facto fiduciaries because they were responsible for monitoring and supervising the appointed trustee. Id. at 882-83. The court noted that the board members’ fiduciary status, however, went further than merely appointing the trustee because “the selection of U.S. Trust as trustee for the ESOP was so inextricably intertwined with the desired end of effectuating the stock purchase transaction that the act of appointing the trustee essentially exercised de facto control over the plansf] assets and management.” Id. Under ERISA, a person is a fiduciary “to the extent (i) he exercises any discretionary authority or discretionary control respecting management of [a] plan or exercises any authority or control respecting management or disposition of its assets, ... or (ii) he has any discretionary authority or discretionary responsibility in the administration of such plan.” 29 U.S.C. § 1002(21)(A)(i) and (iii). Though this definition will be “broadly construed,” whether a party is a fiduciary requires a “functional” inquiry. See LoPresti v. Terwilliger, 126 F.3d 34, 40 (2d Cir.1997). To the extent that Owens retains fiduciary status for his role in voting for the appointment of the Trustee, plaintiff has no cause of action, as they neither allege negligence in the hiring of the Trustee, nor is there any evidence such a decision in this case would give rise to a breach of fiduciary duty. With respect to the Reach decision, it is initially noted that this holding, if cited in the manner plaintiffs refer to it, may reap incurable conflicts of interest and effectively paralyze the sale of stock to employees of closely held corporations. For example, generally following the court’s reasoning, seller defendants Sullivan, von Elbe, and Drollette, in their capacities as CommutAir directors, could be ESOP fiduciaries at the same time they sat across the table from the ESOP as sellers. Clearly, this result is envisioned by neither Congress nor the court in Reach. Rather, in Reach, the executive board members under consideration were very active in the entire process, thus leading the court to conclude that their conduct, not their status alone, fit the statute’s functional fiduciary definition. Here, plaintiff has presented no evidence pre-dating the transaction that Owens was an influencing presence, much less a discretionary authority, on the ESOP or Trustee’s valuation of the stock or decision to go forward with the purchase. He was involved in the negotiations and transaction not in his capacity as a board of directors member, but instead as the designated legal counsel for the sellers. Thus, all that is left as evidence of Owens’s fiduciary status with respect to the transaction is his status as a member of the board of directors. Without more, namely, conduct amounting to discretionary control or authority, Owens cannot be considered a fiduciary with respect to the alleged overcharge. This should not be taken as a rejection of plaintiffs argument that some individual or entity was responsible for monitoring and supervising the Trustee in its investigation relative to the purchase of the convertible preferred stock. Such monitoring and supervision, however, did not fall to Owens as an individual, an ESOP administrative committee member, or even as an individual on the CommutAir board of directors. Rather, such monitoring and supervising duties fell to CommutAir, and its alleged failure to do the same, and to remove the Trustee from its position as ESOP fiduciary, is addressed in the fourth basis of Count One. See infra. b. Price and Owens as co-fiduciaries A more compelling, but ultimately unsuccessful, argument is that Price and Owens were co-fiduciaries for the alleged overcharge because they allegedly concealed or misrepresented the overcharge after the date of the transaction. Under 29 U.S.C. § 1105(a), a person may incur co-fiduciary liability if: (1) “he participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other fiduciary, knowing such act or omission is a breach”; (2) “he has enabled such other fiduciary to commit a breach”; or (3) he has knowledge of a breach by such other fiduciary, unless he makes reasonable efforts under the circumstances to remedy the breach.” Plaintiff cites a laundry list of allegations that purportedly demonstrate Price’s and Owens’s knowing participation in or concealment of the alleged breach. (Docket No. 76, pp. 10-13.) It is true that Section 1105(a) may only be invoked against a fiduciary. See Silverman v. Mut. Benefit Life Ins. Co., 138 F.3d 98, 103-04 (2d Cir.1998) (“Under 29 U.S.C. § 1105(a), a plan fiduciary shall be liable for a breach of fiduciary responsibility of another fiduciary ... ”) (emphasis added); Lee v. Burkhart, 991 F.2d 1004, 1010 (2d Cir.1993) (recognizing distinction between liability as “co-fiduciary” under Section 1105 and non-fiduciary under common law). As defendants point out, many of the allegations made by plaintiff relate to events that pre-date Owens’s and/or Price’s appointment as fiduciaries. However, their