Just how expensive is it to litigate claims brought under the Employee Retirement Income Security Act?

U.S. District Judge Nanette Laughrey of the Western District of Missouri gives some insight with the plaintiffs’ attorney fees she recently authorized in Tussey vs. ABB Inc., an excessive fee case that was finally brought to a close this summer after nine years of legal wrangling.

Read: Case against jumbo 401(k) claims self-dealing, excessive fees

In December, Laughrey signed off on about $10.8 million in plaintiffs’ attorney fees for time spent litigating the case in District Court, and another $900,000 for time spent litigating the case on appeal.

Both awards are to be paid directly by ABB, and not out of monetary awards to plan participants.

Over the nearly decade-long seminal ERISA case, attorneys for ABB and Fidelity, recordkeeper to two ABB 401(k) plans, were paid about $42 million attorneys’ fees defending the claims.

The $11.7 million in fees to plaintiffs’ attorneys is less than the $13.4 million originally sought. But ABB had argued that plaintiffs’ attorney fees should be halved, on the grounds that payment to the lawyers was disproportionate to the overall damages awarded to participants.

Read: 7 things fiduciaries shouldn't say in court

In 2012, Judge Laughrey ordered ABB to pay a total of about $36 million in damages to participants in two ABB 401(k) plans.

Plan fiduciaries failed to monitor its relationship with recordkeeper Fidelity after $120 million in plan assets were “mapped,” or transferred from Vanguard’s balanced Wellington Fund to Fidelity’s Freedom Funds.

But in 2014 the 8th Circuit Court of Appeals in part vacated that ruling.

Originally, $21.8 million in damages had been awarded relating to investment losses resulting from higher fees paid to the Freedom Funds.

On appeal, the 8^th Circuit said that figure was “speculative,” remanding the case back to Laughrey’s court. In July of 2014, she ruled that “plaintiffs failed to prove damages consistent with the method of damage calculation suggested by the 8^th Circuit,” according to court documents.

ERISA experts viewed it as a victory on a technicality for ABB.

In the end, ABB will pay $13.4 million in damages to plan participants.

In authorizing the $11.7 million in plaintiffs’ attorney fees, Laughrey said that legal fees may not always be directly proportional to the damages awarded clients.

“Plaintiffs’ counsel took unusual risks in uncharted waters against an extraordinarily well-funded defense team,” wrote Judge Laughrey.

“Tying Plaintiffs’ counsel’s fees to a percentage of the monetary recovery would unfairly deprive them of compensation for the time spent successfully litigating important claims and issues,” she added.

Laughrey reasoned that the consequences of the long-fought case will benefit plan members and participants in other 401(k) plans long after all the attorneys’ fees are collected.

“Of special importance is the significant, national contribution made by the Plaintiffs whose litigation clarified ERISA standards in the context of investment fees,” wrote Laughrey.

“The litigation educated plan administrators, the Department of Labor, the courts and retirement plan participants about the importance of monitoring recordkeeping fees and separating a fiduciary’s corporate interest from its fiduciary obligations,” she said.

In the brief authorizing the fees, Laughrey called ABB’s conduct administering its fiduciary obligations “particularly reprehensible.”

Plan fiduciaries were “not merely negligent but rather motivated by self-interest,” she wrote.

St. Louis-based Schlichter, Bogard and Denton represented the plaintiffs in the case.

Instant Insights /

Law firms received more than $50 million from Tussey vs. ABB

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