Attorney Schlichter preps new round of 401(k) suits

A pioneer in bringing lawsuits over retirement-plan fees is investigating several large plans, building on recent successes and a broader wave of litigation.

Jan 22, 2016 @ 12:26 pm

By Greg Iacurci

Jerome Schlichter
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Jerome Schlichter (Dan Donovan)

Jerome Schlichter, a trailblazer of the 401(k) fee litigation that's proliferated in the U.S. over the past decade, seems to be gearing up for another round of class-action complaints.

He is riding on a wave of success, broadening growth of similar 401(k) legal battles and the wind-down of older suits.

Schlichter Bogard & Denton, of which Mr. Schlichter is a founder and managing partner, has been running advertisements over the past several months in search of participants in specific 401(k) plans, including those of Great-West, KeyCorp and Oracle Corp.

The ads contain the same general message: Schlichter Bogard & Denton would like to speak to these plan participants about an investigation of their respective plans' fees and investment options. That jells with the general theme of excessive investment and administrative fees that have run through several of Mr. Schlichter's 401(k) suits, which date back to 2006.

The ads signal that Mr. Schlichter seeks participants to represent a class of plaintiffs in potential suits, according to attorneys. The Employee Retirement Income Security Act of 1974 also allows plan participants to request certain plan documents, such as the Form 5500, which litigators can scrutinize for detailed plan information.

“He needs facts and information, but he also needs a litigant,” said Andrew Oringer, partner and co-chair of the employee benefits and executive compensation group at Dechert. “The lawyer himself can't be the plaintiff. He needs to find one or more people whose interests represent those of the class as a whole to raise their hands as the class representatives.”

The profile of these companies fits with the prevailing profile of other firms Mr. Schlichter has targeted in 401(k) litigation: large companies with huge 401(k) plans, often with several billion dollars in assets.

There have also been similar ads from Mr. Schlichter's firm for the 401(k) plans of Merck & Co. Inc. and Delta Airlines (both for the Delta Family Care Saving Plan and Delta Airlines Pilots Savings Plan) that date back to 2014 and 2012, respectively. It's also advertised for Evangelical Lutheran Church in America, dating to late 2014.

“There's precedence for advertising happening for well over a year before a case is brought,” according to Thomas Clark Jr., an ERISA attorney at The Wagner Law Group.

Of course, just because there's an advertisement doesn't mean a suit will follow. Mr. Clark, who used to work for Schlichter Bogard & Denton, approximates that one in every three cases that are seriously investigated actually result in a formal suit.

“There's not a whole lot of rhyme or reason, other than they must have some success they see available through finding people or looking through the documents," Mr. Clark said. "They can bring or not bring a case for a number of reasons.”

Mr. Schlichter declined to comment for this article.

NEW TERRITORY?

The Evangelical Lutheran Church in America advertisement stands out from the rest because it would concern a 403(b) plan. If a suit were ultimately brought, it would represent largely uncharted waters.

“They're not as voluminous up to this point,” David Levine, principal at Groom Law Group, said of suits targeting 403(b) plans.

Two such former suits, Montoya v. New York State United Teachers and Jerre Daniels-Hall, et al. v. National Education Association, were dismissed. Allegations had been of breach of fiduciary duty under ERISA, but the courts said the plans in question weren't subject to ERISA.

The ELCA plan is a church plan, a specific type that isn't subject to ERISA unless the sponsor of the plan has elected ERISA coverage, Mr. Oringer said. If there's no ERISA election, which is the case for ELCA, the plan is subject to state or other applicable non-ERISA law.

“If you look at the landscape, [litigators] have branched out,” Mr. Levine said. “Definitely, I think they are evaluating different market sectors and groups to go after. They keep expanding their focus. And partly it's because they've had success with settlements.”

GATHERING STEAM

In all, Mr. Schlichter has obtained settlements of around $300 million in 401(k) excessive-fee cases, earning him such titles as "Public Enemy No. 1 for 401(k) Profiteers" and "A Lone Ranger of the 401(k)s" by media outlets.

Last year alone saw some massive payouts for Mr. Schlichter. Lockheed Martin Corp. agreed to a $62 million settlement, the largest-ever in a 401(k) excessive-fee case, and The Boeing Co. agreed to pay a runner-up $57 million. He also won a decision in Tibble v. Edison, the first 401(k) fee case to be heard by the U.S. Supreme Court.

He's also secured settlements from corporations such as Bechtel Corp., International Paper Co., Caterpillar Inc., General Dynamics Corp., Kraft Foods Global Inc., Novant Health Inc., Cigna Corp. and Prudential Retirement Insurance and Annuity Co. (which were involved in the same suit), and Ameriprise Financial Inc.

Due to these settlements and some case dismissals — like those of United Technologies Corp., Exelon Corp. and Deer & Co. — Mr. Schlichter doesn't have many active suits remaining.

His firm filed two new suits over the past month, one against Insperity Inc. and Reliance Trust Co. and another against Anthem Inc. These new suits, plus some of the recent advertisements, suggest Mr. Schlichter is ramping up his case log.

“In light of him filing two new suits in the last month, it appears these cases aren't going away any time soon,” Mr. Clark said.

Indeed, 401(k) litigation activity has grown more broadly lately, due in part to new players getting involved in the action, according to Mr. Levine. Eleven major class-action suits were filed against plan sponsors or providers in the fourth quarter of 2015 alone. Another filed this week targets service provider Empower Retirement and other Great-West Financial companies.

“It's been a wild ride lately,” Mr. Clark said. “I haven't seen this many new cases in a really long time.”

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