Judge Charlotte N. Sweeney, representing the U.S. District Court for the District of Colorado, has granted class-action status to a protracted lawsuit concerning the acquisition of a radiology practice. The case’s origins date back to December 2017, when Envision Radiology, located in Colorado Springs, became fully employee-owned in a transaction valued at around 164 million dollars.

Established in 2000, Envision Radiology manages over 50 imaging facilities across Colorado, Louisiana, Oklahoma, and Texas, employing around 1,000 people. In January 2021, a former employee, who is now a shareholder, initiated legal proceedings, alleging that shareholders grossly overpaid for Envision stock.

On 24 January 2025, Judge Sweeney granted the lawsuit class-action status, permitting it to advance while offering a word of caution: “This ruling underscores that the certification of the plaintiffs’ class does not determine the validity of their underlying claims,” Sweeney said. In assessing the appropriateness of a class action, the focus is not on whether the plaintiff or plaintiffs have articulated a valid cause of action or will succeed on the merits but rather on whether the stipulations of Rule 23 are satisfied.

Rule 23 stipulates that one or more members of a class may sue as representative parties on behalf of all members if: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims of the representative parties are typical of the claims of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.

When Envision’s owners sought to sell the company in 2017, they devised a transaction in which Envision’s employee stock ownership plan (ESOP) would acquire it. However, the ESOP lacked sufficient funds to complete the purchase. Consequently, it borrowed over 103 million dollars from the sellers and nearly 51 million dollars from the company itself.

The complaint states that employees were not afforded the opportunity to negotiate the stock prices. Ultimately, ESOP acquired 100% of Envision for 163.7 million from the sellers. Department of Labor filings reportedly indicate that ESOP paid 1,770 dollars per share for 64% of the Envision shares and 1,404 dollars for the remaining 36%.

According to the plaintiffs’ lawyers, Cohen Milstein, there is no apparent reason for the price discrepancy. The lawsuit alleges that ESOP overpaid at least 23.4 million dollars for Envision stock based solely on this variance.

A few months following ESOP’s acquisition, Department of Labor filings allegedly showed that all shares, irrespective of their initial pricing, were valued at just 349 dollars per share.

The complaint asserts that the defendants acted as fiduciaries to ESOP, with a legal obligation to prioritize the best interests of employee participants. Instead of adhering to these responsibilities, the defendants caused ESOP to pay inflated prices for Envision stock. The lawsuit aims to recover the excess amount paid by ESOP for the Envision stock and to reclaim any profits unjustly obtained by the defendants from the ESOP transaction.

This lawsuit, Harrison v. Envision Management Holding, Inc. Board of Directors, et al., is brought on behalf of all participants in the Employee Stock Ownership Plan by the law firm Cohen Milstein.