I can’t help but wonder what kind of fee arrangements were made in the ERISA class actions suits that were highlighted in the blawg world and online this week. A Law.com article from the San Francisco Recorder described this “burgeoning arena of ERISA cases filed on behalf of company employees who lose their retirement savings when corporate scandals hit.” The cases are targeting new fiduciaries and broadening fiducial duties.
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BenefitsBlog (June 16, 2003) asked whether the ERISA fiduciary lawsuits are “an oasis for plaintiffs’ lawyers?” CorpLawBlog referred to them as the “Newest Happy Hunting Ground for Plaintiffs’ Firms”. The Recorder article is filled with boastful quotes from plaintiffs’ lawyers about the ease and size of settlements, and the willingness of some employers who have survived their scandals to reach an agreement. Recorder reporter Jason Hoppin gushes, “Imagine, if you will, an oasis for plaintiffs’ lawyers, where you can make new law, the bar is friendly on both sides of the aisle, there are few competitors and, of course, huge recoveries are the norm.”
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It’s great that lawyers for employees who lost their pensions (and often their jobs) may have found a creative way to make the employees whole. I’m worried, however, that there may be a large hole in that whole — of perhaps 25%, or 33%, or 40%. When it comes to fees, you see, lawyers are too often phantom fiduciaries: They are superheroes with amazing powers to detect and defeat fiduciary-defendants. But they frequently are blind to their own duty to earn only a reasonable fee from their clients, and to fully inform those clients about the factors involved in making their fee reasonable. A lawyer’s job is to help the client assert a claim. It is not to insist on a taking a large share of that claim, in order to work for the client. [check out our 4-part essay on the ethical obligations involved with charging contingency fees]
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If visitors can provide me, or point me to, information about the fee arrangements in these ERISA suits, I’d appreciate it. I’m hoping to be pleasantly surprised by novel fee arrangements that compensate the lawyers appropriately but not outlandishly for their risk, creativity, and exertion.
P.S. Senator Dascle, with a dozen Democratic co-sponsors, has introduced Senate Bill 9, which will amend ERISA to extend fiduciary duties in the manner argued in the class action suits — and cover all pending suits on behalf of employees against insiders and other plan fiduciaries.
Update (6/19/03, 9:33 AM): See the article in today’s New York Law Journal (via law.com), entitled WorldCom Employee Claims Go Forward: Former CEO Ebbers allegedly withheld negative information about finances. Reporter Mark Hamblett quotes U.S. District Judge Denise Cote: “When a corporate insider puts on his ERISA hat, he is not assumed to have forgotten adverse information he may have acquired while acting in his corporate capacity” from In Re WorldCom Inc. ERISA Litigation, Master File 02 Civ. 4816.