A lawsuit was filed on Oct. 28 in Seminole County's 18h Judicial Circuit by five current and former employees of Del-Air Heating, Air Conditioning and Refrigeration Inc. — just days before the Nov. 2 sale of the Sanford-based company to New York-based Astara Capital Partners.
The complaint filed by the employees centers around an employee stock ownership plan formed under the company's previous ownership, the court document showed. The plaintiffs alleged they saw their share prices devalued significantly ahead of the sale, per the complaint.
On Nov. 4, Orlando Business Journal reported Del-Air's sale to Astara Capital for an undisclosed price.
Before the sale was completed, an evaluation of the company was done by an independent appraiser to determine the value of the employees' interest in the company through the plan, as well as the overall value of the company, according to the complaint.
The evaluation, which was approved by a trustee on behalf of the plan, lowered the per-share price for the employee plan to less than half of their value from the preceding year — an alleged 66% drop, according to a statement by NeJame Law, although revenue for the company has not changed substantially.
The current and former employees' suspicions were raised by this drop because their shares had increased in value during the last two reporting periods, NeJame told Orlando Business Journal.
"The concerns are that you have a higher valuation pre-sale, and then upon the eve of the sale, there's this significantly lower valuation. The employee owners have great concern about that, and should have — and are entitled to — an explanation and verification."
The plaintiffs are seeking an accounting of the financial valuation of the shares of the company, to determine whether they have received fair market value, as well as a full accounting of any windfalls or agreements received by the board of directors, per the lawsuit.
NeJame also said the suit may be amended so more current and former employees who had a stake in the plan have an opportunity to join the legal action.
An official summons was served to Del-Air on Nov. 2, meaning the next step for the case is for the Sanford company to file a formal, written response, which it has 20 calendar days to do, Seminole County records showed.
Del-Air's representative Tucker Byrd, co-founder and partner of Winter Park-based law firm Byrd Campbell, told OBJ that given how the employee stock ownership plan was structured, it was the role of the trustee — identified in the suit as James Urbach — to determine that a fair price was obtained.
The mechanisms in place as part of the plan, including the role of the trustee, meant that the process worked as it was intended to and that a fair transaction occurred, Byrd said.
"I understand that [the plaintiff's] question theoretically is a good question to ask. But at the end of the day, the answer will be that this was a good price and this was a good thing for the company."
Source: Orlando Business Journal