Judge orders 2 law firms to pay $1.5 million for ‘recklessly' pursuing ERISA trial

A federal court judge in Denver has ordered two law firms representing plaintiffs in an ERISA lawsuit to pay $1.5 million to defendants' lawyers in the case because the two firms "recklessly proceeded to trial in violation of their duty to objectively analyze their case."

The Tuesday ruling by Senior U.S. District Judge Christine M. Arguello said the $1.5 million payment should be split between Schlichter, Bogard & Denton and Schneider Wallace Cottrell Konecky Wotkyns.

Representatives of both firms did not respond to a request for comment.

The judge ruled in September 2020 that the two law firms should be sanctioned for their trial behavior representing plaintiffs in several lawsuits — eventually consolidated — alleging ERISA violations by several units of Great-West Lifeco Inc., a financial services holding company based in Winnipeg. (All Great-West businesses in the U.S. were rebranded with the Empower name earlier this month.)

After a bench trial, the judge ruled in August 2020 in favor of the Great-West units that had been sued by participants in several sponsors' retirement plans. Her ruling covered the consolidation of three cases brought against several of these units. The sponsors weren't named as defendants.

In her opinion, Ms. Arguello criticized the sole expert witness offered by plaintiffs' attorneys during the trial. "In addition to the general inadequacy of his testimony, his specific theories regarding plaintiffs' alleged damages are legally flawed," she wrote.

That testimony also played a role in the judge's deciding sanctions against the plaintiffs' law firms.

Lawyers representing Great-West and the plaintiffs subsequently filed requests for sanction against each other under a statute citing attorney behavior that "unreasonably and vexatiously" prolongs litigation, wrote the judge, who supported Great-West's claim.

"Plaintiffs' counsel recklessly pursued their claims through trial though they were lacking in merit," the judge wrote in her September 2020 ruling.

The Great-West lawyers "accurately point out that plaintiffs' decision to continue through trial was inherently lawyer driven," the judge wrote.

The judge noted that each plaintiff "was generally satisfied" with the Great-West services and "stood to gain a relatively small amount" if they won the case.

"On the other hand plaintiffs' counsel stood to gain tens of millions of dollars," she wrote. "Thus it is reasonable to deduce that plaintiffs' attorneys had a strong incentive to litigate even when it became clear they should not."

Her September 2020 ruling said the plaintiffs' law firms should pay "excess costs" incurred by the Great-West attorneys capped at $1.5 million.

Her ruling Tuesday covered each firm's responsibility for payment. The judge noted that Schneider Wallace Cottrell Konecky Wotkyns LLP had argued that the sanctions should apply only to Schlichter Board & Denton, the lead counsel in the case.

"The court disagrees," she wrote. "Both firms were responsible for choosing to take the case to trial, unreasonably prolonging the litigation."