“Having already limited Defendants’ total recovery to fees and expenses after the start of trial and having further restricted that recovery to no more than $ 1.5 million, the Court finds no basis to further reduce the fee award.”
“We believed this was a lawyer-driven lawsuit from the start and chose to defend this matter vigorously.”
Stephen Gawlik
And with that, the United States District Court in Colorado affirmed the judgment against high-profile attorney Jerry Schlichter for $1.5 million for “reckless” fiduciary claims.
Plaintiffs represented by Schlichter, who were participants in Colorado-based Great-West Capital Management’s retirement plan, argued the firm’s fees were “so disproportionately large that [they] bear no reasonable relationship to the services rendered.”
In a scathing order in October 2020 granting the defendant’s motion for sanctions, Judge Christine Arguello wrote that Schlichter and his firm, St. Louis-based Schlichter, Bogard & Denton, “recklessly pursued their claims through trial despite the fact that they were lacking in merit.”
The issue largely centered on the plaintiff’s use of a professional witness, J. Christopher Meyer, and an observation from the court “that caselaw suggested that some of Mr. Meyer’s opinions were factually inaccurate.”
Defendant’s response
While declining to comment on the case’s specifics because it’s still pending litigation, an Empower spokesman (formerly Great West) said it’s pleased with the ruling.
“The law firms that filed these lawsuits are plaintiffs’ firms that regularly file lawsuits against the retirement plan industry,” Stephen Gawlik, Empower’s Vice President for Corporate Affairs, said in a statement. “In recent years, the industry has seen a significant increase in lawsuits filed against retirement companies. We believed this was a lawyer-driven lawsuit from the start and chose to defend this matter vigorously.”
Empower said it sought sanctions in this case because it said it should never have gone to trial.
“In addition to affirming both the value and the legality of the products and services we offer, the result of this validates the good work of the many individuals—including the independent directors of the Empower Funds board—who have worked to make those products available to our customers,” Gawlik added. “We believe our innovative offerings help our clients reach their retirement goals.”
Factually inaccurate
Despite concerns from Great West and the court raised about Meyer’s opinions, “Plaintiffs proceeded to trial, relying on Mr. Meyer as the sole means of calculating the amount of damages they allegedly suffered.”
In the 2020 decision, Arguello said Meyer was “thoroughly discredited” at trial, noting that at one point, he went so far as to admit some of his opinions were implausible and “probably shouldn’t have [been] included” in his report.
“His complete lack of credibility as to the element of damages dealt a fatal blow to Plaintiffs’ case …Thus, Plaintiffs’ counsel knew they were facing an uphill battle from the outset of this case. Once they took into account the flaws that Defendants pointed out with respect to Mr. Meyer’s opinions, they should have recognized that they had no plausible means of establishing actual damages …”
Arguello concluded that “Plaintiffs’ attorneys are personally liable for Defendants’ excess costs, expenses, and attorney fees reasonably incurred …That amount shall not exceed $1,500,000.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
