Court Opinions: 10th Circuit Court of Appeals Opinion for Feb. 9

The 10th Circuit Court of Appeals

Editor’s Note: Law Week Colorado edits court opinion summaries for style and, when necessary, length.

Harrison v. Envision Management Holding, Inc. Board, et al.


Envision Management Holding, Inc. is a privately-owned shell corporation, based in Colorado Springs, Colorado, founded in approximately 2000 by defendants Darrel Creps II, Paul Sherwood and Jeff Jones. Envision owns Envision Management, LLC, which provides diagnostic imaging services in several states. Envision and Envision Management, LLC collectively employ around 1,000 people.

Envision had a board of directors. Creps, Sherwood and Jones were members of the board. Robert Harrison, a Colorado resident, was employed by Envision for around four years between 2016 and 2020 and left his employment in August 2020. 

In 2017, the defendants created the Envision Employee Stock Ownership Plan. The ESOP is an Employee Retirement Income Security Act-protected, defined contribution plan where the employer makes contributions on behalf of employee-participants and the contributions are invested into the employer’s stock. 

Under the plan document’s terms that governed the ESOP, each eligible employee became a participant of the ESOP “as of the date the Eligible Employee first perform[ed] an Hour of Service in 2017.” Because Harrison worked for Envision in 2017 and qualified as an eligible employee, he became a plan participant. By Dec. 31, 2019, Harrison had three years of service in the ESOP, which meant he was 40% vested.

Envision was the primary sponsor of the ESOP. The ESOP was administered and managed by the Envision Management Holding, Inc. Employee Stock Ownership Plan Committee. Harrison alleges that at all relevant periods, the ESOP Committee’s members included Creps, Sherwood and Jones and other unidentified individuals. 

Under the plan document terms, the named fiduciaries to the ESOP included the committee, the board of directors, the named trustee to the ESOP and the ESOP’s investment manager. 

Harrison alleged the defendants created the ESOP so that it could purchase 100% of their private Envision stock for $163.7 million and they selected Argent Trust Company to serve as the ESOP trustee. Harrison alleged that despite the sale occurring, the defendants retained control over both Argent and the ESOP by receiving assurance from Argent that they would remain on the board, granting themselves the right to unilaterally fire Argent and exculpating Argent from liability stemming from the ESOP transaction. 

Harrison alleged the defendants, with the effective assistance of Argent, were able to financially benefit by selling Envision to the ESOP for significantly more than it was worth, while at the same time leaving the ESOP with a $154.4 million debt. He also alleged the defendants, notwithstanding the sale, were able to retain control of Envision with the assistance of Argent. In his complaint, Harrison alleged the transaction caused him and other ESOP participants to suffer significant losses to their retirement savings and the claims brought are pertinent to the Employee Retirement Income Security Act of 1974. 

The district court issued an order denying the motion the defendants’ filed to compel arbitration and to stay the proceedings, applying the effective vindication exception and finding the arbitration provision in the ESOP conflicts with ERISA. In their appeal, the defendants argued the district court erred in denying their motion to compel arbitrations because the order circumvented the Federal Arbitration Act.  

The 10th Circuit Court of Appeals rejected the defendants’ argument and affirmed the lower court’s decision, ruling the district court properly invoked the effective vindication exception to invalidate the arbitration provisions of the plan document.

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