PHILADELPHIA – Lawyers who sued a defunct Philadelphia firm for using employees’ retirement funds to dissolve itself are asking for $225,000.
Attorneys at The Barton Firm of D.C. and The Garner Firm of Philadelphia earlier this month asked Judge John Milton Younge to approve their request, which represents one-third of a $675,000 settlement agreed to by Schnader Harrison Segal & Lewis.
Class members are receiving an average gross recovery of nearly $12,000.
“Despite the obstacle of a terminated plan (which eliminated a ready way to distribute the payments in a tax-favorable way through an existing plan), Class Counsel negotiated a series of provisions designed to preserve, to the extent practicable, the tax-advantaged status of the settlement payments if class members elected to have these payments paid into an IRA or another retirement plan,” lawyers wrote.
Schnader Harrison Segal & Lewis failed financially two years shy of its 90th birthday, after having operated nationwide and employing more than 300 lawyers in its heyday. By 2022, though, operations had been scaled back considerably and the firm announced plans to close.
Lead plaintiff Jo Bennett said in her lawsuit that contributions she made to her 401(k) were commingled with firm funds during this time, in violation of the Employee Retirement Income Security Act. Defendants are equity partners for their roles as fiduciaries of retirement plans.
Bennett was a non-equity partner required to deposit deferrals from her paycheck into her 401(k) plan.
She says that despite requirements that employers remit such employee contributions after segregating them from their general assets, Schnader did not. Instead, it used that deferred money for its own purposes while the firm was going under.
It was in September 2023 that it told non-equity partners like Bennett that it would not remit the deferrals because it lacked the funds to do so, Bennett alleges. In its last two years of operation, Schnader illegally commingled her deferrals with the firm's general assets, she says.
She said the practice had even occurred before 2022. But Schnader argued in its motion to dismiss that the funds at issue were the matching contributions it paid for her 401(k).