Overview
On September 13, 2024, Cohen Milstein filed an amended complaint in Ramirez, et al. v. AMPAM Parks Mechanical, Inc., et al., on behalf of the participants and beneficiaries of the AMPAM Parks Mechanical, Inc. Employee Stock Ownership Plan (ESOP).
The class action lawsuit alleges that AMPAM Parks Mechanical, Inc. (“AMPAM”) and the founders of AMPAM, Charles E. (“Buddy”) Parks III and John D. Parks, (collectively, “the Parks Brothers”) breached their fiduciary duties in the management of the AMPAM Parks Mechanical, Inc. Employee Stock Ownership Plan (ESOP) in violation of the Employee Retirement Income Security Act (ERISA).
On October 25, 2024, Plaintiffs filed a motion to certify the class action.
Case Background
AMPAM Parks Mechanical, Inc. is a closely held company, employing approximately 1,000 individuals, that provides residential plumbing subcontractor services for multifamily residences throughout California.
Specifically, the lawsuit alleges that the Parks Brothers, along with other AMPAM owners, collectively liquidated their interest in AMPAM stock for $247 million in 2019. The complaint also alleges that, to accomplish the sale, the Parks Brothers (who together controlled AMPAM) created a retirement plan, the AMPAM ESOP, to purchase their AMPAM stock at an inflated price. Employees’ ESOP retirement accounts were used to purchase 100% of AMPAM stock from the Parks Brothers and the other AMPAM owners.
The lawsuit further alleges that 1) the employees were not given an opportunity to negotiate or otherwise take part in the determination of the price that they paid for AMPAM stock, the employees only found out about the ESOP transaction only after the ESOP transaction was completed and the highly inflated $247 million purchase price was approved. As a result, 3) the ESOP was left deeply in debt and allowed the Parks Brothers to cash out their interest in AMPAM, while retaining control of AMPAM and maintaining a hidden interest in AMPAM.
Shortly after the sale, AMPAM’s stock held by the ESOP was reported to be valued at $17,821,310, or approximately 7% of what the ESOP had paid for the company. Thereafter, the company’s value continued to plummet; the ESOP’s 2020 Form 5500 reported that the ESOP’s stock was valued at a mere $2.1 million, less than 1% of what the Plan paid.
The lawsuit also names Neil Brozen, the trustee of the ESOP, who was hired by the Parks Brothers as an independent third party acting with undivided loyalty to the ESOP and its participants, as well as John G. Mavredakis, who was on the AMPAM Board of Directors at the time of the ESOP Transaction. However, and as alleged in the complaint, the Parks Brothers collectively controlled AMPAM and used the ESOP governance structure to retain the right to fire Brozen as the ESOP Trustee if Brozen did not carry out the wishes of the Parks Brothers and other Company insiders.
Class Action
This lawsuit is brought as a class action under ERISA on behalf of the participants and beneficiaries of the AMPAM Parks Mechanical, Inc. ESOP.
Plaintiff brings this action to recover the losses suffered by the ESOP and the participants and beneficiaries of the ESOP, to obtain other equitable and remedial relief as provided by ERISA, and to otherwise remedy Defendants’ prohibited transactions and fiduciary breaches in violation of ERISA.
Status of the Litigation
On May 16, 2024, Cohen Milstein filed Ramirez, et al. v. AMPAM Parks Mechanical, Inc., et al., Case No. 5:24-cv-01038 KK (DTBx), United States District Court for the Central District of California.
Whom to Contact for More Information
Please call or email a member of the attorney team for this case. All team members can be reached at (202) 408-4600 or by their individual email.
Eleanor Frisch, Esq. – efrisch@cohenmilstein.com
Jacob T. Schutz, Esq. – jschutz@cohenmilstein.com
Ryan Wheeler, Esq. – rwheeler@cohenmilstein.com
Michelle C. Yau, Esq. – myau@cohenmilstein.com
Doron Hadar, Paralegal – dhadar@cohenmilstein.com