ERISA & employee beneFits | EMPLOYEE STOCK OWNERSHIP PLANS
Relentless legal advocates protecting retirement savings.
We have obtained millions of dollars in recoveries for ESOP participants who have been harmed by alleged self-dealing or mismanagement related to their ESOPs.
What Is an ESOP?
An Employee Stock Ownership Plan is a type of benefit plan that gives employees an ownership stake in the company in the form of shares of stock. Participating employees receive an account, and the number of shares they receive each year is based on a formula that may depend on factors like pay and seniority. When an employee retires or leaves the company, the employee is generally entitled to receive the fair market value of their vested shares.
ESOPs can offer benefits to employees like tax advantages and retirement savings, but they also come with risks. The value of the shares depends on the company’s performance, and ESOPs can be vulnerable to mismanagement and abuse. Employees may also have limited control over the company’s decisions that impact the value of their shares.
What Are My Rights as an ESOP Participant?
As an ESOP participant, you have certain rights under the Employee Retirement Income Security Act (ERISA), such as the right to obtain information about the ESOP and the ability to take legal action if necessary. These rights are meant to protect your interests and ensure that the ESOP’s fiduciaries act prudently and in the best interest of the employees who participate in the plan. Learn more in the article ESOPs – Know Your Rights.
How Are ESOPs Valued?
In a privately traded ESOP, the company’s stock is not available for public purchase and is not valued by the stock market. Instead, typically, an outside party determines the value of the stock. They do this by analyzing the company’s data, like past financial statements, internal financial records, and future projections. The third party uses different methods to figure out the fair market value of the company’s stock. The ESOP’s trustee is responsible for reviewing the third party’s work to make sure the value and methods used are fair and accurate.
How Can ESOPs Be Abused?
ESOPs can be vulnerable to abuse, conflicts of interest, and even fraud, especially when companies use them to benefit executives at the expense of their employees. In some instances, the ESOP valuation can be falsely inflated, leaving employees with shares worth much less than they were led to believe. Furthermore, when companies leverage ESOPs to take on excessive debt, employees can be exposed to greater financial risk since the value of their shares depends on the company’s performance and its financial health.
Examples of ESOP Cases
Our team of ERISA attorneys has successfully litigated numerous ESOP cases, recovering millions for plan participants and holding companies accountable for their actions. Below are some notable examples:
- Smith v. Greatbanc Trust Company, et al., was a class action brought on behalf of participants and beneficiaries of the Triad Manufacturing, Inc. ESOP. The plaintiffs alleged numerous violations of ERISA in connection with the sale of Triad Manufacturing, Inc. to the ESOP for an inflated value. In August 2023, the court certified the class and granted final approval of a $14.8 million settlement.
- Harrison v. Envision Management Holding, Inc. Board of Directors, et al., is a class action brought on behalf of participants and beneficiaries of the Envision Management Holding, Inc. ESOP. Plaintiffs allege defendants breached their fiduciary duties in connection with the sale of Envision company stock to the newly formed ESOP. The district court rejected defendants’ attempt to force the case into arbitration, and the Tenth Circuit affirmed that decision. In March 2024, the court denied defendants’ attempt to dismiss the lawsuit, and in January 2025, the court certified a class of ESOP participants, allowing the lawsuit to move forward as a class action.
Ramirez, et al. v. AMPAM Parks Mechanical, Inc., et al., is a class action on behalf of participants and beneficiaries of the AMPAM Parks Mechanical, Inc. ESOP. The case alleges numerous ERISA violations against the defendants for causing the ESOP to purchase AMPAM stock from the former owners at an inflated price, and then orchestrating the sale of the company to a former owner at a lower price just four years later. The court rejected defendants’ attempt to dismiss the lawsuit in February 2025, and then granted plaintiffs’ motion to certify a class of ESOP participants in March 2025.
