Correction: The allegations against Great West Capital Management were not for an ERISA breach, rather a violation of Section 36(b) of the Investment Company Act. The story has been updated to correct the error.
Fiduciary zealot and tort lawyer Jerome Schlichter was a bit overzealous in the opinion of District of Colorado Judge Christine Arguello when he accused Great West Capital Management of charging unreasonably high-fees, which he claimed violated Section 36(b) of the Investment Company Act.
Plaintiffs represented by Schlichter, who were participants in retirement plans on which Great West sibling Empower Retirement acted as recordkeeper, argued the firm’s fees were “so disproportionately large that [they] bear [] no reasonable relationship to the services rendered.”
In a scathing order granting the defendants’ motion for sanctions, 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.”
Red flags
In spite of the red flags that both 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.”
Arguello said Meyer was “thoroughly discredited” at trial, noting that at one point he went so far as to admitting 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.”