Amsted is owned by its employees through an Employment Stock Option Plan that is administered through the regulations of the Employee Retirement Income Security Act. At the end of each fiscal year, the Amsted ESOP distributes shares of stock to participants' individual ESOP retirement accounts. The ESOP allocates shares of stock to participants with a value equal to a percentage of their annual compensation. The participants' account values change not only with new share allocations each year, but also with the company's stock price fluctuations.

In the 1990s, the company developed a cash surplus and began a program of expansion, acquiring other companies. In May 1999, Amsted began a hostile takeover of a local competitor named Varlen Corporation. Amsted eventually succeeded in its bid, but only at an exaggerated stock price and the assumption of $250 million in Varlen's debt, the total coming to nearly $900 million.

This action alleges that the acquisition was carried out because of the personal agendas of Amsted management, rather than for the good of the company. The ESOP was directly affected by the acquisition, with the company's stock price soaring to $181.41 per share in September 1999, a 32% increase in value allegedly ignoring the negative aspects of the Varlen merger. The action alleges that this stock inflation occurred because Amsted management used accounting practices that neglected to factor in the negative side-effects of the Varlen merger.

In the months that followed, numerous ESOP distribution requests were submitted by employees who saw the stock increase as a chance to retire or resign while the stock price was most beneficial to their retirement. Under the terms of the ESOP, employees separating from the company either with 30 years of service or after reaching 55 years of age were eligible to receive the value of their ESOP account in a cash lump-sum payment. The rules and regulations of the ESOP expressly prohibited the limitation of early retirement benefits or retirement subsidies.

On March 2, 2000, the ESOP issued the 1999 Developments Report to Amsted employees--it expressly stated that the $181.41 share price was to be used for all ESOP withdrawal requests received by the company on or before June, 30, 2000. Named plaintiff Jackie Carlee is a retired employee of Amsted who served at the Bessemer, Alabama, Griffin Wheel plant. In April 2000, he submitted a written official notice of his intent to retire on June 30, 2000, so that he would have more than 30 years of service at retirement. In his letter, he requested that he be notified of any other actions that he needed to take to effectuate his retirement. On April 13, he called the benefits supervisor at Amsted headquarters in Chicago, Illinois, to confirm his retirement. At that time, he was informed that the current ESOP Account Distribution Forms were obsolete and that new forms were being created. He was advised not to complete the current form, and to wait for the new ones to arrive.

On April 25, 2000, the Amsted ESOP Committee allegedly met and substantially amended the plan, in violation of its regulations. The lump-sum plan was replaced by a plan that allowed the company to spread payments out over a four-year period with interest to be paid on the outstanding balance. The effect of the amendment was to issue retirees a lump sum of shares in Amsted stock and then to cash in the shares over the four-year period. The cash-out amounts were to be tied to the value of the stock at the time the disbursement was made. On September 30, 2000, the stock was reevaluated, its value falling to $89.87 per share, over 51% less than its former value. Because Mr. Carlee's retirement benefits were not given to him as Amsted promised, he has lost in excess of $285,000. Any subsequent downward reevaluations will cause him and other Amsted retirees in his position to lose even more.

The action has been consolidated by the Multidistrict Litigation Panel with three others in the federal court for the Northern District of Illinois, where it will be litigated.