Current Cases
BDO USA ESOP Litigation
Taylor v. BDO USA (D. Mass.): Cohen Milstein represents participants and beneficiaries of the BDO USA Employee Stock Ownership Plan in a putative ERISA class action. Plaintiff alleges that BDO USA’s board of directors ensured that control of BDO was kept in the hands of management rather than the ESOP, used inflated revenues to value BDO, and engaged in a self-dealing transaction involving the ESOP purchasing 42% of the company’s common stock for approximately $1,300,000,000 – a purchase price that exceeded fair market value.
AMPAM Parks Mechanical ESOP Litigation
Ramirez, et al. v. AMPAM Parks Mechanical, Inc., et al. (S.D. Cal.): Cohen Milstein represents employee participants and beneficiaries of the AMPAM Parks Mechanical, Inc. Employee Stock Ownership Plan in a certified class action lawsuit alleging that AMPAM Parks Mechanical and the founders of AMPAM, Buddy Parks, John D. Parks, James Parks, and Jason Parks breached their fiduciary duties in the management of the ESOP in violation of ERISA.
Envision Management Holding, Inc. ESOP Litigation
Harrison v. Envision Management Holding, Inc. Board of Directors, et al. (D. Col.): Cohen Milstein represents Envision Management Holding ESOP participants, who allege the ESOP purchased Envision Management Holding stock at an inflated price, causing a multi-million-dollar loss to the ESOP. On February 9, 2023, A three-judge panel for the Tenth Circuit, in a 41-page published opinion, sided with Plaintiffs’ argument, which was backed up by a U.S. Department of Labor amicus brief, that an arbitration provision tucked in Envision workers’ ESOP plan impermissibly blocked remedies under ERISA, triggering an exemption in the Federal Arbitration Act, which permits a court to overrule an arbitration agreement if it blocks a party from being able to bring claims under federal law. On October 10, 2023, the U.S. Supreme Court denied Defendants’ petition to review the Tenth Circuit’s decision, thereby affirming the lower court’s March 24, 2022 ruling, which denied Defendants’ motion to compel arbitration.
Past Cases
World Travel ESOP Litigation
Ahrendsen et al. v. Prudent Fiduciary Services. et al. (E.D. Pa.): Cohen Milstein represented a certified class of employee stock option plan participants and beneficiaries who allege that the founders of World Travel and the ESOP trustees created the ESOP and then sold 100% of the employees World Travel stock to the ESOP at an above-market price, saddling it with over $200 million in debt. On June 22, 2023, the Court granted plaintiffs unopposed motion for class certification and final approval of a $8.7 million settlement.
Casino Queen ESOP Litigation
Hensiek v. Board of Directors of CQ Holding Company, Inc., et al. (S.D. Ill.): Cohen Milstein represents ESOP participants who allege that the Board of Directors of CQ Holding Company, Inc. and related defendants violated ERISA when they created an ESOP to buy their Casino Queen stock for $170 million, a significantly inflated price. In late 2021, the Seventh Circuit directed Defendants to voluntarily dismiss their appeal on the arbitration issue on the heels of our precedent-setting victory before the Seventh Circuit in Smith v. GreatBanc Trust Company, which cited an exception to the Federal Arbitration Act that permits a court to overrule an arbitration agreement if it blocks a party from being able to bring claims under federal law. On February 25, 2025, the court granted preliminary approval of a $7.1 million settlement.
Triad Manufacturing, Inc. ESOP Litigation
Smith v. GreatBanc Trust Company, et al. (N.D. Ill.): Cohen Milstein represented participants and beneficiaries in the Triad Manufacturing ESOP who alleged that the ESOP’s trustees breached their fiduciary duties in connection with the sale of Triad Manufacturing to the ESOP. In September 2021, the Seventh Circuit, in a precedent-setting decision, cited an exception to the Federal Arbitration Act that permits a court to overrule an arbitration agreement if it blocks a party from being able to bring claims under federal law. On August 23, 2023, the Court granted final approval of a $14.8 million settlement and granted class certification.