Excessive Fee Litigation Against Small Plans - Damberg v. LaMettry's Collision

My partner, Marcia Wagner, is quoted in this article about a somewhat stunning development, the filing of a class action excessive fee case against a relatively small plan, with around $9 million in assets. I have been asked for some time, by media and by audience members at speaking engagements, if and when we will see small plans sued for excessive fees. I have always felt that such suits were likely at some point, but that the issue was subject to the push and pull of conflicting forces. On the one side, the work done to date on the large dollar cases has plowed the field, doctrinally and in terms of lawyers’ understanding of the financial issues, to an extent that smaller cases are within the technical grasp of a number of lawyers who might be willing to bring smaller value cases (obviously, the firms who have won the large dollar settlements to date are not themselves going to be very interested in playing for small stakes and bringing suit over plans with only a few million in assets). Arrayed on the other side, though, and arguing against the proliferation of such suits involving small plans, is a relative constellation of forces, including; (1) the fact that there are only a limited number of lawyers capable of successfully bringing such claims and few of them would be interested in suing for small amounts; and (2) these are not easy cases to win, factually or doctrinally, and thus the risk to reward ratio may not be worth it in such cases.

The question of whether such suits will proliferate may depend on a number of factors. First off, will the first companies with smaller plans who are sued put up vigorous defenses? If so, the cost/benefit analysis for plaintiffs’ lawyers who might consider bringing such claims changes to the worse for them; it becomes harder, and riskier, to try to obtain a settlement or recover a verdict. Having to go to trial to recover where a potential verdict or settlement is in the tens of millions is one thing; having to do that to recover several hundred thousand, and then only if you prevail, is another. Second, to quote Butch Cassidy and the Sundance Kid, who are these guys? Are the lawyers bringing the suits the real deal, or are they the ERISA equivalent of patent troll lawyers, simply bringing a rash of suits and looking for a quick and inexpensive settlement? If it’s the latter, and sponsors of small plans think its better just to pay a small amount – even if just in lieu of paying to defend the case – as a cost of doing business, then you can be sure we will see plenty of these types of cases.