alleged knowing participation in and concealment of the alleged breach cannot be viewed in a vacuum. Any alleged knowledge or action taken prior to appointment does not evaporate. In other words, Price and Owens still know what they knew before. The only difference is that, upon appointment to the ESOP administrative committee, they “knew” as fiduciaries. With respect to Price, plaintiff claims his knowing participation in and/or concealment of the breach arose from: (1) his failure to submit adjusted management projections, or to cause HLHZ to modify its valuation, despite knowledge of the February 1994 fare wars; (2) his failure to cause HLHZ to modify its valuation despite his knowledge of the fare wars and his knowledge that the growth rate used by the appraisal firm in calculating was unreasonably high; (3) his post-transaction representation of the company’s total equity value to ESOP participants, despite his alleged knowledge that such representation was overstated by more than $100 million; (4) his knowledge of the company’s actual financial performance in 1994 and 1995 that allegedly made clear the deficiencies in the projections he submitted; (5) his refusal to permit plaintiff Henry access to the HLHZ fairness opinion; (6) his knowledge of and involvement in the issuance of the notes to the sellers for liabilities they incurred as a result of the first IRS audit; and (7) his knowledge of and participation in the second IRS audit and the events thereafter, including his drafting of a memorandum to ESOP participants in which he represented that the deficiency notices were without merit. If anything at all, most of these allegations, especially those pertaining to the management projections, the fare wars, and the allegedly flawed HLHZ valuation, are relevant largely to the central issue in this case — whether the Trustee breached its fiduciary duty in permitting the transaction to occur. They highlight Price’s alleged ineptitude in preparing the projections and HLHZ’s alleged gaffes in relying on such projections without independent verification in its fairness opinion, both of which bear more relevance on whether the investigation conducted by and on behalf of the Trustee prior to the transaction were reasonable than on whether Price was knowingly concealing a breach. Plaintiff offers no evidence that remotely demonstrates that Price knew of these alleged deficiencies that preceded the transaction; if anything, his staunch defense and continued alleged misrepresentation of the company’s equity value, which was based, whether correctly or incorrectly, in the valuation report, demonstrates that he did not know of the alleged breach. His involvement in the IRS audits was not unusual, given that he was a company officer and/or an ESOP administrative committee member at all relevant times. It is difficult to understand just how the issuance of the notes to the sellers following the first IRS audit ties into the original transaction with the ESOP. The ESOP, after all, also was given a dividend. As for the allegation that he refused to allow plaintiff Henry to see HLHZ’s valuation of the convertible preferred stock purchased by the ESOP, it is initially noted that the Second Circuit has held that a failure to furnish such a report to a participant is not a breach of fiduciary duty. See Bd. of Trustees of the CWA/ITU Negotiated Pension Plan v. Weinstein, 107 F.3d 139, 142-46 (2d Cir.1997). Plaintiff has offered no evidence that Price’s failure to furnish the valuation was done to knowingly conceal the initial breach, as opposed to being a proper refusal by an ESOP fiduciary. Sympathy is expressed for plaintiffs apparent argument that Price was a member of a conspiracy to overcharge the ESOP and line the sellers’ pockets — and perhaps, by implication, the Trustee’s, his own, and Owens’S' — but such participation must come with the knowledge that the transaction itself was a breach. Plaintiff has not demonstrated such knowledge. Price cannot incur co-fiduciary liability. Owens is listed by himself in the allegations only twice, both times relating to the issuance of the notes to the sellers following the first IRS audit. Those notes, as noted, have no apparent connection to the initial sale of stock to the ESOP, a prerequisite for forming a basis of Owens’s co-fiduciary liability. No allegations are made against Owens pertaining to the management projections, fare wars, or HLHZ’s valuation prior to the transaction. Plaintiff does allege that Owens was aware of the company’s actual financial performance in 1994 and 1995, which allegedly demonstraté that the projections were overstated and that the fare wars had a negative financial impact. However, the fact that Price — and HLHZ for that matter — may have been wrong does not in any way demonstrate that Owens, by merely knowing after the fact that the projections did not match up with the results, was knowingly participating in or concealing the alleged overcharge. Owens is also accused of knowingly participating