So, can you predict which law firm is most likely to sue you as a plan sponsor? According to BNA, the uptick in lawsuits filed over the past 12 months has increased dramatically led by just a few law firms. So which one is most likely to target your plan? That may indeed be based on your industry.
Most prolific since November 2015 is the Connecticut based law firm of Izard, Kindall & Raabe which has filed a whopping 19 lawsuits mostly against religious organizations, health care firms and financial services companies. The St. Louis-based law firm of Schlichter, Bogard & Denton that started the rash of DC lawsuits a decade ago follows closely behind with 18 cases with suits against big names like Northrup Grumman, Chevron, Oracle and 12 top private universities.
Universities have been flagged for having too many funds while religious organizations have been sued for underfunded pension plans and financial services firms for self dealing or offering proprietary funds and those that provide rich revenue sharing like the recent suit against Edward Jones.
A mix of large firms like Morgan Lewis & Bockius and boutiques like the Groom Law Group have been selected to defend these suits. Plaintiff’s firms are finding targets through referrals as well as forensic reviews of 5500 forms.
While small and mid-sized defined contribution (DC) plan sponsors may feel immune with just one lawsuit against a smaller plan still pending, they should take cold comfort. Lawsuits against larger plans create a template for local firms hoping to settle with companies and their insurance providers to get a quick payout not to litigate. Smaller plan sponsors may not have the resources to fight a lawsuit even if they think they will prevail. Understanding which law firm is most likely to sue you may depend on the industry you are in.
DC lawsuits come in two basic flavors: self-dealing and “asleep at the switch” where plan sponsors have failed to adequately review and negotiate reasonable fees with their record keeper. The same mutual fund may come in many different flavors with up to 10 share classes each priced differently depending on the revenue sharing they generate to pay providers and advisors. Failing to negotiate the best deal on behalf of plan participants or not understanding how much is being paid and then determining whether it is reasonable leaves plan sponsors most vulnerable to lawsuits coming to a theater near you.
