PHILADELPHIA - A defunct Philadelphia law firm will pay $675,000 to resolve a lawsuit claiming it used employees' retirement money to dissolve itself in 2023.
Schnader Harrison Segal & Lewis has reached an agreement that, before attorneys take their fees, represents 68% of the maximum recovery attainable by a class of former workers including lead plaintiff Jo Bennett.
A document filed Aug. 12 asks the Philadelphia federal court to approve the settlement. Lawyers at The Garner Firm and Barton & Downs will let their fee request be known later.
"(T)he settlement will be allocated among class members who are either participants or beneficiaries entitled to an immediate distribution under the plan," the motion for approval says.
"The settlement is structured to ensure the tax-favored treatment of these payments."
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.
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).
Judge John Milton Younge last year denied Schnader's motion to dismiss, finding the issues presented required further discovery.
