March 25, 2022

A radiology company and its founders must face a proposed class action alleging they overcharged their employee stock ownership plan in a $163.7 million sale, a Colorado federal judge ruled, saying the company can't enforce an arbitration agreement because it conflicts with federal benefits law.

U.S. District Judge Regina M. Rodriguez on Thursday said the agreement between Envision Management Holding Inc. and Robert Harrison conflicts with an Employee Retirement Income Security Act provision allowing plan participants to sue fiduciaries to seek relief on behalf of the entire plan. The Federal Arbitration Act permits a court to overrule an arbitration agreement if it blocks a party from being able to bring claims under federal law.

"The arbitration provision is therefore invalid, and the defendant's motion to compel arbitration is denied," Judge Rodriguez said.

She pointed to the Seventh Circuit's September decision in Smith v. Board of Directors of Triad Manufacturing Inc. , a case that she said is "substantively identical" to that of Harrison. In Smith, the court found that the arbitration provision made it impossible for the plaintiff to effectively argue their claims.

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Harrison is represented by Michelle C. Yau, Mary J. Bortscheller and Ryan Wheeler of Cohen Milstein Sellers & Toll PLLC.

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