in or concealing'the alleged overcharge through his participation in the audits, and company representations thereafter that claimed the IRS was in error. As counsel to the sellers, who were issued deficiency notices themselves, this does not strike one as unusual. He was acting on their behalf to lower any payments they, or the company, had to make as a result of the transaction. In no way does it show he was knowingly participating in or concealing the initial breach. Plaintiffs best argument for co-fiduciary liability is that Price and Owens knowingly participated in or concealed the breach by failing to pursue payment from the sellers pursuant to Section 5.7 of the stock purchase agreement. Price and Owens, however, were both ESOP fiduciaries at this time, so the more proper claim against them in this regard is a direct breach of fiduciary duty claim. Under such a claim, it is more proper to argue they did not conduct a reasonable investigation in making that decision. Couched as a co-fiduciary claim, however, plaintiff is required to demonstrate that such a decision was a knowing participation in and/or concealment of the alleged overcharge. The lack of evidence, even viewed most favorably to plaintiff, on Price’s and Owens’s subjective intent or knowledge with respect to this decision, and all other decisions they made or knowledge they had, precludes co-fiduciary status. Plaintiffs claims against Price and Owens for their failure to invoke Section 5.7 are addressed under the third basis for Count One. Therefore, Price’s and Owens’s motions for partial summary judgment on the first basis of Count One will be granted, and that part of the complaint will be dismissed against them. c. Sellers and CommutAir Despite plaintiffs claim that it presents an issue of fact for trial, it is difficult to comprehend just how the sellers are ESOP fiduciaries with respect to the alleged overcharge. They clearly were not named fiduciaries. To the extent plaintiff is alleging that the sellers were de facto fiduciaries for their role in appointing the Trustee to represent the ESOP, such an argument is rejected for the same reasons stated above as to why Owens is not a de facto fiduciary. To the extent plaintiff is alleging the sellers are responsible for the breach by virtue of co-fiduciary status, such an argument is rejected because the sellers never were and never have been named fiduciaries sufficient to invoke Section 1105, and, in any event, any active part they took in the negotiation and term-setting process can be solely attributed to their role as the selling parties. CommutAir, through its board of directors, is a fiduciary with respect to the ESOP, but only insofar as the company was given the power in the plan and trust documents to monitor and remove the Trustee from its fiduciary position. This particular duty, and whether it was breached, is encompassed within the fourth basis for Count One. Therefore, the sellers and CommutAir, must be dismissed from the first basis of Count One. C. Basis Two: Permitting the ESOP to Engage in a Prohibited Transaction The second basis for Count One is that defendants breached their fiduciary duties in permitting the ESOP to engage in a transaction prohibited by ERISA. Under 29 U.S.C. § 1106(a), a fiduciary may not cause a plan to engage in transaction with a “party in interest” which involves a direct or indirect sale or exchange of plan property, lending of money or extension of credit, or transfer or use of plan assets. Here, it is clear that, for the purposes of Section 1106, the sellers were “parties in interest.” See 29 U.S.C. § 1002(14)(H) and (C) (defining “party in interest” as, inter alia, “an employee, officer, director, ... or a 10 percent or more shareholder directly or indirectly,” of “an employer any of whose employees are covered by [the] plan [at issue]”). 1. Occurrence of a breach However, exempted from the prohibition in Section 1106 is “the acquisition ... by a plan of qualifying securities ... if such acquisition ... is for adequate consideration[.]” 29 U.S.C. § 1108(e). Therefore, the applicability of this exemption can only be resolved after it is determined whether the Trustee breached its fiduciary duty in permitting the transaction to occur. Such a determination will indeed involve a finding as to the fair market value of the convertible preferred stock on the date of purchase, and will by implication determine the availability of the Section 1108(e) exemption. It should also be noted that, even if the exemption does apply, plaintiff must still prove that the transaction itself was prohibited, and defendants will have an opportunity to present any other defenses they may have to this basis of Count One. 2. Responsibility for alleged breach For the reasons stated in the discussion of which parties are responsible for the alleged overcharge, the Trustee is a fiduciary that would be responsible for this alleged breach, while Price, Owens, and the sellers are not. CommutAir, as noted supra, is a fiduci